LANSING, Mich. — Taxpayers who accepted federal Paycheck Protection Program (PPP) loans will not be taxed on loans forgiven through that program, the Michigan Department of Treasury said Friday.
The tax treatment was also outlined in a notice issued by the state treasury department this week, which complies with federal tax treatment for these loans.
PPP was originally created under the CARES Act to provide cash-flow assistance to small businesses affected by the COVID-19 pandemic.
Under the program, eligible borrowers could apply for and receive federally guaranteed loans to be used for payment of payroll and certain other qualified business expenses.
Borrowers who use the loan proceeds to pay qualified expenses are eligible for complete or partial forgiveness of the loan.
Loans forgiven under the program aren’t subject to income tax and the qualified business expenses remain deductible.
Because the state will match the treatment on the federal return, additional documentation substantiating the PPP loan is not needed when filing a Michigan tax return.