Month: January 2021

U.S. Economy Shrank 3.5% in 2020, Grew 4% in Last Quarter

The U.S. economy grew at a 4% annual rate in the final three months of 2020 and shrank last year by the largest amount in 74 years.

For 2020 as a whole, a year when the coronavirus inflicted the worst economic freeze since the end of World War II, the economy contracted 3.5%.

Thursday’s report from the government estimated that the nation’s gross domestic product — its total output of goods and services — slowed sharply in the October-December quarter from a record 33.4% surge in the July-September quarter. That gain had followed a record-shattering 31.4% annual plunge in the April-June quarter, when the economy sank into a free-fall.

Can You Refuse Work and Still Get Unemployment Benefits? President Biden Order to Clarify New Rules

President Joe Biden signed an executive order Friday ordering the Department of Labor to issue guidance that clarifies “workers have a federally guaranteed right to refuse employment that will jeopardize their health and if they do so, they will still qualify for unemployment insurance.”

Generally, you can’t refuse what’s considered “suitable work,” whether it’s a new job offer or a call to return to a reopened workplace, and still receive unemployment insurance. In more traditional times, suitable work is thought of as a job that matches your skill set and pays a similar rate as your old one.

Under the Trump administration, states, local governments and employers were often left to determine what constituted as a safe work environment free of risks to workers’ health and safety during the Covid pandemic. Recent moves from the Biden White House aim to formalize a national standard.

As with existing protocol, new federal guidance will still require workers to demonstrate how their work environment places their health in jeopardy, that they’ve done something to raise the issue with their employer to enforce an improved standard, and that their employer has chosen to not act on recommended health and safety guidance, such as that from the CDC, local or state regulations — and soon, federal guidance on workplace health and safety.

For example, you can’t just walk into your work facility, see that no one’s wearing a mask, walk off the job and later file for unemployment. However, if you approach your boss about enforcing universal mask-wearing to minimize the spread of the virus, and they decline to do so, you may have just cause for refusing unsafe work that places your health in jeopardy and qualifying for unemployment benefits while you look for a new job.

State Of Wisconsin Revenue Estimates Higher Than Expected

The outlook for Wisconsin’s next state budget grew brighter Tuesday with a closely watched report projecting the state would begin the next budget cycle with a balance of nearly $1.9 billion.

The estimate from the nonpartisan Legislative Fiscal Bureau also projected state tax revenues between now and the end of the next budget would be $1.2 billion higher than the Evers administration predicted just two months ago.

While the numbers are estimates and could change based on fluctuations in the global economy among other factors, they were undeniably strong, especially given the mass layoffs and economic pain that marked the beginning of the COVID-19 pandemic. They also set the stage for the budget Gov. Tony Evers is scheduled to release in February, beginning a process of give-and-take with Republicans who run the state Legislature.

“Despite the COVID-19 pandemic and government-mandated shutdowns, the state of Wisconsin is currently in a strong fiscal position,” said state Rep. Mark Born, R-Beaver Dam, and state Sen. Howard Marklein, R-Spring Green, the GOP co-chairs of the Legislature’s budget committee. “We generated more revenue than projected at this time last year, even during a pandemic.”

The increase in revenue has been high enough that the state will be required by law to make another deposit in its “budget stabilization fund,” typically referred to as Wisconsin’s “rainy day fund.” That $232 million deposit would bring the overall fund to nearly $994 million. The balance in the rainy day fund is on top of the state’s projected general fund balance.

Wisconsin Lawmakers Urge Governor Evers to Upgrade Unemployment Insurance IT System

The co-chairs of the Wisconsin Joint Committee on Finance urged Gov. Tony Evers Monday to upgrade the unemployment insurance IT system.

In a letter to the governor, Senate Chair Howard Marklein and Assembly Chair Mark Born explained amid the backlog of unemployment claims, the governor has the authority and resources to request a new system.

“If you believe the UI IT System is truly the cause of the unacceptable backlog of unemployment claims under your administration, your action on this issue is egregiously overdue,” they wrote.

The two chairmen noted that Evers’ administration has reportedly looked into replacing the system for at least one year or more, but a request proposal has not been made yet.

They also say Gov. Evers has claimed to need legislative approval for the project, which they say is not needed.

