Business groups ask Virginia lawmakers for higher PPP tax deductions
House of Delegates, State Senate bills differ in amounts
February 17, 2021
The two Virginia legislatures have yet to agree on how much Virginia businesses can deduct from the federal Paycheck Protection Program loans they received last year, and how much. loans on which they will have to pay state taxes. Business groups are calling on state lawmakers to allow higher deductions – especially for sectors like hotels and restaurants that are still suffering from the economic impacts of the COVID-19 pandemic.
In two bills currently under consideration in the General Assembly, the Senate approved a deduction of $ 100,000, while the House of Delegates only accepted a deduction of $ 25,000 – forcing businesses who have received PPP loans to pay state taxes on any funding in excess of these amounts. The maximum loan amount authorized under the program was $ 10 million; About 114,000 small businesses in Virginia received a total of $ 12.6 billion in PPP loans last year (including Virginia Business Media LLC). In January, the US Small Business Administration opened a second cycle of PPP loans capped at $ 2 million each.
In December 2020, Congress has stipulated that all PPP funds will be exempt from federal corporate tax and also allowed companies to deduct expenses paid with PPP funds.
The two state bills, which would bring Virginia into line with the latest federal IRS code, will ultimately need to be reconciled before they reach the governor’s office – and business groups know in which direction they are heading. want the decision to go: towards higher deduction rates.
In a letter Wednesday to Speaker of the House Eileen Filler-Corn and Senate Majority Leader Dick Saslaw, the Virginia Restaurant, Lodging and Travel Association said the two bills “unfairly limit tax deductions. . PPP represented a temporary solution, which directly benefits Virginia’s fiscal outlook through reduced unemployment and lower Medicaid enrollments. But this legislation negates that economic benefit by increasing state tax burdens when Virginia hotel companies can least afford it. “
VRLTA President Eric Terry notes in the letter that the state’s restaurant industry continued to lose jobs in December 2020, and the entertainment and hospitality industry lost more than 72,000 jobs statewide in the past year. He calls on lawmakers to consider a higher deductible amount for hospitality businesses that have been more affected than other types of businesses, while expressing support for the Senate plan.
“As you review the legislation regarding tax compliance with federal standards, we ask that you take into consideration the exceptionally difficult situation in the hospitality industry,” wrote Terry. “The recent announcement of an additional $ 730 million in the mid-term budget overhaul gives you the opportunity to do more to help those in the hospitality industry who have been hit hardest by COVID-19 .
“Without action, our members will face surprise tax bills at a time when they should focus on surviving the winter and the pandemic. We ask that you consider creating a higher deductibility allowance for the hospitality industry to recognize the unique challenges our members continue to face. “
Monday Governor Ralph Northam announcement these state revenues are expected to be $ 730.2 million higher than forecast for the next two years, rising to $ 46.7 billion. In his statement, the governor said the additional funds “allow us to move forward with our shared priorities – providing families and businesses in Virginia with the relief they need to get back on their feet, supporting schools. public sector employees and give our public employees a pay rise. “
The Virginia chapter of the National Federation of Independent Business issued a statement on Feb. 4 praising the Senate-recommended $ 100,000 deduction and asking the House to reconsider its $ 25,000 limit.
“Small business owners were in despair when they took out these federal loans after losing significant amounts of revenue due to state-imposed closures and restrictions,” said NFIB Director Nicole Riley, in a press release. “They followed all the rules set by Congress to keep their employees paid and unemployed, so at the federal level the loans were canceled and all related expenses were deductible. Now, almost a year later, with so many small businesses still struggling to stay afloat, setting a higher cap on deductions will help them recover and prevent more business closures. “
Virginia is one of some 20 states that freeze state tax rules for compliance with the federal tax code on any given date. Currently, the state of Virginia tax laws comply with the pre-pandemic IRS code as it existed on December 31, 2019.