The Vermont Legislature is currently considering whether or not to tax the forgiven loan I received under the Paycheck Protection Program (PPP) that offered my business, Sugarsnap Catering, the relief that kept us afloat over the last year.
I was aware as early as February 2020 that Covid-19 would impact my business. I didn’t have any concept of the extent of those impacts, though. I knew I wanted to make the changes necessary to keep my employees and customers safe early on, and that it would come at a cost. But then, in what I call the “twilight zone week,” our full schedule of weddings and corporate events vanished overnight. We lost two months of planned events in 24-hours.
The PPP program was a life preserver during a very dark moment. We received PPP money in early April, and it was instrumental in our business being able to adapt to the Covid-19 world. I was able to bring staff back and we all worked hard to adapt the business to this new reality. Without the PPP relief loans, it would have been extremely challenging to keep our employees off of Unemployment Insurance (which is an immediate benefit to the state) and to acquire a state contract.
Taxing these forgiven loans is the antitheses of what was promised to us under these federal relief programs. Businesses gratefully accepted this money with the understanding that it was non-taxable relief. That was the intent of the program, and that is how the federal government is treating these forgiven loans. Vermont is considering a step to not conform with federal treatment of the forgiven loans for tax year 2021. It’s quite literally the opposite of the program’s intent. To retroactively change the terms and circumstances of this program — one that was offered during a time of great desperation — is unfair and inequitable as it will only penalize those of us who couldn’t get our loans forgiven before the 2021 tax year. Those with loans forgiven after the cutoff are more likely to be smaller businesses operating without the assistance of big CPA firms. It’s a difficult process to navigate.
I was grateful to receive my PPP loan, and as directed, spent much of the loan on payroll in order to have the loan forgiven. Under the guidelines of the loan program, only money that was spent would be qualified for forgiveness. That means the money that I was required to spend is the exact pot of money that the state of Vermont now wants to tax. I no longer have that money sitting in reserve in order to pay what would be in my estimate close to a $10,000 tax.
Because of my PPP loan, I have been able to add staff and I now have 14 full-time employees. The economic devastation would have been even more dire for me and for other businesses around the state if it wasn’t for this relief.
Businesses want to do the right thing. We want to keep our employees employed, and we want to keep them safe and healthy. We want to keep our doors open and we also want to keep our customers and communities safe and healthy. We have been grateful for the support that has been offered. But to suddenly learn that the legislature is considering slapping a tax, retroactively, on relief money that we accepted as a lifeline would be challenging for us. I know my fellow Vermont business owners feel the same way. This tax would pull money away from our employees and our future.
I am deeply appreciative of the work of our legislature during this trying time. I realize how difficult it is to create policy while working remotely. It is my hope that the proposal to tax 2021 PPP loans will be quickly discarded, and that we can move on and work toward rebuilding our state’s economy. I implore the Legislature to conform with federal treatment of the forgiven loans for tax year 2021, and to make that decision before adjourning. If you leave before making your decision, it will create a season of great anxiety and uncertainty for already struggling businesses.
Abbey Duke, Founder/CEO Sugarsnap Catering