Bill Text: NJ A4186 | 2020-2021 | Regular Session | Introduced
Bill Title: Excludes forgiven Paycheck Protection Program loans from gross income tax.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced - Dead) 2020-06-01 - Introduced, Referred to Assembly Appropriations Committee [A4186 Detail]
Download: New_Jersey-2020-A4186-Introduced.html
Sponsored by:
Assemblyman RONALD S. DANCER
District 12 (Burlington, Middlesex, Monmouth and Ocean)
SYNOPSIS
Excludes forgiven Paycheck Protection Program loans from gross income tax.
CURRENT VERSION OF TEXT
As introduced.
An Act excluding forgiven Paycheck Protection Program loans from gross income tax.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. Notwithstanding N.J.S.54A:5-1, a loan forgiven pursuant to section 1106 of the CARES Act, Pub.L.116-136, shall not be included in the calculation of income subject to tax under the New Jersey Gross Income Tax Act.
2. This act shall take effect immediately.
STATEMENT
This bill ensures that forgiven Paycheck Protection Program loans will not be subject to the State's gross income tax.
The CARES Act, a federal law enacted in response to the economic impact of the COVID-19 pandemic, established the Paycheck Protection Program (PPP). The PPP offers loans to small businesses as an incentive to keep employees on their payroll during the pandemic. Some or all of the loan may be forgiven if certain conditions are met. Federal law generally considers forgiven debt to be taxable income, but the CARES Act excluded forgiven PPP loans from federal income tax.
For businesses subject to the State's Corporation Business Tax, a forgiven PPP loan would not be taxed because that State tax generally follows federal treatment of income. For pass-through businesses, which do not independently pay tax, the income of the business gets passed along to the business owners who then pay tax on the income under the State's gross income tax.
Unlike federal law, a forgiven personal loan is not subject to the State's gross income tax because forgiven personal loans do not fall within any category of income under the State's definition of income. However, forgiven loans of businesses may be subject to tax when the business's income is passed-through to business owners. To ensure that forgiven PPP loans are not ultimately taxed, this bill explicitly excludes such forgiven loans from the State's gross income tax.
