ST. PAUL – Last year, many small business owners accepted a federal loan in order to survive the pandemic. Now that decision could cost them tens of thousands of dollars in unexpected state tax increases.
With tax bills due in the coming weeks, State Representative Bjorn Olson (R-Elmore) said the legislature must act quickly to prevent more financial devastation on local employers.
“These business owners have suffered enough after Governor Walz forced them to close last year,” Olson said. “In some cases, they’re still not fully open due to the governor’s executive orders. The last thing we need to do is force them into another financial predicament.”
Olson said impacted business owners who accepted Payroll Protection Program (PPP) loans are being unnecessarily targeted by state government. If businesses used those PPP funds to pay wages, rent, or other criteria approved by the federal government, the loans were ultimately forgiven and were free from federal taxation.
But Minnesota has not conformed its tax code to match the federal law, and in doing so, is the only state in the Upper Midwest that has yet to exempt forgiven PPP loan income from state income taxes.
Recently, Minnesota’s economic experts announced our state would see a $1.6 billion surplus, which Olson said is more than enough to provide the exemption and protect local businesses owners from mammoth tax bills.
“We need to stand by our local businesses during this pandemic, not find more ways for them to struggle,” Olson said. “Minnesota’s surplus gives lawmakers the opportunity to easily eliminate these excessive tax burdens that have been placed on our local employers, and we should do so immediately.”
Olson noted that legislation that would exempt forgiven PPP loan income from state taxes currently awaits action in the Minnesota House Taxes Committee.