by Steve HanerTax on Paycheck Protection Program Grants

The General Assembly session deadlines require final decisions on various revenue bills before the final budget bill is adopted, in theory keeping the two issues separate. What is good tax policy should not be driven by the need or greed of the appropriators. 

But the conference committee overseeing the final decision on how much of the Paycheck Protection Program Grants will be taxed is dominated by appropriators, including the chairs of the both the House and Senate budget panels. The Senate’s proposal to allow $100,000 of PPP grants to be tax free produces less revenue, so the House’s position of allowing only $25,000 to be tax free meant the House budget includes another $70 million in spending.

The announcement that the state’s economy continues to hum and produce additional revenue, adding $730 million more in the General Fund, would allow for the Senate position to prevail without the need to cut the existing House budget. But the pressure remains to tax more and spend more, with Governor Ralph Northam raising expectations even higher with a late proposal for fatter employee raises.

The conference report will appear sometime in the coming week. Republicans who favor the Senate position retain major leverage, because no bill can pass as an emergency measure without their votes. Absent that emergency clause, changing all those tax rules on July 1 really messes with the state’s May 1 tax filing deadline.

None of the 100,000-plus PPP grants, which maintained hundreds of thousands of Virginia jobs in the pandemic, should be taxed. But Governor Ralph Northam wants to skim 6% off the top of that federal funding rush. Of the two viable choices, the Senate version should prevail and that can pass with the emergency clause.

Percentage of Income Payment Plan Tax on Electricity

After Bacon’s Rebellion undertook the all-too-unusual step of actually reading a bill and reporting what it did, the bill in question was substantially changed. The version of the Percentage of Income Payment Plan which advanced out of the State Senate Friday was a shadow of the one subject to that report.

The substitute removed any reference to whole home retrofits, which were to include converting heating plants from natural gas or propane to electric heat pumps. The stripped-down bill is back to focusing (mainly) on providing electricity bill subsidies for low-income families. The proposal to extend those subsidies to Dominion Energy Virginia and Appalachian Power customers with incomes at 200% of the federal poverty level was reduced to 150%.

It also included a reenactment clause, meaning the bill would only go into effect after passing again in 2022. That may or may not mean anything, since the program is already authorized under existing law because of the 2020 Virginia Clean Economy Act. Only the changes or clarifications in this bill would be delayed.

The Senate substitute, which finally had a spotlight on it, squeaked out on 20-19 (roll call not yet posted by Senate staff, sorry). It immediately was rejected by the House of Delegates, so that bill is also now in a conference committee. The more expansive provisions could return. There was no indication either utility was opposed to the more expansive and expensive version.

Senate Majority Leader Richard Saslaw, D-Fairfax, belittled concerns and reported it would cost residential consumers $1.25 per month. That assumes an average Dominion monthly electric bill, was a higher figure for APCo, and also assumes the bare bones program reviewed by the State Corporation Commission.

Those using more juice, especially commercial, government and industrial customers, would see a major price increase. And there is no reason to believe this will stay bare bones before final action.

Saslaw was answered by a passionate speech from Senator David Suetterlein, R-Roanoke, who started listing all the other ways our electric bills have seen $1 or $2 added here or there, over and over, to the point it is becoming a major burden on family budgets. The full list begs for an airing.  A PIPP as it passed the House would be far more expensive than the misleading estimate Dominion lobbyists fed Saslaw.

Electric School Buses in “By for The Day” Limbo

School bus? Storage battery? No, utility profit center.

Having been defeated and reconsidered, Dominion Energy Virginia’s proposal to force ratepayers to finance a battery-operated school bus fleet with guaranteed fat profit margins for itself remains on life support. Monday may tell the tale, after proponents declined to take an additional vote on Thursday or Friday. This would be another of those taxes hidden on your electric bill Suetterlein was discussing.

Again, there are amendments proposed seeking to reduce the cost and the objections. The fleet is now down to 1,000 buses rather than 1,250, cutting the bill to ratepayers to about $225 million (before annual profit margins). But micromanaging “equity” language was added by the House, seeking to steer the buses to Title I schools and to neighborhoods with poorer air quality.

