Tax documents via Unsplash by Kelly sikkema
Businesses that got tax-free federal funds for business expenses will be able to receive a state income tax deduction on those expenses under legislation that Gov. Tony Evers signed Thursday.
Evers applied his signature to AB-2 and issued a statement highlighting $480 million in tax savings included in the legislation, Wisconsin’s first new state law for 2021.
The legislation — originally a routine revision of the state tax code primarily to match changes in the federal code — took on added attention after lawmakers added language to help recipients of the federal Paycheck Protection Program (PPP), instituted in 2020 to help small businesses hit by the COVID-19 pandemic.
The change helps businesses that received PPP loans and got approval to keep the money instead of paying it back. Forgiven PPP loans are already tax-free. With the new law, a business that ended 2020 in the black can still take a deduction on its income tax for the expense that was offset by the PPP money, even though the expense didn’t come out of business income.
The benefit was written into the federal tax code already. The law Evers signed Thursday incorporates it in the state tax code as well.
Although the bill passed with broad bipartisan support, the Wisconsin Department of Revenue had originally raised concerns about its impact, calling it a “double benefit.” Democrats in the Legislature tried unsuccessfully to revise the measure and redirect some of the tax savings to businesses that were especially hard hit, including ones that didn’t end the year with a profit and therefore would not benefit from taking the new deduction.
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