Struggling Virginia businesses may now face another burden: paying taxes on PPP loans

FALLS CHURCH, Va. (FOX 5 DC) - Thousands of businesses in Virginia applied for PPP loans to keep them from having to lay off their employees.

Joe Huh, Alphagraphics co-owner, is upset he may get dinged for taking the money.

"It wasn’t even enough. As you can see, we even had to lay off two other people. Grateful we got it, but it just wasn’t even enough. And then because we let the two other people go, to find out we have to pay income tax on that is a little frustrating," said Huh.

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Back in December, the federal government approved legislation to allow businesses to deduct the PPP loans from federal income taxes.

Virginia does not agree with the federal government to fully deduct the PPP loans. The Commonwealth wants to tax businesses to gain state revenues.

This is not sitting well with some business owners like Sara Huh, co-owner of Alphagraphics, who say they wish they knew this from the start when they applied for the loan instead of being thrown a curveball.

"As a struggling business, we would be absolutely grateful if it was forgiven because we all struggling. I mean, we are barely keeping afloat. We lost 50% or more of our business. The PPP loan was to keep my employees afloat, keep my employees in business so for us, it would be detrimental. It would be heartbreaking," said Huh.

Others on the opposing side consider this a double-dipping – a tax benefit on top of a grant for those lucky enough to have gotten one.

However, Nicole Riley, the Virginia State Director for the National Federation of Independent Businesses’ is calling for the Commonwealth to conform with the federal government.

"The big question is does VA allow the second tax benefit of being able to deduct your expenses. So far, the senate has said we’re going to let you deduct up to $100,000 in business expenses. The house, unfortunately, has said we’re only going to let you deduct $25,000," said Riley.

This dialogue will continue. No final decision has been made yet.

The point here is some businesses feel that paying taxes on a PPP loan is an extra burden during a time when they’re already struggling.