A similar bill for electric buses, but not calling for ratepayers to cover the tab thus making the utility rich, is also going “by for the day” in the Senate, perhaps awaiting the outcome of the Senate bill in the House. It is a good vehicle for an amendment giving the utility-written approach a final chance to pass.

Should this pass, 1,000 buses would only be the start. Diesel is on the way out with the current leaders of Virginia, who paid zero attention to what kept running in Texas last week and what did not.


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55 responses to “Updates: PPP, PIPP, Dominion’s School Buses”

  1. LarrytheG Avatar

    for all the fear and loathing over taxes and solar school buses and wind turbines in Virginia, I was very impressed with Texas “conservative “free market” approach:

    https://dmn-dallas-news-prod.cdn.arcpublishing.com/resizer/5sKtvJM0JGtGDf9bWd46VhPzNck=/1660×934/smart/filters:no_upscale()/cloudfront-us-east-1.images.arcpublishing.com/dmn/YTIAWSQ3DFCVFHZLYLRJMGQTDI.jpg

    1. Steve Haner Avatar
      Steve Haner

      That will be your bill in five years. 🙂 You’ve been reading me advocate year after year for the SCC’s and PJM’s oversight. In 2007 we at the shipyard moved Virginia AWAY from deregulation. That company had the right to move to an independent provider all along, but never has.

  2. LarrytheG Avatar

    for all the fear and loathing over taxes and solar school buses and wind turbines in Virginia, I was very impressed with Texas “conservative “free market” approach:

    https://dmn-dallas-news-prod.cdn.arcpublishing.com/resizer/5sKtvJM0JGtGDf9bWd46VhPzNck=/1660×934/smart/filters:no_upscale()/cloudfront-us-east-1.images.arcpublishing.com/dmn/YTIAWSQ3DFCVFHZLYLRJMGQTDI.jpg

    1. Steve Haner Avatar
      Steve Haner

      That will be your bill in five years. 🙂 You’ve been reading me advocate year after year for the SCC’s and PJM’s oversight. In 2007 we at the shipyard moved Virginia AWAY from deregulation. That company had the right to move to an independent provider all along, but never has.

  3. I feel like Leonidas and the 300 at Thermopylae holding back the endless hordes of Persians. Strike down one tax- or energy-gouging bill and ten take its place.

  4. I feel like Leonidas and the 300 at Thermopylae holding back the endless hordes of Persians. Strike down one tax- or energy-gouging bill and ten take its place.

  5. Forgiven PPP loans should be taxed. Either that or the expenses paid with the loan should not be deductible. To do otherwise results in double dipping. Take the emotion out of it and do what makes sense. The math is not hard

    1. Steve Haner Avatar
      Steve Haner

      Entitled to your opinion, but the double dip line is pure BS. Not taxing it provides one “benefit”, arguably, but two? Total nonsense but a great PR line. Question: Why is Virginia not taxing the $1,800 federal grants to individuals (in two tranches)? No difference really, except the political outcry would be fatal. Why doesn’t the state say, you must reduce your standard or itemized deductions by that amount? It would be nuts, that’s why.

      It is the state doing the double dipping, reaping all the benefits of PPP — continued payroll taxes, spending by the companies and employees, keeping people off UI and social programs — and then wanting its cut like a mobster.

      1. LarrytheG Avatar

        Don’t tax it but they can’t deduct expenses?

        Compare to individuals? They don’t claim expenses in that way?

        Is Unemployment taxed? You bet your bippy it is.

