Today the Minnesota Senate passed 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.

“So many of our businesses took these loans so they could afford to pay their staff and keep their business’s doors open, and we should not be punishing them for that,” said Senator Karin Housley (R-Stillwater). “Our businesses have just faced one of the toughest years we’ve had in a long time, and now they’re going to be hit with an unexpected tax? It isn’t right. We absolutely have to continue helping them in their recovery efforts.”

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. Unfortunately, Minnesota does not automatically conform to federal tax law changes.

This bill seeks to bring Minnesota into federal conformity so that these forgivable loans are not taxed in Minnesota. With tax season on the horizon, passing this bill offers relief to businesses and business owners that have been left wondering if they would be hit with an unexpected tax, after a year of uncertainty and floundering revenues.

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.

“Our businesses have suffered enough,” continued Senator Housley. “Over 100,000 Minnesota businesses utilized these PPP loans—we shouldn’t be punishing them for using these loans to pay their employees during a pandemic. Tax season is fast-approaching, and after the year we’ve had, these loans shouldn’t be blindsiding business owners and dragging them down.”