The state Senate has approved a bill to exempt Paycheck Protection Program (PPP) loans forgiven by the federal government from New Jersey’s gross income tax.
The Senate voted 33-0 to pass the bill, S-3234. The state Assembly will consider the measure next.
Congress created loans as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act to help small businesses keep employees on their payroll during the pandemic. The federal government may forgive some or all of the loans for recipients that meet certain conditions.
“As we all know, the COVID-19 pandemic has devastated the small business community in New Jersey. I can name dozens of family restaurants, small retail shops, and other establishments that have either closed their doors forever or are struggling [every day] to stay open,” state Sen. Anthony Bucco, R-Boonton, said in a news release.
“During this extremely difficult time, small business owners should not have to worry about additional taxes,” Bucco added. This “legislation will eliminate the State tax and keep the State from profiting off the backs of businesses that continue to struggle during the pandemic.”
The Small Business Administration (SBA) approved approximately $17.3 billion worth of PPP loans for small businesses in New Jersey. The Office of Legislative Services could not determine how much revenue the state might lose if the proposed legislation becomes law.
Last year, 157,405 New Jersey businesses received PPP loans. Of those, 135,467 were loans of less than $150,000, according to the National Federation of Independent Business (NFIB).
“When small business owners took these loans last spring to survive when they were ordered to shut down, and the owners agreed to keep their employees on the job and off of unemployment to turn them into grants, they never imagined they would be taxed by the government,” NFIB’s New Jersey State Director Eileen Kean said in a news release.
“We are so grateful to the Senators for going along with Congress, and not imposing taxes on the forgivable funds and allowing loan-related expenses to be deducted,” Kean added. “We hope the Assembly will support New Jersey’s small businesses by doing the same.”
Under the bill, businesses could also deduct expenses paid for by such a loan.
“New Jersey is one of the highest taxed states in the nation,” Bucco added. “During this pandemic, when small businesses are literally struggling to survive, the last thing they need is yet another tax.”
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