Minn. Senate Republicans propose eliminating state tax on PPP loans

Tom Hauser
Updated: March 01, 2021 06:40 PM
Created: March 01, 2021 06:04 PM

One of the first results from the state's newly-projected $1.6 billion budget surplus could be the elimination of state tax on more than 102,000 Minnesota small businesses who received loans under the federal Paycheck Protection Program.

 The average loan was about $110,000.

"If Minnesota does nothing, we will be taxing that and that creates a real burden for some of these small businesses that had to struggle through the shutdowns," Senate Majority Leader Paul Gazelka said at a news conference on Monday.

The 102,000 loans granted in Minnesota total $11.3 billion and have allowed most of those businesses to survive repeated closures and restrictions.

That included O'Donovan's Irish Pub in downtown Minneapolis. Although the bar and restaurant has not reopened since it was forced to close in mid-March last year, a $100,000 PPP loan allowed owner Dermot Cowley to keep the business afloat long enough to open this spring and bring back workers.

The Paycheck Protection Program allowed companies to use the money for payroll, mortgage interest, rent/lease or utilities with the intent of keeping businesses open during often compulsory closures during the pandemic.

At Jasper Engineering in Hibbing, the company received a $687,000 PPP loan they used to keep all 46 employees on the job with full benefits.

Minnesota small businesses welcome second federal COVID-19 relief package

"It was a blessing and we were grateful for every penny we got from the federal government," says company Vice President and Co-owner Jason Janisch. "We said 'Hey, this is going to give us some breathing room. This is going to give us the ability to keep our employees working, to pay for the medical bills,' so we didn't have to lay people off in the middle of a pandemic."

If the state were to forgive the 9.8 percent state tax, Jasper Engineering could save up to $60,000.

"We were able to keep 100 percent of our staff working 100 percent of the time," Janisch told 5 Eyewitness News. "We kept them off unemployment."

For O'Donovan's Irish Pub, it could help them survive and reopen this month or in April.

"After going through what we've gone through, that would be huge for a small business like us," Cowley says of the potential $10,000 savings.

The chair of the House Tax Committee, Rep. Paul Marquart, DFL-Dilworth, says he's authored legislation to eliminate the state tax on PPP. However, he says it's going to be complicated to target the businesses that need the tax relief the most. He also said he'd like to explore the possibility of not taxing the extra $600 in unemployment relief individual workers received from the federal government after layoffs during the pandemic.

The House and Senate are both expected to consider bills in the next week.

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