Battle continues over Maine's potential tax on PPP loans
The back-and-forth over whether Maine should tax certain PPP loans continues.
The latest salvo came from the Maine State Chamber of Commerce, which urged the state Legislature to forego a tax on Paycheck Protection Program loans for businesses of all sizes.
Gov. Janet Mills, responding Tuesday to earlier criticism over a proposal to tax all PPP loan recipients, offered a compromise to tax only businesses that received more than $1 million in the pandemic relief loans — which would affect 251 businesses and generate $18 million in much-needed state revenue.
PPP loans are not taxed on a federal level, and many states are wrestling with whether to tax the loans.
In 2020, some 28,000 Maine small businesses and self-employed individuals received $2.3 billion in PPP loans, helping to support 250,000 jobs.
Four of the six largest recipients of PPP loans were in the frontline medical field: South Portland-based Intermed, which received a $10 million loan from People’s United Bank; Bangor-based Penobscot Community Health Center, which received $8.3 million from Katahdin Trust Co.; South Portland-based Spectrum Healthcare Partners, which received $8.1 million from KeyBank; and Bar Harbor-based Mount Desert Island Hospital, with a loan of $6.96 million from First National Bank.
On Tuesday, Mills said she wants to make the first $1 million of PPP proceeds tax-free, an amount that would exempt 99% of the Maine recipients from paying a levy on proceeds as if they were income. Businesses that received over $1 million in PPP loans during 2020 would be taxed only on the amount above that threshold.
On Thursday the Maine State Chamber pushed back at the Mills compromise proposal, saying all businesses “should be treated equally.”
The chamber said businesses continue to face hardships.
“We know that the prevailing factor in the loan amount a business receives is directly related to the number of employees they have. They should not be penalized because of it,” Chamber President Dana Connors said in a news release. “Nor should they be penalized because they, like most other businesses, regardless of the loan amount, have also faced difficulties caused by the pandemic and deserve similar consideration.”
“They, like all businesses, were expecting to receive full conformity as Congress intended and confirmed in late December of 2020. Without full tax conformity, these 251 businesses will be taking on further tax obligations they have not planned for,” he added.
The chamber urged the Legislature to come up with an alternative plan to fill the revenue gap.
For now, the battle is over loans made in 2020, but the debate will likely reignite with the second round of PPP loans, which is in full swing.
The Paycheck Protection Program’s second round of loans have totaled $462.6 million in Maine. So far, 6,116 Maine small employers have been approved for loans, U.S. Sen. Susan Collins said on Wednesday. The numbers are based on data from the U.S. Small Business Administration.
Collins helped secure $284.5 billion for PPP in COVID-19 relief law passed in December.
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This article seems to suggest that hospitals might be taxed. They are nonprofits and do not pay taxes anyway. Also, PPP "Loans" were really grants for most recipients and any amount paid back is not taxed.
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