New Massachusetts Legislation Excludes Forgiven PPP Loan Amounts from Gross Income For Personal Income Taxpayers for Tax Year 2020

On April 1, 2021, Governor Charlie Baker signed legislation which allows the exclusion of forgiven PPP loan amounts from gross income for 2020 for taxpayers subject to the Massachusetts personal income tax. This includes unincorporated businesses reporting income and expenses on Schedule C, partners in a partnership, and individual shareholders of an S corporations.

Prior to this new legislation the Massachusetts Department of Revenue (DOR) – following the Internal Revenue Code of 2005 – determined that forgiven PPP loan amounts were includable as taxable income for taxpayers subject to the Massachusetts personal income tax, while it was not taxable income for conventional C corporations. Under the new legislation, “pass-through” entities are now entitled to the same relief provided to corporations.