Delegate Joe McNamara (R-Roanoke) has pre-filed HB 1787, legislation for the upcoming 2021 General Assembly session that will exempt business owners from state taxes on forgivable Paycheck Protection Program (PPP) loans. PPP loans are part of broad COVID-19 relief funding meant to help small businesses keep paying their employees.
When the PPP was passed by Congress in March 2020, the forgivable loans were exempt from federal taxes, but Virginia’s tax structure means the forgiven PPP loans are not automatically exempt from state taxes. McNamara said that could lead to confusion for business owners.
“This is a huge bill,” McNamara told The Virginia Star. “There are businesses out there that are making decisions daily on how to keep going, how to keep the doors open or not, and so I thought clarification from the state on the taxability of those forgiven loans was very important.”
McNamara clarified that the bill doesn’t benefit him in particular — although he owns two ice cream parlors, he did not apply for PPP loans. He submitted a similar bill during the 2020 special session, but it wasn’t heard during the session.
McNamara said since March, the threshold for PPP loan forgiveness has been reduced, meaning more businesses might be liable for state taxes on the income. Data from the U.S. Small Business Administration shows 114,570 PPP loans worth $12.6 billion were approved in Virginia. McNamara said that although high-profile cases of PPP fraud grabbed headlines, most PPP loans were to normal businesses who needed them. McNamara said it’s difficult to estimate how much some businesses might owe in taxes on forgiven PPP loans, although a financial impact study is being developed.
“I don’t know the exact number, but I think it’s safe to say that the way they have the forgiveness set up, that most businesses will have part or all of the loan forgiven,” McNamara said.
The Center Square reported that Virginia House Speaker Eileen Filler-Corn’s (D-Fairfax) Communications Director Kunal Atit said that Democrats might submit a similar bill. McNamara said he doesn’t care who gets credit for introducing the bill as long as businesses are helped. “Whether I’m the patron or not is not the most important thing,” he said.
McNamara has also pre-filed HB 1788, which would bring the state income tax code into conformity with the federal tax code in most cases, similar to legislation he has filed in previous years. Both bills seem like they could gain bipartisan support. McNamara said using his expertise as a C.P.A. to work across the aisle is part of his strategy for the Democrat-controlled General Assembly.
“I have tried to put together bills that would benefit all Virginians, whether it’s Republican or Democrat. I think putting in really partisan bills in today’s General Assembly is probably not a super path forward,” McNamara said. “So most of my bills have been non-partisan oriented that are trying to improve the lives of Virginians.”
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