As part of NFIB, or the National Federation of Independent Business’ Small Business Day, NFIB members here in Minnesota explained to lawmakers about the burden of having to pay state taxes on their Paycheck Protection loans. 30 other states have already forgiven state taxes on PPP loans, and the federal government has already forgiven federal taxes on PPP loans. Minnesota small business owners told lawmakers during a virtual call that they expect Minnesota legislators to follow suit and lower the burden on already struggling small business owners.

Jean Stelten-Beuning’s small business, Top Dog Country Club, was booming until the pandemic hit. Now, her business is down 55%.

Here is a story from Jean Stelten-Beuning, who owns Top Dog Country Club in New Germany. From 2000 until March of 2020, Top Dog was a thriving business and the envy of the industry. But unlike a normal March, and just as Spring Break was getting underway, there came a sudden stop to travel and every reservation moving forward for the foreseeable future cancelled. During a time when I should have had 100 dogs per day for a period of 4 weeks, by early April, I housed only 5 dogs, dogs that were already boarding from clients that could not return due to COVID-19 restrictions. My staff of 28 had no work, yet I kept them working.

Governor Walz’s shutdowns in April further damaged a business that should have been able to operate without restriction. Top Dog is located on 39 acres in the country and provides vacations for dogs with outdoor play 5-6 hours each day, and the ability to operate with little to no client contact. To save my business, I immediately got creative and instituted reduced fee pickup and delivery by market to get dogs out to New Germany for daycare, since clients were not traveling. Travel: business, international, and vacations accounts for about 95% of my revenue.

Top Dog Country Club in New Germany has sprawling grounds perfect for exercising dogs.

I applied for and received the first round of PPP, which I used 100% on staff wages. Not a dime of the money was used to pay regular business expenses or any money for me as the business owner. I kept my team working even though we had few dogs to care for in order to meet the 8-week deadline for spending the funds (which was the initial restriction for forgiveness) only to find out after 70% of it was spent, that it was extended to 24 weeks. My strategy for bringing staff back would have been completely different had I known I had 24 weeks. I kept them working with projects: painting, landscaping, etc., saving Minnesota the additional unemployment expense of those 28 workers. I floated their benefits and the other business expenses out of my own pocket.

Now to be told that MN will not recognize the PPP expenses and will count PPP money as income is a punch in the face to a business that has suffered greatly in part due to the unnecessary mandates and restrictions placed on it by the very entity it helped to protect. Talk about David taking care of Goliath and then getting stabbed in the back by Goliath. When Congress passed the PPP, it was never intended to be counted as revenue and it was always intended that businesses could deduct the expenses as evidenced in the legislation passed December 2020 to restore the legislation’s original intent. Small business in Minnesota, according to 2016 statistics (even greater today), employs on average 56% of the working population. There was no need to shut down and restrict the tens of thousands of small businesses that could quickly and easily implement safety practices while large businesses continued to operate as normal. It is many times more likely that someone would contract COVID-19 at Target, or the grocery store or Costco than with a simple leash handoff of their dog.

One of the “dog suites” at Top Dog Country Club.

As the business owner I did not take a dime out of my business from March 14, 2020 until December 20, 2020. My top-line revenue for March-December 2020 finished down 55% from 2019. Year to Date 2021, and nearly one year into this mess, revenues are still down 49%. My business depends upon travel. After all of this, to have the State of Minnesota attempt to backfill its overspending and inability to tighten its wallet on unnecessary spending by taxing the PPP money for small business, is simply absurd. Disallowing the expenses is a slap in the face, a punch in the gut, and simply poor governance.

“Thanks to rigid restrictions on businesses operations and previous closure orders, Minnesota small business owners are struggling to recover from this pandemic,” said Mike Hickey, NFIB State Director in Minnesota. “The federal government has done the right thing and forgiven the taxes on these loans, and now it’s time that Minnesota lawmakers do the same. Our small business owners should not be taxed on loans that were made to save them from harmful pandemic restrictions.” 

Small Business Day is an opportunity for our small business owners to talk to their lawmakers and educated them about the issues that really matter and that they are passionate about. Besides PPP tax forgiveness, Minnesota small business owners are also asking lawmakers to pass important liability reform to protect them from frivolous COVID-19 related lawsuits. Like Jean, Minnesota small business owners are doing everything they can to protect their customers and employees from the virus.

According to the NFIB Research Center, almost two-thirds of 2020 PPP borrowers have applied for loan forgiveness, and another 18 percent are ready to apply as soon as their lenders are ready to accept applications.