(The Center Square) – The Georgia House has advanced a bill that could save taxpayers more than $250 million if it becomes law and would make certain federal Paycheck Protection Program (PPP) loans tax exempt.
The measure, House Bill 265, makes an annual update to the state's revenue code to extend tax deductions for medical expenses, charitable contributions and business meals.
The House passed the measure unanimously Tuesday, and it now heads to the Senate for consideration.
One of the bill's sponsors, Rep. David Knight, R-Griffin, said local accountants and tax preparers are waiting on the changes in the bill to file income taxes for 2020.
"Our Georgia taxpayers are already starting to file their tax returns, and, you know, part of that is the state return," Griffin said. "They follow these rules or laws that go through all the way into the tax software."
Most of the provisions in the bill were drafted to conform with the tax relief measures granted by the federal government through coronavirus relief legislation. Lawmakers said the measure could cost the state nearly $255 million in tax revenue over the next five years. Georgians could hold on to about $49 million of tax revenue in fiscal year 2021 and $82 million in fiscal year 2022.
The PPP was launched through the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March. The program provides loans to businesses to keep their workforce employed and cover expenses such as rent and payroll during the pandemic. The latest round of aid was made available in January.
More than 18,000 companies in Georgia were approved for PPP funding in the first round of loans, according to U.S. Small Business Administration data. Under SB 265, businesses eligible for PPP loan forgiveness would not be required to pay state taxes on the loans, even though they count as income. The measure also lets those business owners claim tax deductions on the loans.
The biggest savings for taxpayers could come from medical expense deductions. The measure permanently would lower the deductible floor to 7.5% of a taxpayer's adjusted gross income after it was raised under the Tax Cuts and Jobs Act of 2017. Georgia Department of Revenue (GDOR) officials said it could cost the state $62 million in tax revenue over the next five years.
SB 265 also would increase the ceiling for low-income housing tax credits in tax year 2021 and would make business meals 100% tax deductible until 2021. The provisions would cost the state $45 million and $51 million in tax dollars, respectively.
The measure also would allow Georgians who do not claim their contributions to charity as individual line items to claim a standard tax credit of $300 through 2021. Lawmakers first approved the threshold in June. SB 265 also allows Georgians to donate 100% of their income to charitable causes in the 2020 and 2021 tax years.
"I'm assuming the purpose is because a lot of people are having a tough time now, so just to encourage charitable giving," said John Foster, assistant director of the GDOR Legal Affairs and Tax Policy unit.
SB 265 would extend tax exemption on certain foreclosure debt and allow film production companies to receive credits for the first $15 million in production expenses through 2025. It also would exclude certain employers from student loan repayment in the 2020 tax year.