To align New Jersey’s policy with the federal government’s policy on Paycheck Protection Program (PPP) loan taxation, Assembly Democrats Louis Greenwald, Daniel Benson and Gordon Johnson sponsor legislation to make PPP loans that have been forgiven exempt from the State’s gross income tax and corporation business tax.
The PPP was established by the federal CARES Act to provide loans to small businesses in order to help them keep employees on the payroll during the pandemic. Those loans can be forgiven for certain businesses meeting specific requirements, and any loans that are forgiven are exempt from federal income tax.
The bill (A-5149) ensures New Jersey businesses will not have to pay State taxes on a forgiven PPP loan, while also allowing businesses to deduct expenses paid for via the loan – even if it has been forgiven.
Upon the Assembly Appropriations Committee advancing the bill on Wednesday, Assembly sponsors Greenwald (D-Camden, Burlington), Benson (D-Mercer, Middlesex) and Johnson (D-Bergen) issued the following joint statement:
“Small businesses throughout our state have been hit hard by COVID-19, which means many of their employees have also felt the impact of the pandemic. The Paycheck Protection Program helped companies keep workers on the payroll when they may have otherwise needed to implement layoffs during the worst of the economic crisis.
“Loans that were awarded and later forgiven to help businesses and their employees get through challenging circumstances outside their control should not be subject to income taxation or tax deduction-related restrictions. This legislation will bring our state policy in line with federal policy to benefit small businesses throughout New Jersey.”
The legislation now heads to the Assembly Speaker for further consideration.