MARCH 5, 2021
Hello from the State Capitol,
What’s going to happen now that the state has a $1.6 billion budget surplus?
It’s a question I’ve heard frequently during this past week. And it’s a reasonable question since Minnesota must set a new two-year budget before we adjourn session for the year, and that budget must be in balance.
To me, one area that must be addressed is the unexpected tax burden currently being placed on small business owners who have struggled to make ends meet over the past year.
As fear of COVID-19 spread began, Governor Walz forced many local businesses to close their doors. Due to the lost sales, one potential lifeline for struggling business owners centered on accepting Payroll Protection Program (PPP) loans from the federal government. Those who utilized the loan program to pay wages, rent, or other expense criteria approved by the federal government ultimately had their loans forgiven. These funds were also exempted from federal taxation.
Unfortunately, they have not been exempted from state taxation, and the result is enormous tax bills. I have heard from a number of local businesses who are paying thousands and in some cases tens of thousands of dollars more this year, simply because Minnesota is now treating the forgiven federal loans as income.
How unusual is this? As it stands today, Minnesota is the only state in the Upper Midwest that has yet to exempt forgiven PPP loan income from state income taxes.
The good news is there is legislation that would make this change, and it is currently awaiting action in the Minnesota Taxes Committee. The bad news is that tax filings are due in a few weeks, and small business owners across the state cannot afford to wait while lawmakers sit on their hands.
With the $1.6 billion surplus, we have the revenue needed to pay for this problem and we should be taking fast action on the proposal. Our local business owners have lost plenty over the last year, and state government should not be forcing them to lose even more.
Have a good weekend,
393 State Office Bldg.
100 Rev. Dr. Martin Luther King Jr. Blvd.
St. Paul, MN 55155