Although the federal government declared that Paycheck Protection Program (PPP) loans would not be taxed at the federal level, the same cannot be said at the state level here in Minnesota. As it currently stands, thousands of business owners will be levied with substantial state tax bills and required to pay taxes on their PPP loans. This could be disastrous for many businesses who were already hit hard by the COVID-19 pandemic and set back the state's economic recovery.
Conformity to federal tax code is being advanced at the Minnesota Capitol right now, with legislation already having passed the Republican-led Senate. Democrats have yet to pass its companion in the House, however. AgriGrowth is working diligently with our members, the Minnesota Chamber of Commerce and other business advocates to champion this effort - not only to protect agri-food businesses who kept the food supply chain running throughout the pandemic, but also numerous other industries and businesses across our state devastated by COVID-19.
Last session, AgriGrowth and other key stakeholders helped successfully secure federal tax conformity with Section 179 in relation to the Tax Cuts & Jobs Act of 2017. The legislation provided much needed tax relief to ensure that Minnesota’s business climate remain competitive with our surrounding states. Now we’re once again advocating for state tax conformity in relation to PPP loans.
Just looking at the agriculture and food industry, a 2020 study commissioned by AgriGrowth shows that we contribute $37.1B in total value to the state economy. In addition to its notable economic impact, our sector is also responsible for $21.4B in household income, as well as 388,134 jobs throughout the state. The data found within the Agricultural Economic Contribution Study conveys not only an industry that provides significant revenue at the local, state, and federal tax levels, but one that has an impact statewide on employment, communities and the overall health of our state.
State taxes levied on PPP loans could be devastating to our industry, employers and employees in every corner of our state. Plus, with recent news that Minnesota has the 7th highest state and local taxes in the U.S., that will only compound the issue further for Minnesota businesses.
AgriGrowth is a strong advocate for a tax climate that supports small businesses, farmers, consumers, and numerous industry sectors who are eager to rebuild back the economy stronger and better than before. We are working hard to make sure our businesses aren’t taxed in Minnesota for their PPP loans.
