Good morning everyone:
This is a slimmed down version of the Sunday Reader, essentially a roundup of all the stories we published during the last week with one piece of key news that simply can’t wait another week.
We’re trying to ease up a little this weekend so we can celebrate Mrs. SSJ’s birthday. Happy Easter everyone.
Before we get into our roundup, it’s worth noting a story first reported this week by John Hanna at The Associated Press.
It seems that a twist in the federal tax code could potentially cost Kansas more than $350 milion in revenue over three years, an alarm bell that was sounded to the House tax committee last month.
Forgiven loans are generally considered as income and are taxable.
However, Congress decided that forgivable loans made under federal Paycheck Protection Program – intended to help employers make payroll during the pandemic shutdowns -weren’t subject to income tax.
Plus businsess received the added benefit of being able to deduct expenses paid with those same loans as well.
Since Kansas is a rolling conformity state, the loans are not taxable at the state level either unless the Legislature directs otherwise.
For what it’s worth, the Internal Revenue Service initially ruled last year that the businesses could not deduct expenses paid with PPP loans.
However, Congress went the opposite route and made the expenses deductible when it passed a new COVID-19 relief package at the end of December.
This issue potentially complicates the Republican-controlled Legislature’s efforts to pass $284 million in tax cuts.
The tax bill is awaiting Gov. Laura Kelly’s signature although she seemed to signal her thoughts Thursday when state revenues for March were announced.
“We cannot risk passing any tax bill that would put Kansas back into a self-inflicted budget crisis, and jeopardize our COVID-19 recovery efforts,” the governor said in a statement.
Here’s a rundown coverage of this issue in the last couple of months, first starting with piece from The Associated Press.
- The conservative-leaning Tax Foundation reports that 33 states and the District of Columbia exclude forgiven PPP loans from taxable income while allowing expenses paid with those loans to remain deductible. The Tax Foundation also provides this nifty map showing which states are not taxing PPP loans.
- Michael Mazerov, senior fellow from the liberal leaning Center on Budget and Policy Priorities, warned Kansas lawmakers about the possibiliy of the double tax whammy in testimony to the House tax committee last month. He noted that more than $5 billion in PPP loans had been given to Kansas businesses. “If expenses on those loans can now be deducted, with a top tax rate of 5.7% for the personal income tax and 4.0% for the corporate tax,” he said, “Kansas could be facing hundreds of millions of dollars of personal and corporate income tax revenue losses.” Mazerov generally believes states should decouple from the PPP tax breaks.
- This article from Inc. covers the issue facing states.
- Oregon lawmakers are moving toward taxing PPP loans.
- Minnesota is moving toward exempting PPP loans from state taxes.
- Kentucky’s governor recently signed legislation into law that allows businesses to deduct from their state income taxes the expenses they paid using their PPP loans.
- Massachusetts governor signed a bill that includes a tax benefit for PPP loans.
Now onto other news you need to know but may have missed from this week:
- The outlook for passing a sports wagering bill appears dim after the House voted down a broad sports wagering proposal earlier this week.
- Legilsative leadership revoked the governor’s mask mandate after the existing one expired. It was essenitally a done deal after the House and Senate overwhelmingly passed resolutions oppsing a statewide mask mandate. Here’s a story that looks at all of the executive orders she reissued this week.
- Almost 30 business, medical and social welfare groups from across the political spectrum are urging lawmakers to reject a bill discouraging vaccinations and limiting the state health secretary from mandating new innoculations.
- The Legislature passed a new tax bill that could cost taxpayers an estimated $284 million over three years.
- The Senate passed legislation that limits the delivery of ballots to election offices on behalf of someone else. Critics says the bill suppresses voting rights and turns good neighbor helping others into felons. Supporters of the bill say it’s intended to keep elections secure. A Senate committee, meanwhile, gave up on the idea of narrowing the window for sending out advanced ballots.
- Another of Gov. Laura Kelly’s appointees is getting a cool reception from the Republican-controlled Kansas Senate.
- The Kansas Senate passed a bill requiring high school students to pass a civics test. Critics says the legislation encroaches on the constitutional authority of the Kansas State Board of Education.
- Kansas Attorney General Derek Schmidt has signed onto a lawsuit against the Treasury Department, arguing the federal government can’t use COVID-19 relief funds as leverage to keep states from cutting taxes.
- The Legislature approved a bill intended to protect critical infrastructure from destructive protests but was criticized as an attempt to shut down free speech.
- Kansas Republican Party Communications Director C.J. Grover has left his position, but is expected to still be involved in Kansas politics.
