On January 21, we wrote to you regarding the treatment of forgiven Paycheck Protection Program (PPP) loan proceeds for Massachusetts pass-through entities being taxable at the owner level. This treatment did not conform to the Federal tax-free treatment of these amounts. This issue resulted from the fact that Massachusetts law for individuals does not conform to current Federal individual laws, but to laws in effect as of January 1, 2015. In order for the current law to apply, the Massachusetts legislation would have to be updated to reflect these changes. At the time of our January 21 writing, emergency legislation was introduced to “fix” this problem.
In a joint statement last week, the Massachusetts House and Senate reached agreement on a bill to allow conformity to the current Federal tax code that excludes forgiven PPP loans from gross income for small businesses organized as pass-through entities. This will allow the forgiven PPP loan proceeds to be excluded from income at the individual level for Massachusetts purposes as well. This agreed upon legislation is due to be voted on and sent to the Governor for signature as quickly as possible to provide relief to Massachusetts small business pass-throughs in time to accurately file individuals’ returns.
Should you have any questions, please don’t hesitate to reach out to your tonneson + co representative.