(The Center Square) – Ohio lawmakers took the first step Tuesday toward making sure businesses that received help from federal COVID-19 funding won’t get stuck paying state taxes on loans designed to keep people working.
House and Senate committees held hearings on bills that conforms Ohio tax law with federal law that called for Paycheck Protection Program loans to be forgiven and allowed businesses to deduct payroll and other expenses paid with the loans.
According to the National Federation of Independent Business, 77% of its Ohio members used the first PPP loan established by Congress, and 55% reported a revenue loss of at least 20% over the past year.
Ohio NFIB Legislative Director Chris Ferruso said the organization’s typical Ohio member employs 20 or fewer people and does less than $2 million in annual receipts.
“Our members need the certainty that as they are preparing their tax returns, Ohio Law will not treat these loans differently,” said Ferruso, who testified in support of Senate Bill 18. “Keeping resources in our small businesses is crucial to their ongoing viability.”
Ohio Department of Taxation Legislative Director Tim Lynch testified in support of House Bill 48 and said conforming to federal tax laws just makes things easier for filers.
“The first line of the Ohio income tax form asks taxpayers to enter their Federal Adjusted Gross Income from the Federal Form 1040. Having the same starting definition of income as the federal government greatly simplifies the preparation and administration of state income tax for taxpayers, tax preparers, state tax officials and school districts that impose income taxes,” Lynch said.
Policy Matters Ohio objected to allowing the deductions, however, claiming it benefits the wealthy.
“This is a classic double dip for wealthy Ohioans,” Zach Schiller, of Policy Matters Ohio, testified before the Senate Ways and Means Committee. “The Internal Revenue Service specifically prohibited the deductibility of such expenses with the first round of PPP loans, citing existing law and precedent. Now, while hundreds of thousands of Ohioans are paying taxes on the unemployment compensation they received last year, business owners will avoid paying taxes on their forgiven loans they used to pay workers’ wages, and they’ll get tax deductions.”
Reaction from state legislatures around the country is mixed.
In Virginia, lawmakers are debating limits on spending deductions. In Minnesota, lawmakers have not made a decision on conforming to federal tax law, while Iowa businesses will not pay state taxes on the loans.