New York won’t tax businesses on the forgivable loans they secured to survive the coronavirus pandemic, a spokesman for the state Department of Taxation and Finance said.
Accountants had been concerned the state would treat as income Paycheck Protection Program loans forgiven last year after borrowers complied with PPP regulations — namely they didn’t lay off employees or they brought back furloughed employees.
The federally guaranteed loans were up to $10 million per borrower during the program’s first phase, between April 3 and Aug. 8.
The tax department decided recently to adopt the federal rule against taxing the forgiven portion of PPP loans. Adoption was required because New York "decoupled" from federal tax regulations in March, meaning it no longer automatically follows Washington’s tax policy.
"We’re going to conform to federal guidelines … whoever received the [PPP] loans, it’s not considered taxable income," said department spokesman James Gazzale. "Additionally, expenses associated with PPP loans are deductible" on state tax returns.
More information may be found at tax.ny.gov/pit/cares-act-faq.htm.
Nearly 348,900 PPP loans were made in New York State last year, totaling $38.7 billion. More than 64,500 loans were made on Long Island, according to data from the U.S. Small Business Administration, which oversees the loan program. Newsday Media Group received a $10 million loan in April.
Newsday contacted the tax department this week after receiving questions from local accountants about whether the forgiven PPP loans would be subject to state income or corporate taxes. The questions arose after Congress and President Donald Trump approved a new stimulus package last month.
That package, besides authorizing a second PPP loan for those who exhausted their first loan, states that business income "does not include any amount that would otherwise arise from the forgiveness of a PPP loan" dating back to March 2020. The provision also applies to second PPP loans, according to a congressional summary of the law.
About 23% of borrowers have requested loan forgiveness from their lender, with 19% receiving either full or partial forgiveness, based on data from Numerated Growth Technologies, a provider of software used by 100 banks and other lenders to process loans. More than half the requests for forgiveness are for loans under $50,000.
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