The Minnesota Senate on Thursday voted to advance a proposal to provide tax relief to business owners and Minnesotans who lost their jobs amid the pandemic just days before businesses faced a deadline for the income taxes.
On a 55-12 vote, the Senate approved the roughly $470 million plan that would conform state tax laws with federal guidelines, allowing business owners that pulled down Paycheck Protection Program loans to avoid paying state income taxes on the funds. Minnesotans that got a $600 additional unemployment insurance benefit last year would also see part of that benefit erased from their income reporting requirement.
More than 100,000 Minnesota businesses received federal loans that were supposed to help them keep employees on payroll during the pandemic and tens of thousands of Minnesotans claimed unemployment insurance benefits after their employers laid them off or cut their hours due to COVID-19 and state efforts to stop it.
Senators said they felt a growing pressure to pass a tax conformity bill as business owners face a deadline Monday, March 15, to file their taxes. Without a change, many could face additional income taxes because of the PPP loans. Individual filers have another month before their income taxes will come due.
Democrats, Independents and Republicans on the Senate floor urged their peers in the House of Representatives to pass the bill or a similar one that could be workshopped in a conference committee and sent to the governor’s desk. Legislative leaders from the House and Senate have been weighing a compromise plan and have yet to reach one they’ve shared publicly.
“This can get done. This can get done yet this week,” the bill’s author Sen. Tom Bakk, I-Cook, said. “I would really encourage my colleagues and the leadership in the House to get this done, let’s not slow down the economic recovery coming out of this pandemic.”
But the head of the House Tax Committee said the Senate bill was “incomplete” since it didn’t offer support to business owners who didn’t turn a profit in 2020 or were shut out from receiving the loans. He also said lawmakers should offer more aid to Minnesotans who are set to be taxed on unemployment insurance benefits.
“We have to make sure we help all those businesses and those impacted by the pandemic,” Rep. Paul Marquart, DFL-Dilworth, told Forum News Service. “Before the train leaves the station, we need to bring along all the businesses and individuals. And that’s what I’m afraid of. If you were to just go with this bill, who knows if we’ll have another bill on taxes. … There are going to be a lot of people that get left behind.”
Marquart said tax conformity bills, proposals to waive taxes for more Minnesotans that received unemployment insurance and let businesses that didn’t report a profit in 2020 carry forward their operating losses had all been considered in his committee and could quickly be teed up for House votes. Speaker Melissa Hortman, DFL-Brooklyn Park, said the Monday deadline to pass a bill was a “red herring” and said leaders would continue working to strike a deal before April 15 that could apply to businesses retroactively.
On the Senate floor, the bill’s supporters said the Legislature needed to quickly pass a conformity bill to help business owners and Minnesotans out of work to avoid another economic setback.
“These were lifelines, the Payroll Protection Plan was a lifeline not just to the business, but to the employees. It kept the paychecks flowing even when there weren’t customers and so it supported Minnesota workers,” Sen. Carla Nelson, R-Rochester, said. “Now far too many of them would be taxed on their lifeline and it’s unconscionable that we would do that and put many of them right over the brink.”
The Minnesota Chamber of Commerce applauded the vote and said providing the tax relief could help Minnesota “continue growing the economy and creating and sustaining jobs for Minnesotans.”
Democrats raised concerns about the proposal after senators voted down amendments to expand the amount of unemployment insurance exempted from income taxes, exempt student loans from taxable income and putting aside funding for summer school programming.
“If we’re going to do this economic stimulus for businesses, then what we also need to do is provide fairness for workers,” Sen. Jen McEwen, DFL-Duluth, said, as she introduced an amendment to exempt more unemployment insurance funds. “We need to stand up for average Minnesotans, for the workers in Minnesota.”
Democratic Gov. Tim Walz at a news conference on Thursday urged lawmakers to add onto a tax relief plan funding for summer school programming to address learning loss from distance learning. He proposed a $150 million plan that would make summer school options open to all students.
