Update: Many Lexington businesses can get more local tax relief. Here’s who qualifies
The Lexington council approved a proposal that would allow businesses that received federal Paycheck Protection Program loans to deduct those expenses from local net profit taxes.
Lexington Mayor Linda Gorton has proposed the new tax exemption earlier this week.
The Lexington-Fayette Urban County Council voted unanimously Thursday to allow the tax break.
By allowing a local deduction, Gorton’s office estimates businesses that received a PPP loan could save $2,500 on average in local taxes.
“Businesses have been doing all they can to keep their doors open and employees paid. I’m proud of our business owners for their flexibility in caring for their employees and our community,” Gorton said. “This is something the city can do to help them. It’s the right thing to do.”
The proposal would allow businesses who received those PPP loans to deduct from taxes due this year.
It’s not clear how many Fayette County businesses received PPP loans. A July report from the U.S. Small Business Association showed businesses and nonprofits that received the most money under the program.
In Lexington, five businesses received loans larger than $5 million — Blue Diamond Mining, Ramaco Resources, Rhino Energy, the Roman Catholic Diocese of Lexington and S&S Firestone. There were 22 businesses in Lexington that received loans between $2 million and $5 million, including Ball Homes, Don Jacobs Imports, McBrayer, Kentucky Eagle, Transylvania University, Paul Miller Ford and Stoll Keenon Ogden.
The federal government has made similar changes to allow businesses to deduct PPP expenses. A proposal to allow state deductions on PPP loans is being considered by the state legislature, Gorton said. Lousiville has already approved a similar local program.
Wes Holbrook, a senior administrator in finance, told the council Tuesday that data on how many businesses in Fayette County received PPP loans is difficult to get, but the city estimates the city’s loss in taxes could be up to $2 million.
City tax revenues — including payroll and net profit taxes — are performing better than expected. The city currently has a surplus of about $20 million, according to data provided to the council Tuesday.
Earlier this year, the council approved $2.5 million for a small business stimulus program that went to 168 small businesses and nonprofits hurt by coronavirus-related shutdowns. The majority of those businesses did not receive PPP loans. Of those businesses, 65 percent were either women-owned or minority-owned businesses.
Councilman Preston Worley, who proposed the first small business stimulus program, said during a Tuesday Budget, Finance and Economic Development Committee meeting that he plans to propose a second business stimulus program in March.
The program will likely be different. Worley said instead of a grant — which doesn’t have to be repaid — the city is considering a forgivable loan program. If a company retains the number of employees over a period of time, it will not have to repay the loan. If the company has to lay off those employees, some of the money would have to be repaid, Worley said.
“There still is a great deal of need for aid to small businesses,” Worley said.
Most on the committee agreed that more needs to be done to help small businesses.
Councilman Richard Moloney cautioned that many small businesses were hurting last year due to government-required shutdowns in April, May and into June. Businesses are no longer closed, but some, such as restaurants, are operating at a reduced capacity.
Since city payroll and net profit taxes are coming in higher than the city expected, businesses may not be hurting as much as last year, Moloney said.
“There is also some more federal money coming for small businesses,” Moloney said. “We need to make sure that we are helping the people that need it. Sometimes there is a loophole in there, and we end up giving people money that didn’t need help. We just need to be cautious.”
This story was originally published February 23, 2021 at 1:43 PM.
