Mills’ budget proposal would tax Paycheck Protection Program funds as income The Legislature's tax and budget committees met Monday to hear testimony on a set of proposals by Gov. Janet Mills that could leave some businesses paying state taxes on loans exempt from federal taxes. Share Maine businesses would have to pay state income taxes on forgivable federal Paycheck Protection Program loans that are not taxed by the federal government under a budget proposal from Gov. Janet Mills. The administration told the Legislature on Monday that state government could be facing a more than $100 million revenue shortfall if the state were to fully conform with changes to the federal tax code passed by Congress in December. Those changes exempted PPP loans from federal income taxes while allowing businesses to also claim the expenses the loans helped pay for.