NCACPA has learned that a measure to allow state tax deductions for expenses associated with forgiven Paycheck Protection Program loans may be in play in the NC House of Representatives, but the outcome remains unpredictable.
On March 30, the House Commerce Committee recommended HB 334 for passage and referred the bill to the Finance Committee, where it was expected that opposition from the committee’s senior co-chairs would derail the proposal.
According to multiple sources, the issue received support from an overwhelming majority of House Republican Caucus members during a closed-door meeting on April 1.
The legislature’s Fiscal Research Division estimates that allowing businesses to take the deduction would reduce state General Fund revenue by approximately $600 million, with $367 million in revenue reductions occurring in FY 2021-22.
In March, the Senate Republican Caucus endorsed broad-based tax changes, such as lowering the individual income tax rate, increasing the standard deduction, and reducing franchise taxes for businesses. Those provisions are included in SB 337, which is estimated to reduce revenue by $1.86 billion.
The General Assembly is on its spring break during the week of April 5, and supporters of PPP expense deductibility have indicated they would like to include the provision in the Internal Revenue Code conformity bill (HB 279/SB 322) when they return on April 12.
If you have questions about this issue or other policy matters, please contact NCACPA Director of Advocacy Robert Broome, CAE.