MADISON – Many Wisconsin small businesses may have to pay unexpected state taxes related to loans under the paycheck protection program, which was deemed tax-free unless lawmakers and the governor’s office intervene.
It did so after the US Congress took action in December to avoid a similar situation at the federal level. However, at the state level, companies could continue to have an impact on their finances after receiving PPP loans. unless lawmakers step in to actually change the law, as Congress did.
The PPP is part of a $ 2 trillion coronavirus aid package that Congress passed last year. The program aims to motivate small businesses to keep their employees or, if they have been laid off, get them back to work. The main incentive for businesses to apply for PPP loans is the offer of forgiveness when most of the money – originally 75% but later revised to 60% – is used on payroll. Businesses can borrow up to $ 10 million based on their labor costs. The loans have a 1% interest rate and a six-month grace period. Owners can also use the money for rent, mortgage interest, and insurance. If companies were to cut jobs or their employees’ wages, they would have to pay back some of the money.
“Congress never intended that these funds would be taxed by the state,” described accountant Michael Silverman of CFO Solutions, describing the situation as a “money robbery” from the state government. Silverman said if the situation is not addressed, the consequences for the company and employees could be dire. “By and large, the time is from the Essence. We have to do it. “
Patty Mayers, a spokeswoman for the Wisconsin Department of the Treasury, said the state would technically not tax PPP loans. “The current tax law says that income that is not taxable is not deductible,” she said. “For the first time in December 2020, federal law granted companies the dual benefit of excluding PPP loans granted from income tax and deducting business expenses paid with the funds. Current Wisconsin law does not allow both benefits. Legislation needs to be passed and signed in Wisconsin to handle federal state tax treatment … In short, this is not something our department chose to do. We obey the law. “
Some are trying to change the law to allow for an outcome more similar to that of the federal government. These include the Wisconsin Tavern League, which, along with dozens of other Wisconsin-based associations, wrote a letter calling on lawmakers to “get the law cleared up quickly, as Congress did to reflect the intent of the CARES Act – that forgivable PPP loans were intended as taxes – free aid. Small businesses in Wisconsin shouldn’t face an unplanned tax bill of nearly half a billion dollars for sloppiness Elaboration and questionable legal interpretation at the federal level. “
Chris Marsicano, president of the Wisconsin Tavern League, said he and others were surprised at the prospect of being financially affected by PPP loans. “We’ll have it fixed for our people,” he said. “We’re getting the state through some laws to fill this loophole so we can get our tax deduction on wages paid. … Other states have already fixed the problem. “
Two representatives of the Waukesha County Congregation, a Democrat and a Republican, expressed concern about the situation Thursday and intended to address it.
Rep. Robyn Vining, DWauwatosa, said she had been Watch the process closely. “I’m a small business owner, I see,” she said, adding that she also put in place laws to give additional tax breaks to small businesses in Wisconsin that received help from programs like the We All In Scholarships and Hopes to see this is over
Rep. Scott Allen, R-Waukesha, said he was open to investigating this type of aid further. “I would definitely take a closer look at this,” he said. “It doesn’t sound unreasonable to me.” Allen said he hoped something would be done to address PPP lending, and if the federal government doesn’t do it, “there is no reason the state shouldn’t do it too.”
Contributors: Associated Press