      2. Not bs at all.

        pre-covid PPP Loan PPP Loan PPP Loan Actual
        Forgiveness Forgiveness Forgiveness Results
        Not Taxed, Taxed, Not Taxed,
        Expenses Expenses Expenses
        Not Deductible Deductible Deductible

        Revenue 100,000 100,000 100,000 100,000 100,000
        Loan Proceeds 0 0 35,000 0 35,000

        Payroll (25,000) (25,000) (60,000) (60,000) (60,000)
        Other Expenses (17,000) (17,000) (17,000) (17,000) (17,000)

        Taxable Income 58,000 58,000 58,000 23,000 58,000

        35,000
        double
        dipped
        The guy should be paying tax on $58,000, not $23,000. Sorry about the formatting.

  6. Forgiven PPP loans should be taxed. Either that or the expenses paid with the loan should not be deductible. To do otherwise results in double dipping. Take the emotion out of it and do what makes sense. The math is not hard

    1. Steve Haner Avatar
      Steve Haner

      Entitled to your opinion, but the double dip line is pure BS. Not taxing it provides one “benefit”, arguably, but two? Total nonsense but a great PR line. Question: Why is Virginia not taxing the $1,800 federal grants to individuals (in two tranches)? No difference really, except the political outcry would be fatal. Why doesn’t the state say, you must reduce your standard or itemized deductions by that amount? It would be nuts, that’s why.

      It is the state doing the double dipping, reaping all the benefits of PPP — continued payroll taxes, spending by the companies and employees, keeping people off UI and social programs — and then wanting its cut like a mobster.

      1. LarrytheG Avatar

        Don’t tax it but they can’t deduct expenses?

        Compare to individuals? They don’t claim expenses in that way?

        Is Unemployment taxed? You bet your bippy it is.

      2. Not bs at all.

        pre-covid PPP Loan PPP Loan PPP Loan Actual
        Forgiveness Forgiveness Forgiveness Results
        Not Taxed, Taxed, Not Taxed,
        Expenses Expenses Expenses
        Not Deductible Deductible Deductible

        Revenue 100,000 100,000 100,000 100,000 100,000
        Loan Proceeds 0 0 35,000 0 35,000

        Payroll (25,000) (25,000) (60,000) (60,000) (60,000)
        Other Expenses (17,000) (17,000) (17,000) (17,000) (17,000)

        Taxable Income 58,000 58,000 58,000 23,000 58,000

        35,000
        double
        dipped
        The guy should be paying tax on $58,000, not $23,000. Sorry about the formatting.

  7. Paul Sweet Avatar

    I expect that a lot of people went to Griddy because their rates for electricity were generally lower than other utilities under normal circumstances. Their website says “Wholesale beats the TX average 96% of the time” and “20% cheaper that the Texas average”.

    A bill ten times normal is terrible, but I’m not sure customers should have their bills cancelled, unless Griddy wants to eat the loss so everybody doesn’t dump them. Maybe customers should be allowed to pay it off over a year.

    1. Steve Haner Avatar
      Steve Haner

      Gamblers need to always remember the house always wins. That 4% chance (1 in 25) will come up on the wheel….

    2. LarrytheG Avatar

      Well these are the same customers who KNOW they have water pipes in their ceilings and don’t shut off the master valve when the electricity goes out and they lose heating..

      If YOU KNOW the heat is out in freezing weather – most folks I know – go shut off the master water valve. But in Texas where they also get ^6000 electric bills , hmmmmmmmm

      On the 6K bills. Is this how a “competitive” electricity market in Virginia would have worked? Is the govt going to “forgive” those bills?

  8. Paul Sweet Avatar

    I expect that a lot of people went to Griddy because their rates for electricity were generally lower than other utilities under normal circumstances. Their website says “Wholesale beats the TX average 96% of the time” and “20% cheaper that the Texas average”.

    A bill ten times normal is terrible, but I’m not sure customers should have their bills cancelled, unless Griddy wants to eat the loss so everybody doesn’t dump them. Maybe customers should be allowed to pay it off over a year.

    1. Steve Haner Avatar
      Steve Haner

      Gamblers need to always remember the house always wins. That 4% chance (1 in 25) will come up on the wheel….

    2. LarrytheG Avatar

      Well these are the same customers who KNOW they have water pipes in their ceilings and don’t shut off the master valve when the electricity goes out and they lose heating..

