State Sen. Paul Sarlo (D-Woodridge) introduced a bill that would exempt forgiven loans received under the federal Paycheck Protection Program from state income tax and allow businesses to deduct PPP-related expenses.
“This will help ensure that the receipt and forgiveness of coronavirus assistance through the PPP does not result in surprise tax costs for small businesses that complied with the terms of the loans,” Sarlo. “The goal of the CARES Act funding was to enable these businesses to survive the economic hardships of the shutdown, and Congress’s intention was to allow the loans to be forgiven with no tax consequences. Many businesses are on the brink of insolvency and these costs could push them over the edge.”
The PPP was created under the Coronavirus Aid, Relief and economic Security Act, providing loans to businesses to cover expenses — namely payroll — amid virus-fueled business shutdowns.
The Internal Revenue Service earlier this month issued guidance that said businesses could not deduct PPP expenses if their loan under the program would not be forgiven until next year.