TAX MAN: TO GET or not to GET – SVOG and RRF are the questions
3 weeks ago James C. Winstead
The COVID-19 pandemic has made history here and abroad, but for different reasons.
Here, he is remembered not only for the 1,400 lives he cost, but also for the businesses he hurt or ruined.
Our experience has been similar to that of other states across the country, and our federal government has stepped in to provide economic relief that we hoped would lessen the impact of stay-at-home orders and forced business closures. .
This economic assistance has taken the form of very different federal programs.
Everyone’s had a few rounds of stimulus checks. The federal government and we said it was not income and we would not tax it. No income tax, no general excise tax.
The unemployed received additional unemployment benefit. The federal government didn’t tax it, up to $10,000 in 2020. We did. We did pay the income tax, but not the GET.
Then came forgivable loans: PPP (Paycheck Protection Program) and EIDL (Economic Injury Disaster Loan) as they were called. These were initially loans to the companies affected, but the companies got some or all of the loans forgiven, meaning the companies could keep the money.
For tax purposes, the loans you get are not income because you have to repay the money. But when debt is canceled, the amount of debt canceled is income.
Congress has declared that the PPP rebate does not count as income, but the EIDL rebate does. So we said for income tax purposes we would do the same thing.
And then, for the GET we said (in Tax Information Release 2020-06): “The general rule is that the sums received by a company which replace the income are subject to the GET. Thus, grants or other payments that replace or supplement income are normally subject to GET. However, given the severity of the economic impact of the COVID-19 pandemic, GET will not be taxed on payments received under the PUA, loan amounts canceled under the PPP and EIDL grants. . These amounts will be treated as gross receipt exclusions and should not be reported on GET statements.
Usually, “severity of economic impact” is not a legitimate reason why laws that apply to other people or in other situations regardless of economic consequences do not apply here.
If our legislators pass laws that change the rules, that’s fine. Or if they pass laws that say the agency can take into account the economic impact, maybe among other things, and grant a waiver of this or that legal requirement, that’s fine as well. Or the governor could step in and suspend the laws due to the emergency, which he regularly did with emergency proclamations.
But no legislation was passed to change the rules or grant the state Department of Taxation the power to circumvent the laws, and the governor’s proclamations did not suspend the tax code (except to cut off the flow of taxes). TAT money to the counties).
Now we have restaurants and bars receiving grants from the Restaurant Revitalization Fund (RRF). And we have entertainment venues that receive grants through the Shuttered Venue Operators Grant (SVOG) program. The State Tax Department has yet to officially tell us if GET will touch these grants, although department staff have unofficially said they would be taxable due to the “general rule” cited above.
But what about the severity of the economic impact? Does it matter anymore? Restaurants and bars receiving RRF money, or entertainment venues receiving SVOG dollars, must show pandemic-related revenue loss before the federal government gives them money. Does it matter at all?
What do you say, Department of Taxes? TO GET or NOT TO GET, that is the question today.
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Tom Yamachika is president of the Tax Foundation of Hawaii.