The Minnesota Senate Tax Committee on Tuesday approved a new bill to provide substantial tax relief to Minnesota businesses and individuals for federal assistance they received during the Covid-19 pandemic.

“The economy is slowly opening back up but I still hear from small businesses every day that are barely making it,” said Sen. John Jasinski (R-Faribault). “They are doing everything they can to keep their doors open and keep people on the payroll. With our state budget picture in such good shape, we have an easy opportunity to help these businesses get some relief.”

The bill contains two main components:

• The bill protects businesses by exempting federal Paycheck Protection Program (PPP) Loans from state taxes. These emergency loans, issued by the federal government last year to help businesses struggling to survive the Covid-19 pandemic, are not subject to federal taxes; the Senate bill would conform Minnesota tax laws to federal rules. 

• The bill also allows Minnesotans who collected additional Covid unemployment benefits from the federal government to subtract a portion of those benefits on their income taxes this year. In addition to regular unemployment benefits, many laid-off workers received bonus unemployment payments of  $600-per-week or $300-per-week through the federal CARES Act. Minnesota withheld taxes from the regular unemployment payments, but not from the bonus payments. Many individuals were surprised with hefty tax bills because the state did not withhold taxes on those payments.

WATCH: Senate press conference on March 1 highlighting the PPP tax exemption bill.