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Smart business owners should have realized that there is no free lunch and that there was a high probability that eventually the taxman would come knocking at their door, if the loans were not repaid. Forgiveness of debt results in taxable income. The folks that helped the businesses apply for the PPP loans should have given the biz owners a heads up as should have their accountants and CPAs.
In the ordinary course, loans that are forgiven would rightfully be taxed. However, these were not ordinary times and not ordinary loans. The loans helped keep the unemployment system from being overwhelmed and helped keep as many workers on the employer’s payroll. It was a win-win. Employers would have made different decisions had the State been upfront that these would be taxed. To change the rules, especially after the state received a huge Federal windfall is simply unconscionable. Let’s focus on policies and taxation that encourages businesses to come to (and stay in) RI and grow! Rhode Island is falling back to its old ways —tax, tax and tax again. Good luck with that approach! What’s next? Cooler and Warmer?