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NJBIA testified Wednesday in support of legislation to ensure by statute that New Jersey businesses that received federal assistance under the Paycheck Protection Program (PPP) will not have to pay state taxes on their loans, even if those loans are forgiven.
The bill, A-5149, sponsored by Assembly Majority Leader Lou Greenwald (D-6), would also allow taxpayers to deduct eligible business expenses on state income taxes, even if the expenses were paid for with a PPP loan that was later forgiven.
The IRS has already said forgiven PPP loans are not taxable as income by the federal government and eligible business expenses paid for with forgiven PPP loans remain deductible for federal tax purposes.
Although Gov. Phil Murphy recently announced that New Jersey would follow the federal government’s lead for the 2020 tax season, it is important to codify this by law and ensure that forgiven PPP loans remain nontaxable for state tax purposes beyond the 2020 tax year, said NJBIA Vice President of Government Affairs Christopher Emigholz.
“New Jersey PPP recipients have been contacting NJBIA because they are worried about this tax issue,” Emigholz said. “This legislation will provide businesses with peace of mind knowing that forgiven PPP loans will not be treated as taxable income by the state.”
The Assembly Appropriations Committee voted unanimously to release the bill. Identical legislation, S. 3234, sponsored by Senator Troy Singleton (D-7) and also strongly supported by NJBIA, was unanimously approved by the Senate on Jan. 28