Earlier this year, in the depths of the economic shock caused by the start of the pandemic, the federal government handed out a half-trillion dollars worth of expedited business loans.
The Paycheck Protection Program helped businesses — mostly small businesses — keep workers employed, with loans issued by banks but funded by the feds in the amount of 2.5 times a business’ average monthly payroll costs.
The portion of the loan spent on payroll, rent or mortgage payments and utilities can then be forgiven, after the business submits an application and proper documentation.
Though there has been criticism of the rushed roll-out of PPP, and of the larger businesses that received a sizable portion of the overall funds, a search of the recipients turns up plenty of small Arlington businesses — from restaurants to gyms to others — that received PPP loans that likely saved jobs or even the businesses themselves.
There is, however, a potential downside to the loans.
If a business received a loan and kept employees on, even if they continued to lose money, they’re now facing the reality that — absent a proposed fix from Congress — they may face extra tax liability and have to dig into emptied pockets at tax time next year. That’s because the expenses paid for by the forgiven portion of the loan are, under current guidance, not able to be deducted, effectively making the forgiven loan federally taxable for many businesses.
Fixes have been proposed by Congress as part of new coronavirus relief packages, but so far nothing has passed.
On the plus side, there is a bit of good news for businesses in Arlington. Officials from both the county and the Commonwealth expect that forgiven loans will not be taxed on a state or local level.
In the case of the county, there’s a question of whether the forgiven portion of the loan would be included in the “Gross Receipts” that are subject to the Business, Professional, and Occupational License (BPOL) tax, which is generally $0.36 to $0.18 per $100 of revenue — not profit, as is the case for federal corporate taxes.
William Burgess, an attorney with the Arlington Commissioner of Revenue’s office, tells ARLnow that the county does not currently think that forgiven loans are taxable.
“Per Virginia Code § 58.1-3732(A)(4), the loan proceeds received by a borrower are excluded from gross receipts,” Burgess said. “Therefore there is no provision addressing what happens if the loan is forgiven and no [state tax documents] interpreting this section.”
“Given that the statute expressly exempts loan proceeds and does not explicitly address forgiveness, our office believes that the loan proceeds do not become taxable upon forgiveness,” he continued.
Virginia officials, likewise, said the current expectation is that forgiven loans will not be taxed by the Commonwealth. An annual tax “conformity” bill that is expected to be passed by the state legislature should ensure that.
“The Virginia General Assembly would need to enact legislation advancing Virginia’s date of conformity in order for the state to adopt the Paycheck Protection Program loan forgiveness provision set forth in the CARES Act,” said Virginia Tax spokeswoman Stephanie Benson. “If the General Assembly conforms to this provision, the forgiven loans would not be subject to Virginia income taxation.”
“It is common practice for the Virginia General Assembly (GA) to adopt a conformity bill each session, and the GA generally conforms to the majority of federal tax provisions,” Benson noted.
Photo by Pepi Stojanovski on Unsplash
Changes to Stalled Ballston Development — “An Arlington homebuilder is reviving plans to redevelop a church in Ballston with a new proposal for a mix of townhomes and condos on the site… The site is currently home to the Portico Church, but the developer [BCN Homes] could someday replace it with 10 townhomes and 98 condo units.” [Washington Business Journal]
Beloved Former County Official Dies — “Ann Bisson, a long-time resident and former Deputy Commissioner of the Revenue for Arlington County, passed away peacefully on January 7, 2020… In addition to her work in the Commissioner’s office, Ann was very active in the community.” [Dignity Memorial]
History of Royal Visits to Arlington — “If Prince Harry and Meghan Markle ever decided to make their home in the DC area, they’d be in good company. Many members of the royal family have made their way to Arlington over the years.” [Arlington Public Library, Twitter]
Bill Proposes Funding for Local Cemeteries — “Three Arlington cemeteries would receive state funding under a program designed to preserve burial places of African-American Virginians. Del. Rip Sullivan (D-Fairfax-Arlington) has patroned legislation to add the three graveyards – at Calloway, Lomax and Mount Salvation churches – to the more than two dozen statewide that already receive support from the Virginia Department of Historic Resources.” [InsideNova]
