Just days before Massachusetts businesses face a tax filing deadline, legislative leaders appear to be ready to align the state’s tax regulations with federal laws to remove the 5% state individual income tax levied on individuals on forgiven Paycheck Protection Program (PPP) loans associated with pass-through entities and sole proprietorships.
Massachusetts excludes forgiven PPP loans from taxable income under its entity-level corporate income tax structure. But PPP loans forgiven and associated with “pass through” businesses – such as sole proprietorships, partnerships, and S corporations – are currently subject to the 5% state income tax at the individual level.
Now, however, state legislative leaders have announced they will allow the release of a bipartisan bill filed in January by Democratic Sen. Eric Lesser of Longmeadow, who chairs the Committee on Economic Development and Emerging Technologies, and co-sponsored by the Senate’s Republican minority leader, Bruce Tarr, and others sought to do away with the 5 percent state tax on the forgivable loan.
Action on the legislation is expected to take place this week, ahead of the March 15 business tax filing deadline.
If the bill is passed and enacted into law, the state will not tax income from PPP loans that were given to small businesses organized as pass through entities. The federal government already makes PPP loans tax-free.
For more information please contact Gray, Gray & Gray at (781) 407-0300.
