Farm Credit Administraton
BY THE EDITORIAL STAFF OF THE FREE LANCE STAR
After Governor Ralph Northam shut down much of the Virginia economy last year due to the COVID-19 pandemic, he now plans to tax the federal loans that have saved many Virginia businesses from bankruptcy.
The Governor’s Bill (SB 1146), presented by Senator Janet Howell, D-Fairfax, Chair of the Senate Finance and Funds Committee, proposed taxing paycheck protection program loans made to companies under the Coronavirus Aid, Aid, and federal funds have been used to keep employees on payroll while on lockdown, Economic Security Act (CARES Act).
PPP loans issued by private lenders and supported by the Small Business Administration could be granted if the employer used at least 60 percent to cover labor costs and the remaining 40 percent for certain allowable business expenses such as mortgage or rent or utilities and labor protection equipment .
These loans have literally been the lifeline for hundreds of Virginia businesses. And in December, “Congress made it clear that a PPP loan made is completely tax-free and non-taxable income,” according to the US Chamber of Commerce.
But while Virginia has been adhering to federal income tax law and adopting federal income definitions since 1972, Northam wants PPP loans made to be considered taxable income so that it can collect 6 percent of every PPP pie. Although the loans allowed un laid-off employees to continue to pay Virginia income, sales, and personal property taxes, and prevented them from applying for state unemployment benefits.