Session Update: Beneficiaries of Federal COVID-19 Assistance May Avoid Tax Penalty

Businesses and individuals who benefited from federal COVID-19 programs may avoid anticipated state tax obligations as a result of a measure passed by the Minnesota Senate Thursday, March 11. The bill, SF 263, would exempt from state taxation the forgivable federal loans some Minnesota businesses accepted through the Paycheck Protection Program (PPP) as well as the additional unemployment stipend sent to unemployed Minnesotans. The measure would also give S corporations the option to file as C corporations.

The bill’s author and former Senate Tax Committee Chair Tom Bakk, I-Cook, argued that taxing the PPP assistance would slow down the state’s economic recovery. “Why would we take $374 million dollars out of our business economy on Monday only to have it go sit over at the Department of Revenue building until we get around to appropriating it?” he questioned.

Senator Jennifer McEwen, DFL, Duluth, expressed her concerns with the bill, saying it fails to offer any benefits to the working men and women of Minnesota. “If we are going to do this, economic stimulus for businesses, then what we also need to do is to provide fairness for workers. We need to stand up for average Minnesotans,” she said.

The measure passed on a vote of 55-12.