PPP Loan Recipients Could Face Big Tax Bills, Griffin Says
Businesses that have received loans from the Paycheck Protection Program in response to financial hardship related to COVID-19 could face a massive tax bill if the state legislature does not act, the week said. last Lieutenant Governor Tim Griffin.
Griffin and Les Warren State Representative, R-District 25, spoke with members of the Hot Springs National Park Rotary Club at its weekly meeting on Wednesday and discussed PPP loans, taxation of allowances from unemployment and emergency powers granted to Governor Asa Hutchinson during the pandemic.
Griffin said there were “pandemic-specific laws” that “are good to have on everyone’s radar,” starting with the potential taxation of PPP loans which he and Warren agreed to have. should not be imposed.
“So the federal government said early on that P3 loans … are not taxable for federal income tax,” Griffin said. “It makes sense, right? But states must take steps to exempt them. Well, here’s the interesting thing: The authorities said you had to spend the entire loan to get it canceled.
“So whoever wanted to be responsible for taxes and put money aside to pay the state income tax that might exist – and DF&A (the Department of Finance and Administration) says so – anyone would want him to do so would be in violation of the federal requirement that you use the entire P3 loan to be forgiven. “
The result? Griffin said the Arkansans spent the loans as they were supposed to, but are now told they owe income tax.
“So this is the situation that many Arkansans face, and if the legislature does not act, businesses will be hit with a massive bill they are not prepared for,” he said.
“I will say that the House Revenue Tax Committee, of which I am a member, passed this bill by the Revenue Tax Committee, so it should go to the Senate soon,” Warren said. “You were perfect with almost everyone I know; we don’t want people to be taxed on this.”
Griffin also discussed the taxation of people receiving unemployment benefits – a number that has reached nearly 300,000 in Arkansas since the start of the pandemic.
Prior to 2017, he said state income tax should not be paid on unemployment benefits, but in recent years, unemployment benefits have been imposed to pay for military income in retirement. .
“Because of the pandemic, you have a really historic and unprecedented number of Arkansans who have filed for unemployment,” Griffin said. “So the legislator, in my opinion rightly … is considering a one-time income tax exemption on unemployment benefits in 2020 and 2021.
“And they’re also looking at a solution so that in the future, at a minimum, the state can withhold taxes before sending you that check so you know what you’re dealing with.”
Warren said people who are currently on unemployment benefits must “use this money to get through these tough times.”
Griffin also discussed the governor’s emergency powers granted during the pandemic, a topic he said has many passionate views, but he felt it would be “remiss” to omit from the conversation.
“There is legislation under consideration that will seek to restrict the governor’s authority during the state of emergency,” he said.
Historically, Griffin has said emergency powers should not have been granted for as long a period of time as the pandemic permitted, and since no one predicted such a protracted event, he noted that they “weren’t ready “to make decisions on how extended emergency powers would be handled.
“One of the pieces of legislation proposes a change that would include limiting declarations of emergency to 30 days … unless it is extended by the legislature by a vote of the legislature,” he said. “And then there are also some proposals requiring the approval of certain rules that would come from the executive, but they would have to be approved by the legislature.
“So there’s that sort of thing floating around, and I think the balance that some people are trying to achieve is that you don’t want to limit the frame to the point that it can’t function as a frame, and that he can’t cope with the emergency at hand. If you do that, you cut your nose to upset your face, don’t you? “
Warren agreed that this was a “really difficult subject” and said he was “grateful” that he had not been governor in the past year.
“I’ve had voters hitting me both ways,” Warren said. “I have those who are upset with the restrictions that have been placed on individuals and businesses. I have individuals who tell me he hasn’t done enough. So it’s a very fine line that a governor must follow Ultimately, he is the last line, and at the moment the roles of the governor are defined, and if we are to change that, we need legislation in place.
“I have participated in conversations with the only piece of legislation (Griffin) referred to. he’s very involved. It’s not just a simple two-page piece of legislation that you just pulled out. It’s very complicated when you start to limit powers because … you want a governor who can take action and take care of your condition in emergency type situations, but at the same time, you want people to have a voice, ”Warren said.
“I don’t think there is a really simple answer to that. I think we have to be very careful to do what it takes so that in situations that none of us ever expected. with this COVID-19, we take care of our people, and the bottom line is that we take care of our people. “