The Senate passed bipartisan legislation Thursday to match the federal government’s tax-exclusion for forgiven Paycheck Protection Program (PPP) loans received by businesses in 2020. About 102,400 businesses received $11.3 billion worth of loans in Minnesota. Typically, forgiven loans are taxable at the state and federal level, but Congress made special exceptions last year. Conforming to that measure will cost Minnesota $409 million over the next two years.
The bill also includes a $28 million tax exemption for unemployed Minnesotans who collected the additional $600-per-week Pandemic Unemployment Compensation approved by Congress for 17 weeks in 2020. The Senate’s bill allows eligible Minnesotans to subtract 18% of these payments from income for 2020.
While an important benefit, it falls far short of what President Biden signed into law on Thursday: a full exemption of $10,200 in unemployment benefits received in 2020. Senate DFLers offered an amendment to match the federal provision to make sure unemployed Minnesotans do not carry a larger tax burden. Unfortunately, Senate Republicans voted against the amendment and against providing equitable tax relief to Minnesota’s working families.
Senate DFLers offered additional amendments to address some of the most urgent post-pandemic needs. Adding $57 million for critical summer learning support programs was ruled not germane, and another idea to conform to a federal law allowing employers to contribute up to $5,250 to their employees’ student loan payments without penalty also was rejected.
There was also some concern about spending nearly a half-billion dollars on business tax relief without regard for the many needs facing Minnesota as the recovery continues. Senate DFLers offered an amendment to limit the PPP tax subtraction to $1 million, freeing up more funds for additional relief measures. Another would have added a fifth tax bracket on those earning more than a half-million dollars per year to add fairness to the tax system and raise revenue to support ongoing investments in education, health care, and other core priorities. Neither of these amendments was adopted. (SF 263)
