As many of you know, throughout this pandemic I’ve been working closely with business owners in Hastings, Cottage Grove, and Afton to hear their concerns, pass them on to the governor, and try to brainstorm ways for them to survive while not operating at full capacity.
Last year, many of our local stores and restaurants were ordered to close their doors by Governor Walz during the early stages of the COVID-19 spread. While most of them are back in business, some, such as bars and restaurants, continue to operate with restrictions. For others, the pandemic put them out of business for good.
As the days turned into weeks of forced closure, one of the lifelines offered to struggling business owners was the opportunity to secure a Payroll Protection Program (PPP) loan. Those who utilized this federal loan program to pay wages, rent, or other expense criteria approved by the federal government ultimately had their loans forgiven. To further help these businesses, the funds would not be subject to Federal income tax.
Minnesota, on the other hand, is not nearly as sympathetic.
Our state has not conformed its tax code to match the federal law, and is the only state in the Upper Midwest that has yet to exempt forgiven PPP loan income from state income taxes.
So what would a failure to conform mean for local business owners who accepted the PPP loan?
I’ve heard from a Hastings medical-related business who received a large PPP grant due to a high number of employees and payroll. He is looking at a $24,000 tax bill.
Remember, these are businesses, through no fault of their own, were forced to shut down and accepted the federal loan in order to survive. Now their state government wants to tax this revenue as income, which would continue the financial assault our local business owners have faced.
Recently, Minnesota’s economic experts announced our state would see a $1.6 billion surplus, which would be more than enough to provide the exemption and protect local businesses owners from mammoth tax bills. Currently, there is a bill sitting in the Minnesota House Taxes Committee that would exempt forgiven PPP loan income from state taxes, and I believe it should be brought to the House floor quickly.
With a surplus available, there is no reason to force our struggling businesses to pay more to state government. Tax bills will soon be coming due, so lawmakers can and should act with some urgency to give our local employers some peace of mind.