A friend of mine sent me a text the other day saying that he was tired of being under house arrest for a crime he didn’t commit. He was joking of course, but I think that general sentiment is shared by many Iowans whose jobs and businesses have been impacted by the shutdown of our economy to slow the spread of COVID-19.
The federal and state governments have taken extraordinary steps to support Iowa individuals and businesses who have been impacted by a situation they did not create. Direct cash payments to families and businesses in our state are keeping Iowans fed and employers afloat.
The last thing government should do is tax recovery payments to families and businesses that have been impacted by a global pandemic. It is unclear, however, whether these payments are taxable as income under state law. Legislators should not wait for the Iowa Department of Revenue to rule on this issue. Instead, one of the first things we should do when we return to the Capitol is pass a bill ensuring these payments will not be taxed.
Taxing these payments could be a particularly significant problem for small businesses in Iowa. Many employers have taken advantage of the federal Paycheck Protection Program and the Iowa Economic Development Authority’s Small Business Relief Grants. These programs have pumped nearly $4 billion into Iowa’s economy to keep job creators afloat. Most of these funds are in the form of forgivable loans contingent upon employers keeping nearly all their employees on their payroll.
These grants are helping many small employers to keep their business alive. This money is designed to help businesses recover and keep people employed. It is not ordinary income and should not be treated that way for tax purposes. Job creators should not see their tax bills increase because they accepted federal or state recovery funds.
We must protect Iowans who received recovery payments for a situation they did not create from an unexpected hike in their tax bills. This will be a priority of mine when the Legislature resumes its session. I plan to work hard with my Senate colleagues, Governor Kim Reynolds, and members of the House of Representatives to get it done.
The Legislature suspended its current session on March 16 to slow the spread of COVID-19. We are scheduled to return on April 30.