AUGUSTA (Jan. 25, 2021) – Today the Committee on Appropriations & Financial Affairs heard testimony on whether Maine should conform its state tax code to match federal tax law when it comes to a small businesses that took Paycheck Protection Program loans. Congress opted not to tax the proceeds if employers spent the funds on payroll, rent, and utilities and recently passed a provision to allow deductions for PPP loan expenses. But the Mills administration testified today it would not follow the federal government’s lead on allowing deductions for expenses.

“When many desperate small businesses were closed through no fault of their own and they took PPP loans, they did what the government asked them to do, which was keep their employees on the job and off the unemployment line,” said NFIB’s Maine State Director David Clough. “The business owners never imagined they would have to pay any tax. If Maine decides to disallow deductions for PPP loan expenses, that is essentially a surprise tax at the worst possible time.”

“We appreciate that Governor Mills has done much to assist small businesses during this tough economic crisis, but this is a very fragile time for them to have higher expenses,” added Clough. “Those who were hardest-hit, like restaurants, retail shops, and those who hold events are just some of the ones trying to stay afloat. If they have to pay more in taxes now it could be the difference between recovery and permanent closure.”

In Maine, 24,311 private sector small businesses received loans of up to $150,000, and another 2,614 received loans of over $150,000.  An NFIB survey in December of small business owners showed that one-in-four (25%) of small business owners report that they will have to close their doors if current economic conditions do not improve over the next six months.