‘We didn’t budget for that’: Pizzeria that got PPP money caught off guard by tax rules

HUNTERSVILLE, N.C. — A lot of business owners in North Carolina who accepted a loan as part of the Paycheck Protection Program are finding out the hard way that they may owe more taxes than they expected.

Brad and Donna Battaglia own Taste of Buffalo Pizzeria in Huntersville. Their staff includes almost 20 full-time workers.

The couple got a loan from the program to help keep their staff employed and on the payroll.

“We didn’t want to have to let them go,” Donna told Action 9′s Jason Stoogenke. “We wanted to make sure that they still had a job.”

The couple said they followed all the rules that come with accepting PPP funds, so the government forgave the loan.

The federal government and the state of North Carolina don’t consider forgiven loans as income, so that money isn’t taxed. But there are certain taxes that the Battaglias do owe now.

The North Carolina Department of Revenue website states: “Any expenses paid using the proceeds of the forgiven PPP loan ... are not deductible.”

Typically, businesses in North Carolina can deduct payroll and other expenses, such as rent and utilities, on their state taxes. But this year, if a business used PPP funds to pay for those expenses, the state will not allow the business to deduct the expenses.

The Battaglias did not know about the tax restriction and used some of their loan to cover business expenses.

“No clue, so we didn’t budget for that, and that was a nice little hit,” Brad said.

South Carolina does not tax forgiven PPP loans, and businesses there can still deduct the expenses the money was used for.

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