The Paycheck Protection Program (PPP) is the loan program created by Congress to help small businesses during the COVID-19 pandemic. The much needed financial lifeline allowed small businesses to keep their doors open, maintain their payroll and avoid laying off employees, and cover business related overhead while weathering out the pandemic. Nearly 90,000 Wisconsin businesses received funding through this program.
Congress intended for the PPP loans to be tax-free, while also allowing expenses paid with the loans to be tax deductible. In January, the Wisconsin Department of Revenue (DOR) issued guidance via their website stating that the first-round of PPP loans will not be treated as taxable income, but expenses paid for using those loans will be ineligible for the usual expense deduction. The second-round of the PPP loans, oddly enough, would be treated in the opposite manner where expenses will be deductible and the loans will be treated as taxable income.
I was surprised and disappointed by that decision from DOR. It would mean businesses that took the desperately needed PPP loan will have a higher level of taxable income than if they had not. This would result in $431 million in unexpected taxes over the next four years on thousands of already struggling small businesses. As a member of the Senate Committee on Financial Institutions and Revenue, where there was a Senate bill to update the state’s tax code, I drafted and introduce an amendment to fix the problem.
My amendment passed in committee and was attached to the Senate bill. After committee, both houses voted with bi-partisan support to pass the Assembly version of the bill that included my amendment language. Governor Evers recently signed this legislation into law. I am thankful to my colleagues who supported my amendment and I am pleased it was included in the final bill.
Our local small businesses have adapted with innovative ways to survive this pandemic and overcome many government restrictions and limitations forced on them. They have followed the rules and should not be punished with a surprise tax bill. I will always support our local small businesses and I remain committed to being your voice in Madison.