Because Governor Janet Mills and the Legislature have not acted, Maine businesses in the Paycheck Protection Program (PPP) will have to pay Maine income taxes on forgiven loans.
Businesses that took a PPP loan to survive and worked hard to meet the terms for loan forgiveness will have to pay state taxes on the forgiven loan unless Maine changes state tax laws. As of July 6, more than 27,000 Maine businesses have received PPP loans totaling over $2 billion—a potential windfall for state coffers.
Congress and the Trump Administration explicitly intended PPP loans as relief to keep those businesses afloat. They purposely exempted the forgiven loans from federal taxes.
But in Maine, if the Mills Administration or the Legislature continue to do nothing, the state will see an increase in state revenue from the tax on PPP loans.
In addition to the PPP, the Trump Administration’s Coronavirus relief acts that Congress passed last spring included changes to federal tax law to help businesses survive the pandemic.
Businesses are making make decisions now based on what the law allows. But when Maine’s law doesn’t match, businesses might not be able to take advantage of the changes.
The tax code is confusing enough. Having two sets of laws for federal and state tax returns will create problems.
To make things easier for taxpayers when the federal government changes the tax code, each state typically adopts that same changes. Adopting the same code simplifies how Mainers pay income and business taxes.
Many states automatically adopt the federal changes. In other states, like Maine, the Legislature has to pass the changes. A number of these states, including New York, California, Colorado, Georgia, Iowa, New Mexico and North Carolina, have taken action to adopt all or most of the federal changes.
Yet Maine has taken no action. In not matching federal law, Governor Mills has created a needless, giant headache for Maine’s small businesses.
Contact Governor Mills here and urge her to exempt PPP loans from state taxes and match Maine’s tax law with the federal changes.
NOTE: People who have questions about the tax law changes and any PPP tax liability should consult their tax advisors. There is additional federal legislation pending to clarify the federal tax implications of PPP loans.