TRENTON — In an effort to help New Jersey small businesses battered by the ongoing pandemic, Paycheck Protection Program loans will be tax exempt at the state level for the 2020 tax season.

Those who received the tax-exempt loans also are able to deduct business expenses paid for with the proceeds, state officials announced Tuesday.

Out of 155,851 PPP loans that New Jersey businesses received, nearly 134,000 of them were for amounts less than $150,000, totaling $4.6 billion, according to the governor's office.

Another 19,066 of the PPP loans received in New Jersey were for amounts of between $150,000 and $1 million each, totaling $6.6 billion.

Based on those figures, the remaining 2,824 PPP loans received by state companies totaled $6.1 billion, as the state received PPP loans that totaled $17.3 billion.

“This decision is designed to help already beleaguered small businesses, which are the majority of recipients of these loans,” Gov. Phil Murphy said in a written statement.

“It’s no secret that New Jersey has been one of the hardest hit states by COVID-19 and our small businesses have shouldered the brunt of it. PPP loans helped many stay afloat and this move will provide added benefit to help them weather this storm,” he added.

The move follows the federal government’s lead, which has clarified that PPP loans and business expenses paid for with the funds are exempt from federal income taxes.

In a recent poll, 67% of small businesses surveyed in the state said they have received PPP loans, while 47% of respondents said they have received New Jersey Economic Development Authority grants or loans.

“Access to PPP funds has been a lifeline for thousands of struggling small businesses throughout New Jersey. Increasing state taxes on the back of that federal aid would have gone against the intent of that aid and caused further financial duress for those employers,” New Jersey Business and Industry Association Vice President of Government Affairs Christopher Emigholz said in a written response on Tuesday.

Emigholz also still touted the legislation sponsored by Sen. Troy Singleton, D-Burlington, and Assembly Majority Leader Louis Greenwald, D-Camden, to ensure that future rounds of PPP loans would remain tax exempt. Murphy said that New Jersey could follow the federal government’s lead without needing further legislation.

Under the state's clarification, for the 2020 tax season, related expenses paid for with PPP loans will be deductible for both Gross Income Tax and Corporation Business Tax  purposes and forgiven loans will be excluded from being subject to either tax.

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