A state bill that could reduce business taxes by $540 million by allowing Paycheck Protection Program (PPP) loan recipients to deduct related purchases has been put forward by the Republican-controlled budget committee, according to a Wisconsin State Journal report. If passed, the deductions would apply to 2020 state taxes.
The PPP was formed under the CARES Act and awarded forgivable tax-free loans to businesses facing financial losses during the COVID-19 pandemic. The Internal Revenue Service determined expenditures paid are not tax-deductible because the loan was not taxed as income. Last month, Congress passed a law on the federal level overriding the IRS’ decision and allowing businesses to deduct payments made with PPP funds. However, until the changes are made at the state level, the Wisconsin Department of Revenue is following the IRS determination that expenditures paid with PPP cannot be deducted.
