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State Sen. Paul Sarlo Wants To Protect New Jersey Small Businesses From ‘Surprise’ PPP Tax Costs

State Sen. Paul Sarlo (D- 36) has proposed a measure that aims to provide tax relief to small businesses struggling in the midst of the ongoing COVID-19 pandemic.

Introduced Dec. 7, the Democratic senator’s bill would exempt forgiven Paycheck Protection Program (PPP) loans from state income taxes and allow business owners to deduct certain expenses covered by the federal relief funds.

PPP, part of the $2 trillion Coronavirus Aid, Relief and Economic Security (CARES) Act, was designed to help small businesses that suffered economic hardship as a result of coronavirus restrictions, like the closure of non-essential businesses in order to stop the spread.

IRS Confusion

Under the program, businesses were able to apply for low-interest, forgivable loans to help keep employees on payroll, as well as cover other expenses, like mortgage interest and utility costs. To incentivize loan recipients to keep existing workers, the program permitted loans to be forgiven if the borrower met certain criteria for payroll and employee retention.

While Congress “clearly intended for recipients of forgiven PPP loans to be able to deduct the expenses,” the Internal Revenue Service (IRS), Sarlo said, issued guidance, IRS Notice 2020-32, that is contradictory to “congressional intent.”

Earlier this month, the IRS said businesses could not deduct PPP expenses if their loan through the program would not be forgiven until next year. In order to “make sure state tax officials don’t attempt to do the same,” Sarlo’s bill would protect the tax-exempt status of forgiven loans.

‘Surprise Tax Costs’

“This will help ensure that the receipt and forgiveness of coronavirus assistance through the PPP does not result in surprise tax costs for small businesses that complied with the terms of the loans,” said Sarlo. “The goal of the CARES Act funding was to enable these businesses to survive the economic hardships of the shutdown, and Congress’s intention was to allow the loans to be forgiven with no tax consequences. Many businesses are on the brink of insolvency and these costs could push them over the edge.”

Sarlo also introduced a Senate resolution opposing the IRS’s guidance and urging the federal government “to back down from its attempt to impose the tax.”

Under the federal program, the federal Small Business Administration approved $521 billion in loans for small businesses. In New Jersey, nearly 145,000 small businesses were approved for PPP loans, totaling more than $17 billion.

Congress is currently considering a new $908 billion coronavirus relief package that would include a second round of PPP loans for small businesses.

Daily Data

As of Dec. 14, the cumulative number of coronavirus cases in New Jersey reached 405,448 with 4,805 total new cases reported and 25 new deaths, bringing that total to 15,907. The state listed probable deaths at 1,868, bringing the overall total to 17,775.

For North Jersey counties, Bergen had a total of 385 new cases, Essex 380 new cases, Passaic 361 new cases, Hudson 344 new cases, Morris 242 new cases, Sussex 52 new cases and Warren 65 new cases.

State officials noted 50 deaths occurred in the last 24 hours of reporting that have not yet been lab confirmed.  

Of the total confirmed deaths in North Jersey, Essex County has the most with 2,064, followed by Bergen at 1,951, Hudson with 1,474, Passaic at 1,230, Morris at 743, Sussex at 164 and Warren with 163.

In regards to probable deaths, Bergen has 254, Essex has 234, Hudson has 159, Morris at 157, Passaic at 144, Sussex has 39 and Warren has 13.

State Testing 

The daily rate of infections from those tested as of Dec. 10 was 11.0%, with the North reporting 10.4%, Central 10.9% and South 12.4%. The state is no longer using serology tests as health officials explained those results show a past presence of the disease as well as a current one. 

As for the rate of transmission, it decreased to 1.13 from 1.15 the day before. Officials have continually cited transmission rate and positivity rate as health data they rely on to track how the coronavirus is being contained in New Jersey, guiding them in determining when restrictions have to be tightened or lifted.

Officials reported 3,635 patients were hospitalized, 3,425 of those cases confirmed and 210 under investigation. By region, there were 1,637 in the North, 1,185 in the Central and 813 in the South.

Of those hospitalized, 704 are in intensive care units and 491 on ventilators. While 300 patients were discharged, 350 were admitted.

Essex Tops County Count

Essex has the most cumulative cases in the state with 41,471, followed by Bergen at 40,879, Hudson at 37,521, Middlesex at 37,291, Passaic at 35,737, Union at 32,669, Ocean at 26,505, Monmouth at 25,681, Camden at 24,003, Burlington at 17,179, Morris at 16,934, Mercer at 16,312, Gloucester at 11,597, Somerset at 10,798, Atlantic at 9,758, Cumberland at 6,277, Sussex at 3,403, Warren at 3,146, Hunterdon at 3,077, Salem at 2,187 and Cape May at 1,995.

Another 1,019 cases are still under investigation to determine where the person resides.

In regards to cases related to in-school transmissions, a total of 88 outbreaks involving 388 cases have been reported in 19 of the 21 counties in the Garden State, with 15 new outbreaks involving 103 cases recorded in the last week. For North Jersey, Bergen County has 15 confirmed outbreaks with 79 cases, Passaic County has four confirmed outbreaks with 23 cases, Warren County has four confirmed outbreaks with nine cases, Sussex County has three confirmed outbreaks with seven cases and Hudson County has two confirmed outbreaks with 10 cases. 

Long-term Care Facilities

Health officials noted 395 long-term care facilities are currently reporting at least one case of COVID-19, accounting for a total of 8,625 of the cases, broken down between 4,085 residents and 4,567 staff. 

Cumulatively, 1,096 long-term care facilities reported a case infecting 28,130 residents and 17,270 staff, for a total of 45,400 cases. 

The state’s official death total will now be reported as those that are lab confirmed, sits at 7,389 on Dec. 14. The facilities are reporting to the state 7,068 residents deaths and 124 staff deaths.

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