      If YOU KNOW the heat is out in freezing weather – most folks I know – go shut off the master water valve. But in Texas where they also get ^6000 electric bills , hmmmmmmmm

      On the 6K bills. Is this how a “competitive” electricity market in Virginia would have worked? Is the govt going to “forgive” those bills?

  9. maybe this is a better example…
    pre-covid PPP Loan PPP Loan PPP Loan Actual
    Forgiveness Forgiveness Forgiveness Results
    Not Taxed, Taxed, Not Taxed,
    Expenses Expenses Expenses
    Not Deductible Deductible Deductible
    Revenue 100,000 75,000 75,000 75,000 75,000
    Loan Proceeds 0 0 25,000 0 25,000
    Payroll (25,000) 0 (25,000) (25,000) (25,000)
    Other Expenses (17,000) (17,000) (17,000) (17,000) (17,000)
    Taxable Income 58,000 58,000 58,000 33,000 58,000
    25,000
    double
    dipped

    1. Steve Haner Avatar
      Steve Haner

      If an employer had taken a bank loan to buy equipment, hire more people, invest in a factory, I would agree. Money to EXPAND. The main fallacy is to equate that with a government rescue grant used to prevent layoffs, to replace revenue lost (in many cases) because of government restrictions. Not the same at all. I consider imposing tax on that despicable.

      And even in your view, it is only one “dip” of revenue not being taxed.

        1. Steve Haner Avatar
          Steve Haner

          But in reality these were not loans intended to repaid but grants with a claw back provision. As long as you kept the payroll intact, there was never an expectation of repayment. Do layoffs or fold, then then you had to repay.

          The best thing to come from this fight is the state is also going to recognize its own grants, Rebuild VA, as tax free to at least some extent (and most were smaller). Had we not taken this stance, those were going to be taxed too. Shameful.

          1. Steve Haner Avatar
            Steve Haner

            And this is when I dug in my heels, when I read this in an email from Secretary Layne: “Your argument does not do justice to how this treatment disadvantages all those businesses that did not get PPP.” This is an equity issue? 100,000 employers must be taxed because all employers could not or did not get such grants? That’s a great basis for tax policy…and follow that route and we end up with a very different tax system.

      1. “The main fallacy is to equate that with a government rescue grant used to prevent layoffs, to replace revenue lost (in many cases) because of government restrictions. Not the same at all. I consider imposing tax on that despicable.” Don’t tax the forgiveness and don’t allow the expenses paid with the load money. Impact on taxable income = 0. Tax the forgiveness and allow deductions for the forgiveness. Impact on taxable income = 0. Don’t tax the forgiveness and allow a tax deduction for expenses paid with tax free money = a distorted taxable income that is lowered by the amount of the forgiveness. Makes no sense

        1. Steve Haner Avatar
          Steve Haner

          For the truly wonky, here is the IRS ruling from last year:
          https://www.irs.gov/pub/irs-drop/n-20-32.pdf

          JD, we just don’t agree. Re-read that IRS guidance and the previous cases it was based on mainly involved things like grants to take an educational trip, but I can see the logic in their conclusion given that Congress was silent on the issue in the CARES act. But then Congress spoke and made the forgiven grant fully tax free (and that only happens if you also allow the deductions — to deny the deductions TAXES THE GRANT and counteracts Congresses intent.)

          There is no reason for Virginia to not conform except it lusts after the money.

          1. LarrytheG Avatar

            how much money is involved, total? Is it a bunch of money to the state?

          2. Steve Haner Avatar
            Steve Haner

            Should the Northam position prevail, $350-500 million over two years. Still quite a bit under the Senate provision, at least half. And of course I think about its value to the employers, not the state. 🙂

          3. yep, trump’s congress. That thing changed every two days. I know, I watched it, I was part of it. We got a significant PPP loan. It is still wrong. Reduce it to debits and credits and you will see it makes no sense. Income and expense……fine. Non-taxable income and non-deductible expenses, fine. Choose.

