BOSTON — A plan to give tax relief to workers and businesses affected by the pandemic will be headed to Gov. Charlie Baker's desk after legislative leaders Monday night reached a compromise on the legislation.
The $350 million package, which still requires procedural votes, dials back increases in unemployment insurance rates, waives state taxes on federal Paycheck Protection Program grants, and establishes an emergency paid leave program for workers to take time off for COVID-19 related issues.
"We need to support our businesses and workers that are still struggling," said Rep. Paul Tucker, D-Salem. "This is a really good step forward."
A key provision allows workers who were unemployed last year or this year to exempt up to $10,200 in the jobless benefits they received from their state taxes, if their household income is below 200% of the federal poverty level.
The proposal also provides relief for businesses by reducing scheduled increases in unemployment insurance taxes for the next two years.
A multibillion-dollar deficit in the state’s unemployment fund, created by a crush of pandemic-fueled jobless claims over the past year, is expected to drive up rates paid by employers an average of 60% beginning next year.
The plan also creates a new commission to study how to rebuild the unemployment fund and authorizes the state to borrow up to $7 billion from the federal government to keep jobless benefits flowing.
Businesses will face a new excise tax on employee wages — which according to legislative leaders will average $57 to $66 per year — to repay interest on the federal loans. That tax would sunset next year.
Additionally, employers who accepted PPP loans that were forgiven by the federal government would not have to pay state income taxes on the money.
Most of those paycheck protection loans — about 4 in 5 — were not forgiven in tax year 2020. Recipients of loans that were forgiven have another month to request an extension on their state taxes as they await word on the proposal, according to the state Department of Revenue.
Business leaders say the tax relief is crucial.
"It's not a permanent solution, but it's a good first step to prevent that rate shock that a lot of businesses were going to see if nothing was done about the tax increase," said Chris Carlozzi, state director of the National Federation of Independent Businesses.
Another provision of the bill creates a $75 million COVID-19 emergency sick leave program, which will allow full-time workers up to 40 hours of paid time off if they get infected and need to quarantine or care for a family member affected by the virus. Part-time workers can also qualify for time off, according to the proposal.
Lawmakers were also considering pushing back the state income tax deadline from April 15 to May 17, but the Revenue Department took unilateral steps to do that last week. That follows an Internal Revenue Service decision to extend the federal income tax filing deadline.
The Legislature's Ways and Means Committee is considering Baker's preliminary $46 billion budget that includes additional relief for businesses and workers.
Massachusetts also expects to receive nearly $8 billion in federal funding for testing and vaccines, schools, businesses and local governments under a $1.9 trillion pandemic relief package signed by President Joe Biden two weeks ago.
The state House and Senate are set to take a final procedural vote on the tax relief measure on Thursday before it heads to Baker's desk for consideration.
Christian M. Wade covers the Massachusetts Statehouse for North of Boston Media Group’s newspapers and websites. Email him at firstname.lastname@example.org.