Paycheck Protection Program (PPP) tax update and forgiveness portal

by Megan Roberts and Rob Holcomb, Extension educators

Paycheck Protection Program (PPP) changes continue to occur as we move through the summer. This blog reviews a state change related to taxability of PPP by the Minnesota Department of Revenue (MDR), and a federal change that allows many PPP borrowers to apply for forgiveness directly via the Small Business Administration’s (SBA) new PPP forgiveness portal. This SBA portal is expected to be fully open on August 4.

Minnesota PPP taxation

On July 1, several changes occurred to Minnesota’s tax code based on laws enacted during the Minnesota Legislature’s special session. Some of the most notable changes occurred to state level taxation of COVID-19 related PPP and unemployment compensation. At the tax filing deadline, PPP and unemployment compensation were considered taxable at the state level. As of July 1, PPP and unemployment are no longer taxable in Minnesota (as shown on the updated M1NC). The Department of Revenue has updated its 2020 tax forms to reflect this change, as well as updated 2017, 2018, and 2019 tax forms to reflect other retroactive conformity changes that affect business tax provisions such as depreciation. While we are still awaiting full details on some of the other retroactive conformity, we have a clearer picture of Minnesota’s new approach to PPP taxation. The Department of Revenue released a list of actions they are taking regarding PPP and unemployment adjustments here in Minnesota.

The Department of Revenue states:

• “If we can adjust the return, we will send you a letter describing what we changed and any refund you may receive as a result. We are committed to adjusting as many returns as we can.
• If you will need to amend solely due to Minnesota tax law changes, wait until you hear from us before filing. We will let you know whether we will adjust your return or if you will need to amend.
• If you have not yet filed a 2020 return, or filed for an extension, you may file using the updated forms to claim the recently passed unemployment and PPP loan forgiveness income exclusions and deductions.”

The key point is, if you already filed for 2020, wait to take any steps until you hear from MDR. For most taxpayers, the adjustment for PPP state level taxation will be automatic. We will cover other retroactive changes to 2017-2020 Minnesota taxes in a future post when further details are confirmed.

New SBA forgiveness portal

For PPP forgiveness, SBA announced this week a pilot of a new direct PPP forgiveness portal. If a PPP borrower has a loan of $150,000 or below and worked with a lender that opted into SBA’s new portal, then the borrower can apply for forgiveness directly with SBA instead of using their lender’s system. The portal is available here and will open to all qualifying borrowers on August 4.

This post is educational in nature and not tax, legal, or financial advice.