By Christian Wade | The Center Square
New Hampshire lawmakers are moving to exempt thousands of New Hampshire businesses from paying state taxes on federal pandemic relief loans.
A proposal filed by Senate Majority Leader Jeb Bradley, R-Wolfeboro, would eliminate state taxes on the federal Paycheck Protection Program for more than 24,000 businesses that received the disaster loans.
The measure cleared the Senate Ways and Means Committee with a unanimous vote on Monday, and has been teed up for a vote in the full Senate next Thursday.
If the Senate approves the bill, it would still need to pass the New Hampshire House of Representatives before heading to Gov. Chris Sununu’s desk for consideration.
At a legislative hearing in February, Bradley referred to the bill as a “clarification” that would put the state’s tax policy in line with the intent of the federal relief program.
“PPP funds were designed to keep the American economy afloat during the significant uncertainty of the pandemic, it was never meant to be a taxable event,” Bradley told lawmakers. “Meaning there was never any intention to create revenue loss to New Hampshire.”
He has taken issue with the state’s claims that it would lose revenue from not taxing the loans, arguing that it is tax revenue the state was never meant to collect.
The state Department of Revenue Administration has said it is unable to calculate the exact fiscal impact of the proposal, citing a lack of information about borrowers, but has estimated the impact to state coffers ranging from about $80 million to $135 million.
The Paycheck Protection Program was approved as part of the $2.2 trillion CARES Act passed by Congress in March 2020 to help keep small businesses afloat during the current pandemic.
Under the law, borrowers are eligible for PPP loan forgiveness if at least 60% of the proceeds go toward payroll expenses.
A second pandemic relief package approved by Congress in December provided another round of forgivable PPP loans and allowed businesses to claim tax deductions for the expenses they covered with forgiven loan proceeds.
More than 24,000 New Hampshire businesses received about $2.6 billion through the first round of the loan program, according to data from the U.S. Treasury.
Congress exempted PPP loans from federal income taxes, but New Hampshire is one of 18 states where loans are taxed, according to the Washington, D.C.-based Tax Foundation.