Today the Minnesota Senate passed bipartisan legislation that seeks to ensure businesses are not penalized for keeping their employees on payroll through the COVID-19 pandemic. Last year, the Paycheck Protection Program (PPP) was an emergency measure passed by the federal government to help businesses and business owners keep their employees on payroll. Unfortunately, business owners are now being faced with the possibility of an unexpected tax on these loans.

“Many of our businesses utilized these loans as a last resort so they could afford to pay their staff and keep their doors open—they should not be punished for that,” said Senator Zach Duckworth (R-Lakeville). “After having faced one of the toughest years in recent history, our businesses are still in the middle of recovery. We need to get folks back to work so they can earn a living and provide for their families.”

Last year the federal CARES Act established the PPP program for small businesses experiencing hardship and revenue losses resulting from the COVID-19 pandemic. In order for the loan to be forgiven by the federal government, the loan needed to be utilized to fund qualifying costs (payroll, health insurance for paid sick/medical/family leave, mortgage interest payments, rent, utilities), and 60% of the loan proceeds needed to be used for payroll costs. In December 2020, the federal stimulus bill made it evident that forgiven PPP loans were not considered taxable income at the federal level. Minnesota does not automatically conform to federal tax law changes, hence the need for this legislation.

The passage of this bill ensures that small businesses that have been negatively impacted by COVID in the last year are not also hit with an unprecedented tax for trying to save their businesses and helping their employees during a pandemic.