Scooters May Be Allowed on Arlington Sidewalks — “The Board voted unanimously to advertise a public hearing at the Nov. 16, 2019 County Board Meeting to consider proposed regulations of shared mobility devices. The proposed revisions include allowing the [scooters] to be used on County streets, sidewalks and multi-use trails and putting in place a permit fee structure for private companies offering the devices. During the pilot program, the devices have been prohibited on County sidewalks.” [Arlington County]
Clarendon Cafe Rebrands as ‘Three Whistles’ — “CoworkCafe founder Ramzy Azar rebranded the space this week. In addition to a new name, Three Whistles (2719 Wilson Boulevard, Arlington, Virginia) has a new look and a new menu. Azar expects to roll out a menu full of Mediterranean small plates in the next few weeks. He says sharable dishes help create the feeling of a gathering place.” [Eater]
Arlington Man Sentenced for Gun Smuggling — “An Arlington man was sentenced today to 18 months in prison for his role in the trafficking of firearms to his native country of Honduras. According to court documents, in October 2018, Chris Rodriguez, 57, attempted to smuggle a firearm and 247 rounds of ammunition out of the United States, concealed in a bucket of roofing tar destined for Honduras.” [U.S. DOJ]
‘Verizon Site’ Building OKed — “Crystal City’s Verizon site will be redeveloped with a 19-story apartment tower within walking distance of Metro that will include 12 affordable housing units… The [County] Board voted unanimously to approve the vacation of a portion of the right-of-way for Old South Eads Street, a rezoning and site plan amendment for the proposed redevelopment.” [Arlington County]
Amazon Avoids Donating to Arlington Pols — “Amazon.com Inc. just sent $23,000 in campaign contributions to a total of 26 Virginia lawmakers, resuming its political giving in the state for the first time in months as a crucial statehouse election draws near… it only sent checks to six lawmakers in Northern Virginia (and did not send money to a single politician representing Arlington).” [Washington Business Journal]
DMV Select Staff Fights Fraud — “Three members of [the Commissioner of Revenue’s DMV Select office] staff (Isaac Kateregga, Ahmad Abdalla and supervisor Michelle Neves) recently were honored by the Virginia Department of Motor Vehicles in Richmond. They were presented with ‘Fraud Busters’ awards for their work in disrupting efforts to commit misdeeds… [involving] title fraud.” [InsideNova]
Reminder: Arlington Restaurant Week Kicking Off — “Arlington Restaurant Week, organized by the Arlington Chamber of Commerce, will run from October 21-28. Diners can visit a number of Arlington restaurants offering special menu items at discounted prices.” [ARLnow, Arlington Chamber of Commerce]
Flickr pool photo by John Sonderman
Two major property tax deadlines are next week.
Thursday, October 5 is the final due date for the payment of both vehicle personal property tax and the second installment of real estate tax. Payments postmarked after October 5 are subject to penalties and interest charges.
Residents can manage and pay their bills online on the county’s Customer Assessment and Payment Portal.
And the deadline for displaying the new car decals is Wednesday, November 15. This year’s decal is entitled “Arlington Sees Stars,” designed by Amy Kohan in the county’s 13th Annual Decal Design Competition.
The county treasurer’s web site has more information about paying tax bills and about the county’s Taxpayer Assistance Program. Residents can also contact the Treasurer’s Office directly by calling 703-228-4000 or emailing [email protected].
Arlington’s Dept. of Real Estate Assessments will be giving representatives from countries like China, India, Turkey and Greece “guidance on proper property tax management, including an overview of how Arlington County values land and property, and how these processes have generated revenue, while promoting fair and equitable property tax collection methods,” according to a press release from Thomson Reuters, which organized the meeting.
Thomson Reuters’ Tax & Accounting Division helps corporations and governments improve their bookkeeping and revenue-generating practices. Arlington boasts an enviable tax revenue split of 50 percent residential and 50 percent commercial tax revenue, and the assessor’s office is responsible for determining the value of each piece of property.
“Arlington County’s strong, successful tax management system has attracted the attention of government officials from emerging nations,” Brian Jaklitsch, a spokesman for Thomson Reuters, said in an email.
“Officials will get a first-person look at how a government in the US processes and records land rights, and how the information is then used to assign a land value and then to process and bill property tax,” according to a press release. “More than 70 percent of local government revenue in the US is generated from property tax, and generating similar revenue could be a major coup for countries that are impoverished and/or lacking proper recording channels.”
Photo via Google Maps