The hundreds of thousands of New Jersey businesses that received COVID-19 relief under the federal Paycheck Protection Program will not have to pay any state taxes thanks to a law Gov. Phil Murphy approved on May 11.
Under the newly signed Senate Bill 3234, income from the federal PPP – forgivable loans to help businesses stay afloat during the pandemic – will not be used to calculate how much taxes a business owes to the state.
They’re also exempt from federal taxes, following a short-term COVID-19 federal relief bill that former President Donald Trump approved in late December.
The U.S. Small Business Administration approved 157,405 PPP loans totaling $17.3 billion in 2020, and in 2021 approved 134,362 loans totaling roughly $8 billion.
Now PPP funds have run out, and it’s up to Congress and the White House to decide if they want to allocate more to this federal pot of money.
Congress created the PPP program when enacting the Coronavirus Aid, Relief and Economic Security Act in March 2020, as the pandemic began to take hold of the nation and business closures meant to contain the virus pushed many establishments to the brink of permanent closure. Unemployment soared to levels not seen in decades as businesses closed indefinitely, or utilized a combination of layoffs and furloughs to stay afloat.
With PPP loans, businesses can receive funds and use them to keep staff on the payroll and pay for other overhead. In turn, those loans would be forgiven.
Both the federal government and, under this new law the state government, allow businesses to deduct other expenses like rent and utilities, which they paid via loan money.
“For many, the federal PPP loans were a godsend that helped [businesses] stay open,” reads a Jan. 21 statement from the bill’s sponsor, Sen. Troy Singleton, D-7th District. “New Jersey should follow the federal government’s lead and allow businesses to deduct forgiven loans from state taxes. This would provide further relief to businesses around the Garden State.”
A $16 billion pot of money run by the SBA to help pandemic-hit bars and restaurants saw more than 16,000 applicants, according to a May 11 announcement. An exact breakdown was not available for New Jersey-only establishments.
New Jersey businesses however, are now turning their attention to COVID-relief grants run by the New Jersey Economic Development Authority.
Applications went live last week for $85 million in assistance, which is broken down into smaller batches for specific types of businesses.
A $15 million pot of grant funding for struggling arts, theater and culture organizations will be jointly administered by the NJEDA and the New Jersey State Council on the Arts. And Murphy and Democratic leadership in both chambers of the state Legislature are also pushing a bill forward to set aside $235 million of additional business relief.r