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Most States Won’t Tax Forgiven PPP Loans

Most states will not treat forgiven PPP loans as income, according to Bloomberg Tax & Accounting’s 21st annual Survey of State Tax Departments. The survey found 29 state tax departments will follow federal treatment of loan forgiveness or cancellation in not considering the amounts taxable.

Eight states treat forgiven amounts for PPP loans to businesses as taxable income: Arizona, Maine, Minnesota, New Hampshire, Texas, Utah, Virginia, West Virginia,

Five states do not have corporate income taxes—Nevada,  Ohio, South Dakota, Washington and Wyoming, Nine states did not reply to the survey: Arkansas, Colorado, Florida, Georgia, Iowa, Kansas, New York, South Carolina, and Vermont.

Otherwise, the response to the pandemic has included some leeway in state taxation with 37 indicating one to six employees who perform non-solicitation activities would create nexus for an out-of-state corporation if the employee is telecommuting from within their state. But half of these states are pausing the nexus requirement  because of COVID-19.

The states that will not tax forgiven loan proceeds are Alabama, Alaska, California, Connecticut, Delaware, Hawaii, Idaho, Illinois, Indiana, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Mississippi, Missouri, Montana, Nebraska, New Jersey, New Mexico, New York, North Carlina, North Dakota, Oklahoma, Oregon, Pennsylvania, Rhode Island, Tennessee and Wisconsin.

Bob Scott
Bob Scott has provided information to the tax and accounting community since 1991, first as technology editor of Accounting Today, and from 1997 through 2009 as editor of its sister publication, Accounting Technology. He is known throughout the industry for his depth of knowledge and for his high journalistic standards.  Scott has made frequent appearances as a speaker, moderator and panelist and events serving tax and accounting professionals. He  has a strong background in computer journalism as an editor with two former trade publications, Computer+Software News and MIS Week and spent several years with weekly and daily newspapers in Morris County New Jersey prior to that.  A graduate of Indiana University with a degree in journalism, Bob is a native of Madison, Ind
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