Utah Is Taxing Companies That Acquired PPP Loans

ENTERPRISE, Utah – A squeeze is being placed on some Utah companies hit hardest by the pandemic. Enterprise house owners are studying they might owe tens of 1000’s of {dollars} after they accepted monetary help to maintain their companies going.

You’ll do not forget that the complete level of the Paycheck Safety Program was to funnel cash into companies so they might preserve their doorways open and their workers employed. From the start, it was offered by lawmakers in Washington as cash that wasn’t going to need to be paid again.

However in a placing juxtaposition, it’s now changing into clear that, in Utah, a lot of that cash goes to be paid again within the type of taxes.

Lee Bracken stated the $90,000 in PPP cash he obtained via the federal CARES Act saved the doorways open on his southern Utah comfort retailer and let him pay workers to remain dwelling after they got here down with COVID-19. For Bracken, it labored precisely as designed.

“It allowed us to do what it was meant,” he stated.

However now — sticker shock. His accountant broke the unhealthy information that Utah regulation doesn’t jive with federal regulation, and the PPP cash he obtained is being taxed as revenue. He’ll owe the state about 5% — a number of thousand {dollars}.

Bracken is amongst a handful of enterprise house owners from whom the KSL Investigators have heard, all expressing they’re shocked and upset by the Utah tax burden as they proceed to battle to remain in enterprise.

Utah tax commissioner John Valentine stated that the way in which the U.S. Treasury Division is dealing with it permits companies to “double-dip.” Not solely are the loans forgiven, however enterprise bills paid with the loans will be written off.

“If folks use the cash because it was meant, it needs to be impartial,” he stated. “The way in which the federal authorities has handled, it’s a tax profit that seems to be an extra subsidy.”

He defends Utah’s place to deal with mortgage forgiveness at taxable revenue.

“It’s truly sound observe to say that you don’t double-dip,” Valentine stated. “They’d have tax free revenue, plus take deductions towards different revenue.”

Permitting “double-dipping” on the federal degree is a rule the feds modified on the eleventh hour.

“Utah was completely aligned with the federal authorities up till Dec. 27 after they modified the foundations,” Valentine stated. “They usually modified the foundations in a approach that by no means been modified earlier than.”

Valentine stated the way in which the feds are doing it’s particularly unfair to the companies who needed a mortgage however didn’t get one earlier than the cash ran out.

“Congress truly did us no favors on this,” he stated.

Tanner Marchant, a CPA with Gibbons & Associates in Farmington, stated Congress’ motion in late-December reveals they by no means meant for the PPP mortgage forgiveness to be taxable.

He thinks Utah is being grasping.

“Utah has at all times adopted the lead of the IRS, so why are they altering now?” Marchant stated. “I feel, from a budgetary standpoint, they noticed that they might get an extra 5% on the PPP mortgage forgiveness.”

Marchant stated it’s the Utah Legislature that’s ‘double-dipping’ as a result of they’re amassing tax income from the wages earned by the staff that stayed employed due to the PPP loans after which they’re additionally taxing small enterprise house owners on the mortgage forgiveness.

“Some small companies are really struggling and, in a way, drowning,” Marchant stated. “Fairly than throwing them a life vest, Utah lawmakers are throwing them an anchor.”

Bracken stated he sees this as a windfall for the state of Utah on the backs of companies nonetheless struggling to make ends meet who didn’t have any time to organize. He added he’ll be capable of meet his tax burden, however he’s apprehensive about different companies.

“I’m actually apprehensive that the ramifications and the impression of small companies all through the state,” he stated. “This will likely be only one extra hardship for them to endure.”

A method a enterprise can keep away from paying taxes on the PPP loans can be to pay the loans again — which is, after all, unimaginable for lots of companies that solely utilized for the cash to have the ability to keep afloat.

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