Businesses buoyed by tax relief package

Apr. 5—BOSTON — Businesses facing double-digit increases in unemployment insurance and taxes on federal disaster loans are now breathing a sigh of relief.

A $350 million pandemic relief package, signed by Gov. Charlie Baker last Thursday, rolls back increases in unemployment insurance rates for businesses, waives state taxes on federal Paycheck Protection Program grants, and establishes an emergency paid leave program for workers to take time off for COVID-19 related issues.

A key provision of the bill lowers scheduled increases in unemployment taxes for the next two years.

A multibillion-dollar deficit in the state's unemployment fund, created by a crush of pandemic-fueled jobless claims over the past year, was expected to drive up rates paid by employers an average of 60% beginning next year.

The plan signed by Baker also authorizes the state to borrow up to $7 billion from the federal government to keep jobless benefits flowing.

Businesses will pay a new excise tax on employee wages — which legislative leaders say will average $57 to $66 a year per employee — to repay interest on the federal loans. That tax would sunset next year.

Additionally, employers who accepted PPP loans that were later forgiven by the federal government would not have to pay state income taxes on the money. Only 1 in 5 of those loans were forgiven in tax year 2020.

In a letter to lawmakers, Baker said the measure "takes a thoughtful and comprehensive approach in delivering critical relief to facilitate economic recovery for the people of Massachusetts."

Business leaders praised the tax relief and lowered unemployment insurance rates.

Chris Carlozzi, Massachusetts state director for the National Federation of Independent Businesses, said many businesses are "breathing a sigh of relief" that they won't be saddled with a big tax bill as they begin to recover.

"These are two crucial policies that will directly assist struggling small businesses who were ravaged by the pandemic and now hope to lead the state's economic recovery," he said.

The measure signed by Baker also included relief for workers who were unemployed last year or this year, allowing them to exempt up to $10,200 in the jobless benefits they collected from state taxes if their household income is below 200% of the federal poverty level.

Another provision creates a $75 million COVID-19 emergency sick leave program, which will give full-time workers 40 hours of paid time off if they get infected and need to quarantine or care for a family member affected by the virus.

"The mandate aptly addresses needs — immunization, isolation and quarantine — that were not contemplated when the state's Paid Family and Medical Leave program was designed," Baker wrote to lawmakers.

However, Baker sent that portion of the bill back to lawmakers with requested technical changes, including a proposed cap on benefits. He also proposed extending a $40-per-employee tax credit to businesses that don't qualify under a federal paid leave program.

Lawmakers can either accept Baker's amendments to the bill or override them.

The Legislature's Ways and Means Committee is considering Baker's preliminary $46 billion budget, which includes additional relief for businesses and workers.

Massachusetts also expects to receive nearly $8 billion in federal funding for testing and vaccines, schools, businesses and local governments, under a $1.9 trillion pandemic relief package signed by President Joe Biden last month.

Christian M. Wade covers the Massachusetts Statehouse for North of Boston Media Group's newspapers and websites. Email him at cwade@cnhi.com