MAIA Advocates for Exclusion of PPP Loans from Taxable Income
Going to bat for agents after hearing their concerns, MAIA contacted several members of the MA House/Senate leadership to express our support for SD.172, An Act providing financial relief to small businesses during the COVID-19 pandemic. This legislation would allow for critical financial relief to local independent insurance agencies that utilized Paycheck Protection Program (PPP) loans.
Although income from forgiven PPP loans is not taxable at the federal level, without this fix, it will be taxable in Massachusetts for businesses incorporated as pass-through entities (S corporations, partnerships, and sole proprietorships). This means that those most affected will be small- and medium-sized businesses that are already struggling. Conversely, corporations will not be subject to this tax because of Massachusetts’ conformity to the federal code.
SD.172 would address this inequity and allow for critical financial relief to thousands of businesses across the Commonwealth. MAIA’s Advocacy team will continue to push for SD.172 language to be enacted before the fast-approaching April 15 individual income tax filing deadline.
Below is the full text of the letter sent by Nick Fyntrilakis to House Speaker Ronald Mariano and several other leaders of the MA House & Senate:
February 25, 2021
Representative Ronald Mariano
Speaker of the House
Dear Speaker Mariano:
I write today on behalf of the Massachusetts Association of Insurance Agents (MAIA), a trade association representing nearly 1,200 independent property/casualty insurance agencies across the Commonwealth. I am writing to express our support for SD.172, An Act providing financial relief to small businesses during the COVID-19 pandemic, which would allow for critical financial relief to small businesses like our local independent insurance agencies that utilized Paycheck Protection Program (PPP) loans.
We are grateful to Senator Eric Lesser and to the bill co-sponsors, Senator Patrick O’Connor and Senator Jason Lewis, for filing this important piece of legislation.
Section 1106 of Public Law No. 116-136, the federal “Coronavirus Aid, Relief and Economic Security (CARES) Act,” provides loan forgiveness to small businesses for certain loans made pursuant to the PPP under the Small Business Act. Under the Act, any amount of cancelled debt associated with the PPP loan that would otherwise be includable in the gross income of the borrower under the Internal Revenue Code (IRC) for federal income tax purposes is excluded from gross income.
However, because, for personal income tax purposes, Massachusetts adopts the IRC of personal income tax as amended and in effect on January 1, 2005, a borrower subject to Massachusetts personal income tax, any amount forgiven under § 1106 of the Act is includable in gross income and subject to tax.
We have heard from our members that because the inclusion of income associated with forgiven PPP loans is includable income and subject to tax, many small and medium sized businesses such as our members that are incorporated as pass-through entities (S corporations, partnerships and sole proprietorships), will be subject to that tax. Conversely, corporations will not be subject to this tax because of Massachusetts’ conformity to the federal code.
It is without question that in the last legislative session, and particularly over the last ten months, the Legislature enacted critically important legislation through which all Massachusetts residents will benefit. We are positive that this important work will continue in the early days of this new session and are hopeful that further relief for our local businesses will continue. SD. 172 would address this issue.
We are cognizant that it is necessary for this language to be enacted before the fast-approaching April 15 individual income tax filing deadline to ensure that relief is provided to the thousands of struggling businesses across the Commonwealth. We believe that attaching such language to fast-moving legislation would address these critical concerns and provide such relief to these businesses in adequate time before this year’s tax season.
Therefore, I respectfully request your consideration of SD. 172 to allow for this critical financial relief to small businesses that utilized Paycheck Protection Program (PPP) loans.
Please do not hesitate to contact me if I can provide additional information. Thank you for your consideration and for your steady leadership through these times.
Nicholas A. Fyntrilakis
President & CEO