© 2022 Maine Public
Play Live Radio
Next Up:
Available On Air Stations

Legislature's Taxation Committee Splits On Mills Proposal To Partially Tax PPP Loans

Maine Public
An exterior view of the front of the Maine State House.

Members of the Maine Legislature’s taxation committee split three ways in their efforts to reach a recommendation on how the state should conform its tax laws to reflect changes at the federal level. 

The issue at the center of the debate is how Maine should tax forgivable loans made to businesses through the federal Paycheck Protection Program. Congress gave loan recipients a double tax break, exempting the income on the forgiven loans and also allowing them to deduct business expenses paid for with that federal money. 

Gov. Janet Mills sparked an outcry for initially proposing to only adopt the income tax break. Now, the administration says it wants to also allow the full business expense deduction, but only for loan amounts of $1 million or less. 

“A $1 million exemption to everyone who received a PPP loan forgiveness, regardless of the size of the loan, so if you received more than a million, you still get a million dollar exemption," Mike Allen, Associate Commissioner for Tax policy, told the tax committee on Tuesday.

Finance Commissioner Kirsten Figueroa told the committee that the new proposal targets the extra benefit to small businesses, which make up the vast majority of PPP loan recipients in Maine.

“Nearly 99.1% of the PPP loans as getting the double benefit that the federal government has authorized," Figueroa said. 

The taxation committee, which is tasked with making a recommendation to the appropriations committee on the issue, got bogged down in a parliamentary squabble over which motion would be voted on first.

Sen. Matt Pouliot, a Republican from Augusta, sought to bring the issue back on track with an asssessment of the politics involved. 

“Probably now is a good time to get to brass tacks on this, and for the Republican house members, the reality is the Democrat members of this committee are not going to vote for full conformity,” he said. 

And Pouliot was right. Seven of the 13 members, all Democrats, supported the governor’s new plan for partial conformity. Republican Representative Ted Kryzak of Acton then moved to recommend full conformity with the double tax break, and a way to pay for it. 

"With the... recommendation that the appropriations and financial affairs committee balance the budget through reductions elsewhere in to fiscal year '21 budget," Kryzak said.

Four Republicans supported that motion.

In the end, the panel split three ways on the issue — between full conformity, the governor’s new plan and a proposal from Sen. Ben Chipman, a Portland Democrat, to reject any state tax breaks on PPP loans and use the revenues raised to assist both businesses and individuals hurt by the pandemic. 

The appropriations committee will take up the issue later this week.