House passes bill allowing NC businesses to deduct PPP covered expenses

North Carolina remains one of three states that does not allow business owners to deduct expenses covered by the Paycheck Protection Program (PPP). NC House representatives hope to change that with a bill passed by the house and discussed in a press conference on Thursday.

“Not only did our business community keep the economy moving last year, they kept countless North Carolinians employed and able to support their families,” said Rep. Jason Saine (R-Lincoln).

NC house legislatures Speaker Tim Moore (R-Cleveland), Minority Leader Robert Reives (D-Chatham), Majority Leader John Bell (R-Wayne) joined primary bill sponsor Rep. Jason Saine (R-Lincoln) and Rep. Ray Pickett (R-Ashe) in putting forth House Bill 334 to change how businesses can deduct expenses purchased with PPP dollars. 

“This is a commonsense bill to help businesses across the state who have been dealing with the significant economic impact of the COVID-19 pandemic,” said Rep. Ray Pickett (R-Ashe), a primary sponsor of the bill. 

In North Carolina, businesses could not deduct expenses funded with PPP dollars if the proceeds received from forgiven PPP loans are excluded from income for tax purposes. 

“This bill will make life easier for our small businesses, job creators, and tax professionals as they deal with fiscal year 2020 and work to get our state back on track in 2021,” said Saine.

The proposed bill estimated to reduce the state’s revenue by $400M, will only allow the deduction for the 2020 tax year. 

“For this specific situation, we felt it was best to simplify the process, align with the Federal treatment of PPP loans, and save businesses a little more money towards the bottom line,” said Pickett.

Over 127 thousand businesses in North Carolina took the PPP loans with an average of 10 employees per business. The legislature had support from both sides of the aisle, including the House Minority Leader. 

“We wanted to make sure we took advantage of all the opportunities we could to help North Carolinians in this particular situation,” said Reives.