TRENTON, NJ — In an effort to protect small businesses from additional taxes on their federal Paycheck Protection Program loans, Gov. Phil Murphy has signed legislation to ensure forgiven loans are not subject to the New Jersey gross income tax.
The new law (S3234) signed into law on May 12, also allows for the deduction of expenses paid for by a PPP loan — even if the loan is forgiven, according to a press release by Sen. Troy Singleton (D-Burlington), sponsor of the measure.
"Our small businesses have been pummeled over the past year. Many of our favorite family establishments have already closed, and numerous others are at risk of shutting down," said Singleton, chair of the Senate Community and Urban Affairs Committee.
"With this law, New Jersey is allowing businesses to deduct forgiven PPP loans from state taxes, providing further relief as we continue to recover from the economic impact of the pandemic," said Singleton, who represents District 7.
Thirtieth District Assemblyman Edward “Ned” Thomson (R-Monmouth/Ocean), whose district includes Belmar and Lake Como, was a co-sponsor of the legislation.
Under the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act, Small Business Administration approved approximately $525 billion in loans for small businesses — $17 billion of which were given to New Jersey businesses to support payroll expenses and other nonpayroll costs, such as mortgage interest and utility costs. To incentivize loan recipients to maintain existing staff, the program allowed loans to be forgiven if the borrower met certain payroll and employment retention criteria, according to Singleton’s press release.