Sen. Tom Bakk, I-Cook, at a press conference with fellow Republicans, told reporters that more than 100,000 Minnesota business owners risked facing a big blow if state tax codes do not ‘did not comply with federal guidelines. Dozens of other states have exempted the loans from state taxes, including all of Minnesota’s neighboring states.

The federal safety net program came into effect last year and was designed to help businesses keep workers on their payroll even though they have been affected by COVID-19 and state policies aimed at limiting its spread. And without legislative change, businesses could be asked to start paying income taxes as of this month.

“Now to be told they’re going to have to pay taxes on this seems really unfair,” Bakk said. “It’s easily doable within budget.”

Bakk said he hopes to get a bill passed in the governor’s office by March 15, when companies are expected to pay a portion of those income taxes. But House leaders remain in discussions on whether the state has the financial means to exempt taxes on all PPP loans.

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Democrats in the House of Representatives also lobbied to exempt supplemental UI benefits from state income taxes.

The one-time cost of exempting PPP loans from state taxes is $ 438 million. And Bakk, along with Senate Majority Leader Paul Gazelka R-East Gull Lake, said lawmakers would have to contribute a budget surplus of $ 940 million expected to pay for that.

“There is no reason not to do this with the surplus we have,” Gazelka told reporters. “It’s the companies that have struggled, it’s the companies that have kept their employees and now we want to help them by complying.”

Gazelka said he was in conversation with House Speaker Melissa Hortman of D-Brooklyn Park about a possible compromise that could pass both Houses.

Greg Davids Representative R-Preston serves as Republican leader on the House Tax Committee and, in a letter Monday, urged House Speaker Paul Marquart D-Dilworth to endorse the plan tax compliance. Marquart said he would consider the proposal.

“We should adopt this tax exemption as soon as possible and make sure it does not get bogged down in political games,” Davids said. “Business is waiting for us, and with a healthy budget surplus, there is no excuse to delay.”

Follow Dana Ferguson on Twitter @bydanaferguson, call 651-290-0707 or email [email protected]

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