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State DOR Guidance Imposes Surprise Tax on PPP Recipients

TAx form

On January 15th, 2021, the Wisconsin Department of Revenue (DOR) issued guidance for the 2020 Tax Season. Many were surprised to find an unexpected interpretation by DOR in relation to the Paycheck Protection Program (PPP) loans that were issued by the federal government. The guidance sheet that was released expresses that expenses incurred that are paid with the forgivable PPP funds are NOT deductible for Wisconsin income/franchise tax purposes.

This means Wisconsin will treat PPP loan proceeds differently than the Internal Revenue Service unless this interpretation of state law is amended in the coming weeks.

Many PIA members have received PPP loans to aid their struggling businesses during these difficult times and cannot afford additional hidden costs. The federal funds were intended to provide relief to small businesses and NOT for states to supplement their tax revenue.

Given a recent projection by the Legislative Reference Bureau of about $1.2 billion more in state revenue than previously thought, it is extremely unnecessary for small businesses to bear this additional burden.

PIA will be strongly advocating to members of the Wisconsin State Legislature and the Governor to make the changes necessary so that struggling Wisconsin businesses that accepted federal aid are not penalized with this surprise tax in the coming months.

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