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One important provision of the Consolidated Appropriations Act enacted in December 2020 allows expenses paid with Paycheck Protection Program (“PPP”) loans to be fully deductible for federal income tax purposes. This federal deduction applies to all PPP loans, regardless of whether a loan was forgiven before the Appropriations Act was enacted, as detailed here.

Many taxpayers are asking whether this deduction is also available for Wisconsin tax purposes. As of the date of this alert, the answer is unfortunately no.

According to the Wisconsin Department of Revenue, the federal fix enacted by Congress does not automatically apply for Wisconsin tax purposes.  Rather, a Wisconsin fix must be separately enacted by the Wisconsin legislature.

According to information obtained from the Wisconsin Institute of CPAs, the Wisconsin legislature’s leadership currently opposes such a move. It is estimated that maintaining the status quo in Wisconsin and not allowing such a deduction will generate approximately $400 million in state revenue.

Taxpayers wanting Wisconsin to allow the deduction should urge their legislators to enact a Wisconsin fix.

As with many things COVID-19, uncertainty is the watchword. If you have any questions regarding PPP loans or their forgiveness, contact your FOS attorney.

Be well.