Our view: It’s time for Minnesota lawmakers to fix the state’s PPP mess
Since it’s one of fewer than a dozen states whose tax laws do not automatically conform with federal tax regulations, the federal aid will continue to be taxed and it will take legislative action before it can change.
“Do no harm.”
That’s the reminder the Minnesota Chamber of Commerce is sending state lawmakers as the Legislature moves into the final weeks of the 2021 session.
The Minnesota Chamber this session is promoting its “Blueprint for Economic Recovery,” a list of initiatives and actions it suggests to “restore livelihoods now and position the state for long-term growth” as the challenges of the COVID-19 pandemic subside.
First up, according to the blueprint, is to stabilize at-risk businesses, since “their viability directly translates to economic activity, employment, community sustainability and generating revenues that benefit state and local government. ...”
Second is to “take strategic actions to accelerate economic recovery in the short term.”
The goal of the outline, according to Minnesota Chamber of Commerce President Doug Loon, is to “shine a bright light on the objective of restoring Minnesota’s economy and allowing us as a state to reach as full of our economic potential as possible.”
“Don’t layer on additional challenges, burdens, restrictions, taxes in the form of new mandates and new taxes on businesses at a time when they’re trying to recover,” he told the Grand Forks Herald.
And if the goal is to indeed “do no harm,” one step that must be taken, according to Loon, is to erase the tax that businesses face after receiving Paycheck Protection Program loans.
This isn’t a new development – it’s been in the news for months. The trouble is that it caught many business owners off-guard and, importantly, it’s going to keep happening unless the Legislature does something about it.
PPP loans, originating from the federal CARES Act, allow businesses that have struggled during the pandemic to offset revenue losses and keep employees on the payroll. If the loans are used for a variety of predetermined purposes – payroll, health insurance, mortgage interest payments and the like – then the federal government will forgive the loan.
More than 100,000 businesses in Minnesota took advantage of the program.
Just one problem: In Minnesota, businesses are being taxed on the dollars. Since it’s one of fewer than a dozen states whose tax laws do not automatically conform with federal tax regulations, the federal aid will continue to be taxed and it will take legislative action before it can change.
Businesses in bordering states North Dakota, South Dakota and Iowa aren’t taxed on PPP loans. Wisconsin changed its law earlier this year to avoid the taxing process.
Yet in Minnesota, businesses are still waiting.
The Minnesota Senate gets it, last month passing a proposal with bipartisan support. The House this week had a chance to offer full relief but opted against it.
Loon considers it the Minnesota Chamber of Commerce’s “hallmark issue.”
And it’s a worthy one, especially for the businesses located along Minnesota’s borders. They have endured additional hardship due to less restrictive pandemic-related rules in states like North Dakota and South Dakota, and now they’re being penalized for accepting federal help, even as their neighbors across the border are not.
If Minnesota truly wants full and fair economic recovery after a year of heavy-handed business restrictions, it must move to right this wrong.