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Ordinance No. 2021-31 Providing Relief From B O Taxation for COVID Assistance Grants1 ORDINANCE NO. 2021-31 AN ORDINANCE of the City of Bainbridge Island, Washington, amending Chapter 5.05, Business and Occupation Tax, of the Bainbridge Island Municipal Code to provide relief from taxation of COVID-19 assistance grants, or the cancellation of COVID-19 indebtedness, as income on persons engaging in business on Bainbridge Island. WHEREAS, on March 11, 2020, the World Health Organization announced that the novel coronavirus (COVID-19) is officially a global pandemic; and WHEREAS, on February 29, 2020, the Governor of the state of Washington issued Proclamation 20-05, proclaiming a state of emergency for all counties throughout the state of Washington in response to new cases of COVID-19; and WHEREAS, these actions are appropriate for public health reasons, but result in severe economic impacts on the economies of the United States of America and Bainbridge Island; and WHEREAS, in response to the economic fallout of the global pandemic, the 116th Congress of the United States passed the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), an economic stimulus bill; and WHEREAS, under the CARES Act, the Small Business Administration (SBA), in consultation with the Department of the Treasury, administers the Paycheck Protection Program (PPP) for economic relief; and WHEREAS, under Section 1102 of the CARES Act, PPP authorizes loans designed to provide a direct incentive for small businesses to keep their workers on the payroll; and WHEREAS, under Section 1102 of the CARES Act, the SBA will forgive repayment of the PPP loans if all employee retention criteria are met, and the funds are used for eligible expenses; and WHEREAS, under Section 1105(i) of the CARES Act, cancellation of indebtedness is excluded from gross income for purposes of the Internal Revenue Code; and WHEREAS, in response to the economic fallout of the global pandemic, the 117th Congress of the United States passed the American Rescue Plan Act (“ARP Act”), an economic stimulus bill, portions of which include economic relief for American businesses; and WHEREAS, on February 23, 2021, the City Council of the City of Bainbridge Island passed Resolution No. 2021-05 establishing a small business relief grant program to provide business expense assistance in response to the public health emergency resulting from the COVID-19 pandemic; and 2 WHEREAS, under Chapter 5.05 of the Bainbridge Island Municipal Code, grants and cancellation of indebtedness would be included in gross income for purposes of the Bainbridge Island Business and Occupation Tax. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF BAINBRIDGE ISLAND, WASHINGTON, DOES ORDAIN AS FOLLOWS: Section 1. Section 5.05.090 of the Bainbridge Island Municipal Code, is hereby amended to read as follows: 5.05.090 Exemptions The provisions of this chapter shall not apply to the following: S. This chapter shall not apply to any person with respect to the value proceeding or accruing from grants, or relief from debt or other legal obligation, that: 1. Does not otherwise qualify for an exemption or deduction under this Chapter 5.05; 2. Is received directly from the United States government, the state of Washington or any of its municipal corporations or political subdivisions, or a federally recognized Indian tribe located at least partially within the geographical boundaries of the state of Washington; 3. Is provided to address the impacts of conditions arising from the state of emergency related to the COVID-19 pandemic, as proclaimed in Proclamation 20-05, by the Governor of this state, on February 29, 2020. Section 2. Severability. Should any section, paragraph, sentence, clause, or phrase of this ordinance, or its application to any person or circumstance, be declared unconstitutional or otherwise invalid for any reason, or should any portion of this ordinance be preempted by state or federal law or regulation, such decision or preemption shall not affect the validity of the remaining portions of this ordinance or its application to other persons or circumstances. Section 3. This ordinance shall take effect and be in force five (5) days from its passage and publication as required by law. PASSED by the City Council this 9th day of November, 2021. APPROVED by the Mayor this 9th day of November, 2021. Rasham Nassar, Mayor 3 ATTEST/AUTHENTICATE: FILED WITH THE CITY CLERK: November 5, 2021 PASSED BY THE CITY COUNCIL: November 9, 2021 PUBLISHED: November 19, 2021 EFFECTIVE DATE: November 24, 2021 ORDINANCE NUMBER: 2021-31