Lawmakers introduce bill to ‘reduce tax burden’ on NC small businesses ahead of filing deadline

North Carolina business owners who received an extra boost from the federal government during the pandemic would not have to pay additional taxes on the items they paid for with those loans under a bill proposed in the state legislature.

North Carolina is one of only three states that tax expenses covered by Paycheck Protection Program loans, which were among the first government relief programs aimed at countering layoffs resulting from the pandemic.

With the tax filing deadline approaching, the proposed legislation would bring North Carolina in line with 47 other states and the federal government. And it would give business owners a reprieve they say is much needed as coronavirus restrictions loosen and they try to get back on their feet.

The measure, which would cost the state about $400 million, has broad support in the House. Only two lawmakers, Rep. Julia Howard, a Republican from Mocksville, and Rep. George Cleveland, a Republican from Onslow, voted against the bill Thursday afternoon.

If signed into law, the measure would benefit some lawmakers who are also small business owners and received PPP loans, including House Speaker Tim Moore.

The measure will likely come up for a vote in the House Monday, and from there move to the Senate.

Support from business owners

Several North Carolina business owners attended a press conference Thursday with legislators to express their support for the legislation. They say without it, they face an unexpected burden.

“This would be a terrible time to tax PPP money we’ve already spent,” said restaurant owner Jason Smith, who owns Cantina 18 in Raleigh and Harvest 18 in Durham.

The Payroll Protection Program was designed to cover a large portion of payroll expenses and other costs if businesses brought back workers.

“Two weeks into the shutdown, we were doing considerable takeout business and still losing $2,000 a day,” Smith said. “The idea of the PPP gave us a lot of hope. We got our money on a Friday and brought back 85 percent of our workers on Saturday.”

Many businesses shut down or limited by COVID restrictions were forced to let go of workers, resulting in thousands of layoffs across the state. That included the restaurant industry.

And while the success of PPP loans varied, most businesses cite the influx of cash as a lifeline to staying open.

In North Carolina, dining rooms were closed for more than two months, from mid-March to late May, forced to operate only as takeout service, or stay closed altogether.

For restaurants receiving PPP money, that meant the early round of loans offered little help. The program enabled businesses to pay employees, but many restaurants didn’t have much work at that time.

At Thursday’s press conference, House Speaker Tim Moore provided a copy of an opinion letter issued by a legislative analysis attorney. The attorney said lawmakers who are also small business owners are among more than 200,000 North Carolina loan recipients who could benefit from the legislation, but it would not be a conflict of interest for a lawmaker to participate in moving the legislation forward.

Still, three lawmakers recused themselves from the latest vote on the House floor Thursday.

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