Today the Minnesota Senate passed a critical PPP tax compliance bill that gives small businesses significant relief by ensuring they are not penalized for keeping their employees on payroll due to the COVID-19 pandemic. Last year the federal government passed the Paycheck Protection Program (PPP) as an emergency measure to help small businesses keep their employees on payroll. Unfortunately struggling business owners are now facing heavy government tax charges on these loans. Senator Justin Eichorn (R-Grand Rapids) voted for the bill and released the following statement:
“Minnesota’s small businesses have been hit by the pandemic, and the lifeline they threw shouldn’t be turned into an anchor dragging them through a huge state tax bill,” Senator Eichorn said. “Minnesota is the only state in the upper Midwest that still taxes small businesses on their PPP loans. I am delighted to be taking steps with my Senate colleagues to bring this important relief to our small businesses and their workers. ”
Last year, the CARES federal law introduced the PPP program for small businesses struggling and losing revenue due to the COVID-19 pandemic. Under the program, loans would be granted when used to fund qualifying costs and 60% of loan proceeds used for labor costs. The federal government has made it clear that PPP loans issued are not considered taxable income at the federal level, but rather at the state level under Minnesota law.
This bill will bring Minnesota into federal tax compliance so that these forgivable loans will not be subject to state taxes. In addition, the bill will give some small businesses more filing flexibility than C companies, which will help reduce their tax burden. If the bill is not incorporated into law, Minnesota small businesses will have to pay millions on PPP loans designed to keep businesses alive. Without action, many of these struggling small businesses will face sizeable government tax burdens on March 15th. 25 other states, led by governors from both parties, have already responded to compliance with PPP tax compliance.
In addition to small business PPP tax breaks, the law will provide tax breaks for struggling Minnesotans who have received expanded federal unemployment benefits. This added relief will be good news for the thousands of Minnesotans who were unemployed through no fault of their own during the pandemic.
“We shouldn’t force people who have become unemployed through government measures to pay additional taxes on the money that keeps food on their table,” said Eichorn. “With the tax deadlines ahead, it is imperative that we move forward quickly. I urge the House and the governor to follow the example of the Senate in bringing significant relief to families in Minnesota. “