The PICPA won a major legislative victory when state lawmakers added a provision addressing Paycheck Protection Program (PPP) loan forgiveness to legislation providing COVID-19 relief to Pennsylvania small businesses. Senate Bill 109 was approved unanimously by the state House and Senate and signed by Gov. Tom Wolf. It is now Act 1 of 2021.

As originally drafted and approved last week by the Senate, Senate Bill 109 appropriates $197 million in educational grants, $570 million for rental and utility assistance, and $145 million for grants to the restaurant and hospitality industry. On Feb. 4, Senate Bill 109 was amended in the House Appropriations Committee with language mirroring Rep. George Dunbar’s (R-Westmoreland) House Bill 385. That bill would exempt income received from the federal PPP from taxation under the state’s Personal Income Tax (PIT).

The U.S. Congress exempted PPP income from federal taxation in the Consolidated Appropriations Act of 2021. Because the corporate net income tax (CNIT) conforms to the federal tax base, PPP income is not taxable under Pennsylvania’s CNIT. Because the PIT does not conform to the federal individual income tax base, PPP income would not automatically be excluded from the PIT. Approximately 80% of businesses in Pennsylvania pay the PIT.

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Republished with permission from the Pennsylvania Institute of Certified Public Accountants