HB 1195 and SB 372 offer relief for employers at critical time

Texas Hotel & Lodging Association is grateful to Rep. Charlie Geren, Sen. Kelly Hancock, Gov. Greg Abbott and Comptroller Glenn Hegar for championing legislation to prevent an unexpected tax increase on businesses at a time when many are still struggling to keep their doors open.

The U.S. Congress approved the Paycheck Protection Program (PPP) last year so businesses could use forgivable loans to pay employees even as COVID-19 caused a severe decrease in economic activity. The legislation creating the program stated that any portion of a PPP loan that qualified for loan forgiveness “shall be excluded from gross income” for tax purposes. However, after many businesses had already accepted PPP loans and used the proceeds to pay employees, the Internal Revenue Service declared that expenses paid with PPP loans would not be tax deductible as promised.

After more than 700 business groups pressed for action, Congress passed legislation late last year to ensure PPP loans were not counted as revenue in the calculation of federal taxes. However, without similar legislation at the state level, the forgivable PPP loans will be counted as revenue for purposes of the Texas franchise tax.

This month, Rep. Geren filed House Bill 1195, and Sen. Hancock filed Senate Bill 372, to ensure Texas employers do not face an unexpected tax bill at a time when they are trying to use every tool available to stay in business and make payroll. The Alliance for Securing and Strengthening the Economy in Texas (ASSET)–of which THLA is a member– is a coalition of business groups that has led the call for a legislative fix that ensures businesses and their employees can see the full benefit of the PPP. 

“These bills are critical to our economic recovery in Texas,” said ASSET spokeswoman Annie Spilman. “Businesses accepted PPP loans at a time when they were desperate to keep operating and paying their employees, and even with those loans, many have continued to struggle. Having to pay taxes on these forgivable loans could be the final nail in the coffin for many Texas employers. Legislators can provide needed certainty and stability for businesses and employees by passing HB 1195 and SB 372.”

Texas Hotel & Lodging Association President & CEO Scott Joslove added, “We are grateful to our state leaders for ensuring Texas hoteliers do not face an unintended consequence of higher franchise tax liability due to participation in the PPP program. Our industry continues to utilize every available resource and tool to preserve jobs and economic activity through this pandemic, and we look forward to continuing our work with state leaders to ensure the Texas hospitality sector can recover strong in 2021 and beyond.”

*Credit: This story has been adapted from an initial press release by Annie Spilman.

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