Your state may require you to pay taxes on Paycheck Protection Program (P3) loan amounts, which could be substantial depending on the amount granted to you. Forbes reports.
The PPP was designed to help small businesses, including those in the cleaning industry, stay afloat during the coronavirus pandemic. It was part of the federal Coronavirus Help, Relief, and Economic Security Act (CARES) and allowed borrowers up to US $ 10 million from private lenders without collateral, personal collateral, or fees. In the first week, approximately 600,000 businesses received more than $ 5 million through 3,000 lenders. The program is scheduled to end on May 31, 2021.
In October, the Small Business Administration (SBA) began processing loan forgiveness requests for qualifying businesses. Businesses that met all the conditions could have their entire P3 loan canceled and not have to pay federal income tax.
Christina Moore, legal partner of Taylor English, points out that some states are still in the process of changing the tax treatment of PPP loans. For example, California changed course on April 28, when Gov. Gavin Newsom signed a law that would allow most California businesses that received a canceled PPP loan to avoid taxes on remittances if they can post a at least 25% reduction in profits for at least quarter due to pandemic. On March 15, Virginia signed a law a bill which excludes canceled PPP loans from taxable income. This new legislation also offers specific deductions of up to $ 100,000 of expenses paid through canceled PPP loans.
however, Forbes Reports that there are nine nine states currently planning to forgive the tax PPP loans including California, Florida, Hawaii, Minnesota, Nevada, North Carolina, Texas, Utah, and Vermont.
Legal experts advise business owners to familiarize themselves with their state’s position on PPP loans and to follow any proposed legislation on this matter. Additionally, experts advise companies to understand their tax liability and plan to have funds available.