UPDATE: On Feb. 9, Governor Murphy and Treasurer Muoio announced that New Jersey will follow the federal government's lead in making PPP loans tax exempt at the state level and allowing recipients to deduct business expenses that were paid with the loan proceeds. Read more
The New Jersey Society of CPAs urges the New Jersey Legislature to vote “yes” on S3234/A5149, which enables small businesses in New Jersey to have their forgiven Paycheck Protection Program (PPP) loans excluded from their state taxable income and allows business expenses from PPP forgiveness to be deducted.
When PPP loans are forgiven and tax free, they truly become viable lifelines for businesses and help communities thrive. However, many small businesses in New Jersey that exist as partnerships or S corporations have their pass-through business income counted as personal income, and their PPP loan forgiveness, therefore, becomes taxable at the state level.
Taxing forgiven loans is a slap in the face to the most vulnerable businesses in New Jersey. Their vulnerability is precisely why they received PPP loans in the first place. Taxing these loans for short-term revenue gains for the state is both counterproductive and unfair.
Small businesses in New Jersey deserve better than that, which is why we are urging members of the Senate and General Assembly to unequivocally vote yes on S3234 and A5149. It would be harmful to the state if New Jersey taxed borrowers’ PPP loan forgiveness when other states do not.
We would like to thank the sponsors of this bipartisan bill: primary sponsors Rep. Troy Singleton (D-7) and Rep. Anthony M. Bucco (R-25), and cosponsors Senator Steven Oroho (R-24), Senator Nellie Pou (D-35), Senator Linda Greenstein (D-14) and Rep. Declan O’Scanlon (R-13). We are encouraged by the Senate’s passage of the bill on Jan. 28 and look forward to a similar action when this bill goes to the Assembly.
As an advocate for CPAs and the businesses they serve, the NJCPA works tirelessly to improve the business landscape in New Jersey and promote fair and equitable opportunities for all.