DOR: State COVID-19 grants will be taxed

GOV. DANIEL J. MCKEE unveiled his fiscal year 2022 state budget on Thursday, highlighting the need for aid due to the ongoing health and economic crisis caused by the COVID-19 pandemic. / PBN FILE PHOTO/NICOLE DOTZENROD

PROVIDENCE – While the state is posed to lose “tens of millions” in tax revenue from forgivable payroll loans, the state’s COVID-19 relief grant programs will be subject to state and federal income taxes, according to Paul L. Dion, chief of the R.I. Department of Revenue’s Office of Revenue Analysis.

Dion in a presentation to the Senate Finance Committee on Jan. 28 explained how the state will follow federal guidelines set forth in the latest stimulus package, which exempt forgivable Paycheck Protection Program loans from state and federal taxes, while also allowing recipients to deduct expenses paid for with the loans from their net income. However, businesses that received grants through the state’s programs – Restore RI; the Hotels, Arts & Tourism, or HArT, program; RI On Pause program; and the Relief Fund for Restaurants and Bars – will still have to pay state and federal income taxes on the money, Dion said.

Exactly how much tax revenue this will bring in for the state has not been calculated, according to Paul Grimaldi, a spokesperson for the department. At the time of the November revenue estimating conference, the last estimate available, the state projected it would bring in $1.5 billion in personal income tax revenue and $458 million in business tax revenue in fiscal 2021.

Nancy Lavin is a staff writer for the PBN. Contact her at Lavin@PBN.com.

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