Legislators have reached agreement on a bill that will free the unemployment insurance tax rate and extend tax breaks on small business loans to help Massachusetts companies and their employees cope with the COVID-19 pandemic.
House and Senate leaders in a statement Monday said they had agreed to freeze the unemployment insurance tax rate for 2021 and 2022 and adjust state income tax laws to extend the tax break.
Senate President Karen Spilka and House Speaker Ron Mariano signed the declaration, as did Senate Chairman for Ways and Means, Michael Rodrigues, and Chairman for House Ways and Means, Aaron Michlewitz. They did not provide a copy of the invoice they referred to.
Other provisions of the agreement include tax breaks for unemployed people whose income falls below 200% of the poverty line, the waiver of penalties for missed tax payments for unemployment benefits in 2020, mandatory paid leave for employees who test positive for COVID-19 or who require a leave of absence Get the vaccine and reimbursements for employers who give paid time off.
“This agreement strikes a balance to ensure that businesses can keep moving while protecting those who work hard to keep the economy going,” the lawmakers said in the statement. “Time is of the essence to bring this much-needed relief to businesses and employees alike, so we will act quickly to get this comprehensive bill to the governor’s desk.”
Hours before, Bruce Tarr, chairman of the Senate minority, joined a call by the conservative think tank MassFiscal to drive changes to the unemployment insurance rate and tax laws on issued PPP loans. The Gloucester Republican said the bipartisan coalition of lawmakers is still scrutinizing the details of the deal, but “it signals the opening of a large window of time to provide the tools necessary to address these challenges.”
Business leaders have been voicing concerns about the expected rise in unemployment insurance for months. Employers are expected to see rates increase from an average of $ 539 per employee to $ 866 per employee. The bill would freeze unemployment insurance rates for 2021 and 2022 and allow government borrowing.
The state’s UI trust fund has been depleted since the pandemic began and fell into the red to more than $ 2 billion by the end of 2020. The Massachusetts Taxpayer Foundation said in a bulletin released last week that borrowing would likely be inevitable. Now the state has time to strike a deal that is inexpensive for the state trust fund and employers.
The Raise Up Massachusetts Coalition, a group of faith-based institutions, trade unions and community groups, praised the plan to push for paid vacation protection for workers, but has not yet seen the bill. The coalition plans to review the bill to see if it meets members’ requirements for at least 5 days or 40 hours of paid sick leave.
“Ensuring that frontline workers can afford to stay home if they have symptoms or have been exposed to COVID-19 is critical to preventing additional voltage spikes and ending the pandemic for good,” said Peter MacKinnon, president from SEIU Local 509.
The proposed tax break for small business owners with issued PPP loans has gained momentum over the past week. Citing the impact of the pandemic on small businesses, lawmakers from Democratic Senator Eric Lesser of Longmeadow to Republican MP Marc Lombardo of Billerica have supported the passage of a law that will allow small business owners to avoid claiming PPP loans on their gross income tax.
The $ 900 billion stimulus package passed in December allows companies with PPP loans to exclude these funds from their gross income. However, they can still ask for deductions from the expenses they paid for using PPP funds, tax experts say. The end result is a “double benefit” for businesses, at least in states that comply with federal tax laws.
“This is a double tax break from a baseline where people typically can’t deduct expenses they don’t pay for,” said Adam B. Thimmesch, a professor at the Nebraska College of Law who controls federal and state taxes across the state analyzes US
Massachusetts complies with federal tax laws when it comes to corporations but not when it comes to personal income taxes. Some businesses, especially small businesses, levy corporate taxes over income taxes because they are “transit companies”.
However, lawmakers in Massachusetts can do one of two things: opt out of the federal code or pass a bill that equates to federal income tax law so that both large and small businesses get what is known as the double benefit, Thimmesch said.
The problem with federal tax compliance in this case is the potential impact on firms in difficulty who have not received a PPP loan.
“If you were a company that did not receive PPP funding, you would pay state income tax on your entire income,” said Timmesch. “Neither of you received federal aid and you have to pay state income tax on your entire income, while a PPP recipient receives federal aid and claims a deduction for an expense that he did not pay.”
For weeks, entrepreneurs have been calling on the legislature to eliminate the differences between the federal and state tax codes.
“I think they just thought we had to survive and use all the opportunities we can get,” said Michlewitz during the budget hearing last week, as administration and finance minister Michael Heffernan testified.
Following Monday’s announcement, Michlewitz’s office did not answer questions about the potential “double benefits” that small and large businesses could get from PPP loans.
On Monday morning, on a phone call to MassFiscal, Republican lawmakers called for the swift passage of a law that would freeze unemployment insurance rates and provide relief to companies with PPP loans.
“Our small businesses and workers across the Commonwealth need us. They are in a difficult position because the government put them in a difficult position, “Lombardo said, referring to the shutdown of non-essential businesses at the start of the pandemic and other restrictions the state has since put in place.
“I represent a lot of these small business owners who are watching much bigger businesses get these PPP loans, which were designed to be tax-free and tax-free, and in Massachusetts, this is where the small business hit,” said Senator Ryan Fattman, a Sutton Republican. “It’s really important to take care of this as soon as possible and as soon as possible now.”
Peter D. Enrich, professor emeritus of law at Northeastern University School of Law, said a change in state tax laws for personal income taxes in line with federal tax laws means businesses would get a double benefit. Enrich, who serves on the board of directors of left-wing think tank MassBudget, said the state would lose more than $ 150 million as more companies demand deductions for expenses they didn’t pay for.
“It is just not true that people without legislation are taxed on the PPP loans they issue,” Enrich said. “It’s just a confused narrative that lobbyists have taken advantage of in the business world.”