For months, state legislative leaders steadfastly refused the idea of conforming to a federal tax deduction for recipients of forgiven Paycheck Protection Program loans. That sentiment changed in early mid-April as the House of Representatives moved ahead with HB 334.
The bill creates a $400 million tax break for North Carolina businesses by allowing them to deduct expenses associated with forgiven PPP loans received in 2020. The bill reinstates the expense addback for PPP loan recipients effective January 1, 2021.
House Republican and Democratic lawmakers were joined by a host of business owners at a news conference on April 15 to praise the legislation. Moments later, the House voted 111-2 to approve the bill on second reading. Finance Committee Senior Chair Julia Howard (R-Davie) and Rep. George Cleveland (R-Onslow) were the only two legislators voting against the measure.
HB 334 is scheduled for a vote on third reading by the House on April 20, after which the bill will proceed to the Senate. The bill’s fate in the Senate is uncertain.
According to the Associated Press, Senate President Pro Tempore Phil Berger (R-Rockingham) said that the Republican Caucus has made no decision on HB 334, and they are continuing to explore alternate financial relief measures.
In March, Senate Republicans endorsed a $1.86 billion tax cut package that would lower the individual income tax rate, increase the standard deduction, and reduce franchise taxes for businesses. That proposal became SB 337, which does not include PPP expense deductibility and has not yet been scheduled for a vote.
If you have questions about this issue or other policy matters, please contact NCACPA Director of Advocacy Robert Broome, CAE.