Recent federal legislation corrected a CARES Act issue by clarifying that recipients of PPP loans who have those loans forgiven do not have to pay federal income taxes on the amount forgiven. However, this is not the case in many states, including Pennsylvania, where tax law does not conform to federal guidelines. If this issue is not addressed by the legislature, small businesses that pay their taxes through owners’ personal income tax will owe the state 3.07% on the amount of PPP loan forgiveness they received. (Corporate net income tax is not affected because state tax law conforms to federal guidelines.)

Last year, State Representative George Dunbar (R – Westmoreland) introduced a bill to correct this issue, which NFIB strongly supported. House Bill 2497 clarified that PPP loan forgiveness is not subject to state income tax. The bill passed the House of Representatives overwhelmingly by a vote of 201-1, but it was not considered by the Senate. NFIB is working with Rep. Dunbar and other legislative leaders to ensure that the bill is reintroduced this session and is considered quickly.