As we have further restrictions on businesses in the state, I wanted to update you on issues with relief packages.
As bars, restaurants and gyms have been either closed or curtailed to take out only, the Governor and Legislature are talking about a relief program. They were waiting until this past Tuesday to see what the budget projection will be and it looks like there may be a $641 million surplus for the rest of this fiscal year, which ends June 30, 2021. This was due to higher than expected consumer spending and pandemic relief coming to the state from the federal government.
The bad news is, there is still a projected $1.27 billion gap to fill for the next fiscal year, which starts July 1, 2021 during the next session. This will somewhat limit what the state will be able to do for assistance in the next fiscal year, but both sides are saying they want to do something yet this December in a special session.
The city of Little Falls EDA may be considering some local assistance for businesses that have been affected by the latest restrictions.
I want to point out some issues with the Payroll Protection Program (PPP) that many businesses may have received this year. First, the IRS and the Minnesota Department of Revenue both consider any grant funding that a business received this year as income and is taxable. Furthermore, on the PPP you can not deduct the expenses you paid with the funds from the PPP. There has been a lot of discussion on the Federal level about changing that, but so far, that has not happened.
Second, you could have applied through your bank to have the Small Business Administration (SBA) forgive the loan and turn it into a grant. If you have expended the funds, you can then fill out an application to have it turned into a grant. You should know that once you make the application to the bank, they have 60 days to review it and submit it to the SBA for forgiveness.
Once submitted to the SBA, they have 90 days to approve it. So you may not have had funding turned into a grant this year, which is fine, as it can be forgiven next year, but you then have to show the funds as a liability on your financial statements for this year. This could be a problem if you have loan covenants on any loans you may have with your bank.
My recommendation to a business would be to talk to your accountant now about how this or other funds you may have received this year affect your taxes. Also, talk to your banker about how these programs may affect your loans.
In closing, there is a lot of information floating around right now about further assistance for businesses both on the state and federal level. I urge you all to keep a daily watch on what is happening in our local and statewide media, because I believe there will be more business assistance coming.
If you know of a business owner who has been affected, please let them know, as some may not see these notices. Should programs become available, I will get the information out to our local media or contact me.
Please stay safe!
Carol Anderson is the executive director of Community Development of Morrison County.