        2. Steve Haner Avatar
          Steve Haner

          As to those points, no argument, JD, don’t tax the income, allow the deductions, and the business got a nice tax-free boost (I still see it a single dip…) compared to the same circumstances for someone else who took no PPP funds. But the one who took no PPP funds is more likely to have done lay offs or failed. I think Congress intended the benefit. Good policy? That I’m happy to debate, but this double dip stuff is nonsense.

          1. lol…….it is demonstrably double dipping and I think it should be taxed. I hope Virginia does that. Give the smaller employers some degree of a break. That is fine with me. But I would NOT conform VA tax code to the Feds in this case.

  10. maybe this is a better example…
    pre-covid PPP Loan PPP Loan PPP Loan Actual
    Forgiveness Forgiveness Forgiveness Results
    Not Taxed, Taxed, Not Taxed,
    Expenses Expenses Expenses
    Not Deductible Deductible Deductible
    Revenue 100,000 75,000 75,000 75,000 75,000
    Loan Proceeds 0 0 25,000 0 25,000
    Payroll (25,000) 0 (25,000) (25,000) (25,000)
    Other Expenses (17,000) (17,000) (17,000) (17,000) (17,000)
    Taxable Income 58,000 58,000 58,000 33,000 58,000
    25,000
    double
    dipped

    1. Steve Haner Avatar
      Steve Haner

      If an employer had taken a bank loan to buy equipment, hire more people, invest in a factory, I would agree. Money to EXPAND. The main fallacy is to equate that with a government rescue grant used to prevent layoffs, to replace revenue lost (in many cases) because of government restrictions. Not the same at all. I consider imposing tax on that despicable.

      And even in your view, it is only one “dip” of revenue not being taxed.

        1. Steve Haner Avatar
          Steve Haner

          But in reality these were not loans intended to repaid but grants with a claw back provision. As long as you kept the payroll intact, there was never an expectation of repayment. Do layoffs or fold, then then you had to repay.

          The best thing to come from this fight is the state is also going to recognize its own grants, Rebuild VA, as tax free to at least some extent (and most were smaller). Had we not taken this stance, those were going to be taxed too. Shameful.

          1. Steve Haner Avatar
            Steve Haner

            And this is when I dug in my heels, when I read this in an email from Secretary Layne: “Your argument does not do justice to how this treatment disadvantages all those businesses that did not get PPP.” This is an equity issue? 100,000 employers must be taxed because all employers could not or did not get such grants? That’s a great basis for tax policy…and follow that route and we end up with a very different tax system.

      1. “The main fallacy is to equate that with a government rescue grant used to prevent layoffs, to replace revenue lost (in many cases) because of government restrictions. Not the same at all. I consider imposing tax on that despicable.” Don’t tax the forgiveness and don’t allow the expenses paid with the load money. Impact on taxable income = 0. Tax the forgiveness and allow deductions for the forgiveness. Impact on taxable income = 0. Don’t tax the forgiveness and allow a tax deduction for expenses paid with tax free money = a distorted taxable income that is lowered by the amount of the forgiveness. Makes no sense

        1. Steve Haner Avatar
          Steve Haner

          For the truly wonky, here is the IRS ruling from last year:
          https://www.irs.gov/pub/irs-drop/n-20-32.pdf

          JD, we just don’t agree. Re-read that IRS guidance and the previous cases it was based on mainly involved things like grants to take an educational trip, but I can see the logic in their conclusion given that Congress was silent on the issue in the CARES act. But then Congress spoke and made the forgiven grant fully tax free (and that only happens if you also allow the deductions — to deny the deductions TAXES THE GRANT and counteracts Congresses intent.)

          There is no reason for Virginia to not conform except it lusts after the money.

