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Economist warns about possible PPP state tax liabilities

An ag economist says farmers and other businesses that utilized the Paycheck Protection Program will have to pay close attention to their state tax laws and potential law changes.

David Widmar from Ag Economic Insights tells Brownfield the PPP program is the first of its kind, so there is no experience in managing its potential tax implications. “It’s a different type of program and it’s not something that we’ve ever had to deal with before, and I think even the states are having to figure that out, and each state has its own tax code. And, what’s the default or the status quo that this program would fall into, and then what’s the final goal or the objective.”

The federal government is not taxing proceeds from forgiven PPP loans, but in many states, the potential tax liability remains a mystery.  Widmar says whether states tax or don’t tax the forgiven PPP loan revenue, farmers and other businesses needed this program. “These PPP loans were an important economic source of activity for our operations. It’s going to help us a lot, and you know, while we prefer not to pay the income tax on it, we’re better off with them than without them. That’s the important thing to keep in mind.”

Widmar says work with a tax professional and stay up-to-date with your state’s tax laws to prepare for a possible tax bill. “Step back and say, ‘what’s my marginal state income tax’ so if it’s say, eight or nine percent, there would be eight or nine dollars of liability for every 100 dollars.”

Some states such as Wisconsin have introduced legislation that would treat PPP revenue the same way the federal government does, and not tax it.