They explained that Evers could request the committee to meet and consider supplemental appropriations, transfer funds, other actions or using reserve funding as a last resort. They asked the governor to make this request.

Wisconsin’s Roads Get a D+ Grade

The American Society of Civil Engineers (ASCE) have weighed in on Wisconsin’s infrastructure. The organization’s Wisconsin Section gave the state’s infrastructure a C in it’s Sept. 2020 report card. The state’s roads got a D+.

“Certainly not a grade that we would aspire to,” Wisconsin ASCE member Martin Hanson said.

Infrastructure issues affect everyone. Hanson said not fixing these problems costs the average family $3,300 dollars annually as delays costs money more crashes lead to higher car insurance rates.

“We think that this is a significant drag on the economy. Also infrastructure would create new jobs and opportunities,” he said.

The Wisconsin Department of Transportation (DOT) agrees.

State DOT Secretary-Designee Craig Thompson said the state needs to spend more money rebuilding and maintaining its roads.

“After 20 years of neglect the conditions of our roads across the State of Wisconsin is not acceptable,” he said.

State lawmakers did come to a bipartisan agreement to raise vehicle registration fees in the last budget, increasing funding for the first time in a generation.

“There was a little bit over $460 million dollars that was raised in new revenue,” Thompson said. “Every penny of that is going to fix what we have first.”

Hanson said, however, it will cost about $6 billion to solve the state’s infrastructure problems. The goal isn’t to get an A grade.

“We think B is where the good target should be. Sometimes it doesn’t come cost effective to raise that grade all the way to an A,” Hanson said.

New Home Construction Increases 10% in 2020

The latest single-housing permit numbers show that new home construction is up ten percent at the end of 2020 compared to the end of 2019.

The data, compiled by information required to be submitted by municipalities to the Department of Safety and Professional Services, shows 12,291 new home permits were issued across the state in 2020 compared to 11,207 in 2019.

Quarter four is down slightly compared to quarter three, with 3,392 permits issued in quarter four of 2020 and 3,825 permits issued in quarter three.

“We are thrilled with the yearly increase in building permits,” said Wisconsin Builders Association (WBA) Executive Director Brad Boycks. “Our industry is one that was not shut down in the early part of the year. The ability to continue building homes for people across the state was a significant factor in this great increase, and further helps the other industries impacted by homebuilding.”

Other encouraging numbers, released by the Department of Administration, includes the numbers of plats and lots approved through December of 2020; 204 and 5,447, respectively. In 2019, there were 152 plats and 4,593 lots approved.

Wisconsin Small Business Owners May Have to Pay State Taxes on PPP Loans

Without action from state lawmakers and Democratic Gov. Tony Evers, many small businesses in Wisconsin may have to pay unexpected state taxes on loans taken out under the federal Paycheck Protection Program (PPP).

The news comes less than a month after Congress created a legislative fix to the same issue on the federal level, ensuring that businesses would not have to pay additional federal taxes on their PPP loans. Those changes came in the latest round of coronavirus relief that was signed into law in late December.

But in a notice posted on its website Friday, the state Department of Revenue clarified that Wisconsin law adheres to prior PPP restrictions, meaning small businesses will not be able to deduct those expenses from their state taxes.

That means small businesses, many of which are under immense financial strain amid the COVID-19 economic downturn, could have to pay state taxes on their PPP loans unless the state Legislature and Evers intervene.

Terry Hoover, a partner at the Appleton offices of the accounting and consulting firm Wipfli, said the cost to businesses will vary depending on the size of their PPP loan and how the business is organized. For a sole proprietor, for example, Hoover estimates businesses could face an extra $6,000 to $8,000 for every $100,000 worth of expenses a business isn’t able to deduct.

If no legislative action is taken by April 15, many businesses will be required to begin paying state taxes on their PPP loans, according to Hoover. But he added that some businesses have already been affected by the confusion, including at least seven businesses at Wipfli alone.

“So now they wake up to find on Friday morning that they actually have underpaid their Wisconsin taxes, and so have to amend those returns and pay in more, plus interest at 12 percent,” Hoover said. “Or they can wait and hope for the best that the Legislature acts to retroactively (bring Wisconsin into alignment with federal law) to avoid having to do that.”


