New COVID-19 Relief Provides Tax Benefits for Small Businesses and Individuals in Massachusetts

Posted by Todd Doe on Apr 14, 2021 9:15:51 AM
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On April 1, Massachusetts Governor Charlie Baker signed into law a new COVID-19 relief legislation package with tax impacts for small business owners and individuals.

Under previous legislation, corporations with forgiven Paycheck Protection Program (PPP) loans were allowed to exclude those funds from their gross taxable income, however small businesses were not. Now, pass-through entities are also allowed to exclude PPP funds from gross taxable income, while still claiming the deductions for expenses paid with PPP funds.

The bill also creates a $75 million COVID-19 emergency paid sick time program, requiring employers to provide workers with paid leave if they are infected, self-isolating, or quarantining due to COVID-19, as well as for those getting vaccinated or caring for a family member who fits the same criteria. Governor Baker exercised his line-item veto power to send the sick leave portions of the bill back to the Legislation with suggested revisions. Under the proposed sick leave provisions, employees on sick leave related to COVID-19 would receive up to 40 hours of paid leave, at no less than their regular rate of pay, up to $850. Part-time employees with “a regular schedule with consistent hours per week” will also receive COVID-19 sick leave benefits, as long as the paid sick leave is equal to the number of hours an employee works per week, on average over a two-week timeframe. Employers may also be eligible for a $40 per employee tax credit to support the COVID-19 paid sick leave program.

The Governor’s proposed revisions suggest that compensation more closely mirror the federal Families First Coronavirus Response Act, with employees being paid at their regular rate of pay if they meet the COVID-19 sick leave criteria, and at two-thirds of their regular rate of pay if they take leave to care for a family member who meets the criteria. The Governor’s revisions also include changes to the way that employers will be reimbursed for providing sick leave; how new paid sick leave will be counted against existing sick leave policies; and a proposed program end date of September 30, 2021.

The legislation also includes several changes to unemployment benefits, including freezing the unemployment insurance rate through 2022. This will slow the annual employer contribution rate, which was expected to increase significantly per employee. Individuals who have received unemployment benefits will not be taxed on the first $10,200 if they live below 200% of the federal poverty level.

If you have questions about how the latest COVID-19 relief packages will impact your taxes, leave a comment below, or feel free to reach out directly, I’m happy to help!

Topics: Tax, Business Advisory, COVID-19, Small Business