          1. Steve Haner Avatar
            Steve Haner

            Been a fun argument, JD — thanks. As to “makes no sense,” ask what was the point of the whole exercise? To maintain payroll, utility and rent payments, etc. and keep the business viable in the middle of a recession crushing income. Had the deal been clearly: “we’re going to make your payroll for you for two months with a pure pass through grant, but you’d better hold back enough for state taxes,” that might have worked. But I don’t think that was the original intention and it clearly became the intention with the clarification in December.

            The bank makes a loan seeking to earn interest. Grampa give you money for your new business to get you going, and if forgiven that is clearly taxable income. This was a different animal.

          2. LarrytheG Avatar

            how much money is involved, total? Is it a bunch of money to the state?

          3. Steve Haner Avatar
            Steve Haner

            Should the Northam position prevail, $350-500 million over two years. Still quite a bit under the Senate provision, at least half. And of course I think about its value to the employers, not the state. 🙂

          4. yep, trump’s congress. That thing changed every two days. I know, I watched it, I was part of it. We got a significant PPP loan. It is still wrong. Reduce it to debits and credits and you will see it makes no sense. Income and expense……fine. Non-taxable income and non-deductible expenses, fine. Choose.

        2. Steve Haner Avatar
          Steve Haner

          As to those points, no argument, JD, don’t tax the income, allow the deductions, and the business got a nice tax-free boost (I still see it a single dip…) compared to the same circumstances for someone else who took no PPP funds. But the one who took no PPP funds is more likely to have done lay offs or failed. I think Congress intended the benefit. Good policy? That I’m happy to debate, but this double dip stuff is nonsense.

          1. lol…….it is demonstrably double dipping and I think it should be taxed. I hope Virginia does that. Give the smaller employers some degree of a break. That is fine with me. But I would NOT conform VA tax code to the Feds in this case.

  11. Great. Pay my expenses when I am going through a hard time. I was all for it. But YOU pay MY expenses and I get to deduct those expenses that I basically did not have to pay out of my own money makes NO sense

    1. Steve Haner Avatar
      Steve Haner

      Well, we are talking about Congress….And the “expenses” Congress paid might otherwise have not been paid, that was the fear. It was mainly payroll. Hey, I said long ago the whole program was debatable. A lot of the money went to non-profits, political groups, etc. Are they taxing the huge amounts of money being used for rental payments, utility payments? Maybe, but I doubt it.

      You sound like Layne, wanting to prevent any tax benefit because you disagree on philosophy. That’s just politics.

      1. slight modification………we are talking about a GOP/Mitch/Trump congress. That is an animal of an unusual, to say the least, stripe

  12. Great. Pay my expenses when I am going through a hard time. I was all for it. But YOU pay MY expenses and I get to deduct those expenses that I basically did not have to pay out of my own money makes NO sense

    1. Steve Haner Avatar
      Steve Haner

      Well, we are talking about Congress….And the “expenses” Congress paid might otherwise have not been paid, that was the fear. It was mainly payroll. Hey, I said long ago the whole program was debatable. A lot of the money went to non-profits, political groups, etc. Are they taxing the huge amounts of money being used for rental payments, utility payments? Maybe, but I doubt it.

      You sound like Layne, wanting to prevent any tax benefit because you disagree on philosophy. That’s just politics.

      1. slight modification………we are talking about a GOP/Mitch/Trump congress. That is an animal of an unusual, to say the least, stripe

  13. ” A lot of the money went to non-profits, political groups, etc.” I don’t have any problem that. People bitched and screamed about the Kennedy Center getting a PPP loan. The idea was to keep paychecks going so who the hell cares? I never understood that bitching.

    1. Steve Haner Avatar
      Steve Haner

      Wow. Free money for the Kennedy Center but not the local factory? I never understood THAT bitching. 🙂

  14. ” A lot of the money went to non-profits, political groups, etc.” I don’t have any problem that. People bitched and screamed about the Kennedy Center getting a PPP loan. The idea was to keep paychecks going so who the hell cares? I never understood that bitching.

    1. Steve Haner Avatar
      Steve Haner

      Wow. Free money for the Kennedy Center but not the local factory? I never understood THAT bitching. 🙂

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