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January 28, 2021

After outcry from businesses, Mills rethinks tax on PPP loans

The Mills administration is backing off its original plan to tax loans made under the Paycheck Protection Plan.

In a statement Wednesday afternoon, Gov. Janet Mills pledged to “solve the PPP issue,” and has asked state departments to look for sources of potential federal funding.

Originally, the administration said it needed to tax the CARES Act relief loans to balance the budget.

Taxes on the PPP loans were expected to generate $100 million in revenue. The federal government will not tax the loans, and lawmakers, including U.S. Sen. Susan Collins, R-Maine, have said the intent was for states to follow that lead. 

The state’s original plan to tax PPP loans drew criticism from a range of business groups, including the Maine State Chamber of Commerce and the Bangor Regional Chamber, as well as trade associations like HospitalityMaine.

Roughly $2 billion in PPP loans were written to 28,000 Maine companies.

In a case reported by WGME, Channel 13, the Muddy Rudder restaurant would have been liable for $14,500 in state taxes for a PPP loan of $199,000, which was used to pay employees and stay open, even as sales were down 50%.

In a statement Wednesday, Mills said her approach is to “solve problems” and that the original proposal was “a starting point.” 

“Now, with the Biden Administration in place, I am asking my departments to take a fresh look at whether there may be any newly-available federal funds that would allow Maine to maintain our balanced budget and adopt the same additional benefit the Federal government is offering to the numerous entities that received PPP,” she said in the statement.

“I am proud of the hundreds of small businesses across the state who used the PPP funds to keep people employed, to keep their doors open, and to keep our economy afloat during a time of extraordinary financial distress. The federal government recognized the value of their efforts when, in late December, it declared that it would provide a double tax benefit on proceeds appropriately spent. Unfortunately, at that time, it did not also offer compensation to the states for the loss of that tax revenue,” Mills said. 

Mills said she plans to work with the Legislature and others to find solutions to “help small businesses through this time of extraordinary hardship.”

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January 28, 2021
Problem is, Janet, the PPP money wasn't "revenue earned by these businesses" which should then be taxable as "revenue". It was money given to them by the federal government, to keep their employees on the payrolls and incentivize them to stay open and not lay everyone off or close the doors ... and make the state of Maine pay unemployment on all these workers. Do what the rest of us did and trim expenses and balance your budget based on revenues.
January 28, 2021

Saying that Maine needs to make up for a lost revenue stream doesn't hold water as this is not a regular revenue stream the state has had in the past, so they are not losing anything. If they want to help Maine businesses we will not tax the PPP loan proceeds.

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