BOSTON (SHNS) – Greater Boston Chamber of Commerce head Jim Rooney is asking lawmakers to make quick work of a piece of legislation that would update state rules so businesses are not taxed for forgivable Paycheck Protection Program loans.
The bill, SD 172 filed by Sen. Eric Lesser, would bring the state tax code in line with a provision of last year’s CARES Act that exempts the forgiven PPP loans from federal income tax, Rooney said.
If the Legislature does not make the change, businesses that pay the state’s personal income tax would have to include the amount of their forgiven PPP loans in their gross income for state tax purposes.
“It is clearly not the intent of the program to have these loans taxed because Congress took two rare steps regarding PPP: forgiving loans if payroll and headcount are maintained and exempting forgiven loans from federal income tax,” Rooney said in the letter to legislators. “These steps were taken because the purpose of the program is to maintain jobs and business activity. By subjecting the forgiven loans to tax, the state would undercut those goals.”
Rooney said the issue affects only businesses with a particular legal structure, one that is most common with self-employed individuals, sole proprietors, and pass-through entities. The bill has not yet been referred to a committee, in part because the House and Senate have not yet organized themselves into a committee structure.
Rooney said he understands that the state faces an uncertain revenue picture, but told lawmakers that giving up the tax revenue on the forgiven PPP loans would “provide much-needed relief for small businesses” and keep many of them afloat.