Wisconsin DOR Update: Important Information About Effect of New Federal Law on 2020 Wisconsin Tax Returns

The federal Consolidated Appropriations Act, 2021 (Public Law 116-260) was enacted on December 27, 2020. The following are significant provisions of the bill that have not been adopted into Wisconsin law and will affect the filing of 2020 Wisconsin income/franchise tax returns.

Paycheck Protection Program Expenses

The Act provides that expenses paid with forgivable Paycheck Protection Program (PPP) loan proceeds are deductible for federal tax purposes (see secs. 276(a) and 278(a) of Division N of Public Law 116-260). However, Wisconsin law follows federal law prior to amendments made by the Act. Therefore, expenses incurred that are paid with the forgivable PPP funds are not deductible for Wisconsin income/franchise tax purposes. Wisconsin follows the interpretation of federal law prior to modification by the Act, which is described in Revenue Ruling 2020-27:

“A taxpayer that received a covered loan guaranteed under the PPP and paid or incurred certain otherwise deductible expenses listed in section 1106(b) of the CARES Act may not deduct those expenses in the taxable year in which the expenses were paid or incurred if, at the end of such taxable year, the taxpayer reasonably expects to receive forgiveness of the covered loan on the basis of the expenses it paid or accrued during the covered period, even if the taxpayer has not submitted an application for forgiveness of the covered loan by the end of such taxable year.”

Note: Although Revenue Ruling 2020-27 was made obsolete as a result of the Act, it still interprets federal law prior to the Act.

Subsequent Paycheck Protection Program Loans

The Act provides that subsequent PPP loan proceeds that are forgiven are excluded from gross income for federal purposes (see sec. 276(b) of Division N of Public Law 116-260). Taxpayers must include in Wisconsin gross income any subsequent PPP loan proceeds forgiven.

Emergency Grants of Economic Injury Disaster Loans (EIDL) and Targeted EIDL Advances

The Act provides that emergency EIDL grants and targeted EIDL advances are excluded from gross income for federal purposes (see sec. 278(b) of Division N of Public Law 116-260). Taxpayers must include the grants or advances in Wisconsin gross income.

Subsidy for Certain Loan Payments

The Act provides that subsidy for certain loan payments are excluded from gross income for federal purposes (see sec. 278(c) of Division N of Public Law 116-260). Taxpayers must include the subsidy in Wisconsin gross income.

Grants for Shuttered Venue Operations

The Act provides that grants for shuttered venue operations are excluded from gross income for federal purposes (see sec. 278(d) of Division N of Public Law 116-260). Taxpayers must include the grants in Wisconsin gross income.

2021 Federal Tax Filing Season Begins February 12

The Internal Revenue Service announced that the nation’s tax season will start on Friday, February 12, 2021, when the tax agency will begin accepting and processing 2020 tax year returns.

The February 12 start date for individual tax return filers allows the IRS time to do additional programming and testing of IRS systems following the December 27 tax law changes that provided a second round of Economic Impact Payments and other benefits.

Last year’s average tax refund was more than $2,500. More than 150 million tax returns are expected to be filed this year, with the vast majority before the Thursday, April 15 deadline.

Overall, the IRS anticipates nine out of 10 taxpayers will receive their refund within 21 days of when they file electronically with direct deposit if there are no issues with their tax return. The IRS urges taxpayers and tax professionals to file electronically. To avoid delays in processing, people should avoid filing paper returns wherever possible.

Wisconsin DHS Secretary Andrea Palm to Join Biden Administration

Wisconsin’s top health official is joining the Biden administration, according to Governor Tony Evers.

Department of Health Services Secretary-designee Andrea Palm will be nominated to be Deputy Secretary of the U.S Department of Health and Human Services, Gov. Evers’ office confirmed Monday morning.

The governor’s office says Palm will leave her post at Wisconsin DHS on January 20, 2021.

Gov. Evers says Karen Timberlake will take over the top spot at Wisconsin DHS. Timberlake was DHS secretary under former Gov. Jim Doyle during the 2009 H1N1 pandemic response.

“Karen Timberlake brings a wealth of experience and knowledge in public health, healthcare, and healthcare systems that will be critical as we continue distributing vaccines quickly in our fight against this virus,” said. Gov. Evers “Our response to this pandemic and our vaccine distribution program will continue under the leadership of Karen and given her expertise and familiarity with the Department, I have no doubts she will be able to hit the ground running.”

Timberlake will officially start at the DHS on January 25, 2021