HYANNIS – Fifth Barnstable State Representative Steven Xiarhos recently tabled legislation to prevent state taxation of economic benefits small businesses received from the federal government during the ongoing COVID-19 pandemic.
Xiarhos said in a press release that funds received by companies under loans from the Coronavirus Aid, Aid and Economic Security (CARES) Act of 2020 and the Paycheck Protection Program (PPP) may be partially or fully allocated.
However, he said that the loan proceeds could be considered business income under the state tax law and therefore companies may have to pay state income tax on the amount received.
Legislation submitted by Xiarhos, a bill to ease the financial burden on small businesses during the COVID-19 pandemic, would counter this by creating a state tax deduction for income businesses obtained from PPP loans issued.
“Thousands of Massachusetts companies have received millions of dollars in the program to keep them in business and keep people busy. In order to be able to issue these loans, companies must demonstrate that they spent the money on payroll and other qualified expenses. I believe it is against the goals of the CARES Act for Massachusetts to impose a tax on these revenues when they are given by the federal government, ”Xiarhos said in a statement.
“The purpose of this money was to get every dollar possible into the hands of the employees who are dependent on proceeds during the pandemic, and we shouldn’t be deducting tax on those benefits.”
The legislation is expected to be assigned to a legislative committee and a hearing will take place in the coming months.