North Carolina legislators this week adopted an amendment to House Bill 334 that gives business owners a tax break for expenses paid for by their Paycheck Protection Program loans. The bill also gives individuals a tax break on their unemployment income to align with federal standards.
HB 334 last week passed an initial vote, 111-2, in the state House. At that time, the bill allowed individual and corporate taxpayers an income tax deduction for expenses paid using a forgiven PPP loan for the 2020 tax year.
Representatives for Alamance County, Ricky Hurtado and Dennis Riddell, both voted in favor of the bill.
This initial vote brought North Carolina law in line with 47 other states and federal standards. In December, the federal Consolidated Appropriations Act made PPP expenses deductible. Under normal circumstances, forgiven loans like these are considered taxable under federal law, lawmakers said.
The General Assembly’s non-partisan fiscal division said the financial impact of the bill, as first written, would be about $400 million over fiscal years 2021-22 and 2022-23.
When the state House took up the bill again Tuesday, it adopted an amendment expanding the tax breaks to include unemployment income and expanded the PPP tax breaks to include the 2021 tax year.
According to the amendment, the amount of unemployment income deductible from an individual’s taxable income will align with the amount allowable by the American Rescue Plan Act of 2021, which is up to $10,200 per person.
Updated fiscal notes from the General Assembly’s fiscal division have not been provided to explain the financial impacts of the bill including the amendment.
According to the Small Business Administration, more than 202,000 PPP loans have been approved in North Carolina and at least 215 businesses in Burlington, Graham, Mebane, Elon, Haw River and Saxapahaw have received over $150,000 in loans through the program.
Over 982,000 unemployment claimants have been paid in North Carolina since the start of the pandemic, according to the N.C. Department of Commerce.
In order to become law, HB 334 must also be approved by the state Senate. After the first vote last week, Republican Senate leader Phil Berger told media outlets he was unsure if the Senate would act on it, but said if that did happen it would not be soon.
"I think House Bill 334, which would exempt PPP loans and unemployment benefits up to $10,200, is good policy as we continue to think about ways to support small businesses and those that have been impacted the most by COVID-19," Hurtado said Wednesday. "I was actually tracking this legislation pretty closely. I think we're going to see a lot of folks and small businesses really benefit from this bill locally."
Riddell did not immediately respond on Wednesday to a request for comment.
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Elizabeth Pattman is the trending topics reporter for the Times-News in Burlington, covering business, COVID-19 and all things trending. Contact Elizabeth (she/her) at epattman@gannett.com. I'm also available on social media @EPattmanTN on Twitter or @burlingtontimesnews on Instagram.
