The top Republican and Democrat on the Senate Finance Committee said the Treasury Department “missed the mark” in new guidance that limits tax breaks for businesses that get their Paycheck Protection Program loans forgiven.
In a joint statement Thursday, Senate Finance Chairman Chuck Grassley and Democrat Ron Wyden said the Treasury is depriving some small businesses of much-needed economic relief by forcing them to choose between getting their PPP loans forgiven or claiming write-offs on expenses they covered with the loan money. The IRS published guidance on the issue Wednesday.
“Regrettably, Treasury has now doubled down on its position in new guidance that increases the tax burden on small businesses by accelerating their tax liability, all at a time when many businesses continue to struggle and some are again beginning to close,” Grassley and Wyden said.
The congressional reaction to the guidance puts additional pressure on the Treasury and Internal Revenue Service to allow taxpayers to claim the expense deductions. Grassley and Wyden encouraged the IRS to reverse its position.
The lawmakers said they are working to include language in year-end legislation clarifying that taxpayers qualify for expense deductions even if their loans are forgiven. That could be included in government spending legislation that Congress must pass by Dec. 11 before federal funding runs out.
Chris Moran, a tax attorney for law firm Venable LLP, said, “the IRS guidance seems to be inconsistent with congressional intent” in the CARES Act, which created PPP loans for businesses struggling from the pandemic. The law stated that the forgiven loan won’t be taxed, but didn’t specify whether companies could still write off the expenses they covered with that money.
Mark S. Bonta is the Executive Director of the Recovery Jobs Foundation, an initiative focused on reintegrating individuals in recovery into the workforce. With 20 years of experience as a Plant Director and 6 years of experience as a recovery-friendly employer, he pioneered the New Hampshire Recovery Friendly Workplace Initiative (NH-RFWI) as one of the first RFW's in the nation. Mark's leadership has been recognized with several awards, including the 2022 Littleton Area Chamber of Commerce Citizen of the Year Award and the 2023 White Mountains Community College President's Community Partner Award. Currently formalizing the Recovery Jobs Foundation, he also serves on the NH-RFWI Advisory Council, and as Secretary of the Florida Recovery-Friendly Workplace Coalition.
Alex Konanykhin is the co-founder and CEO of Unicoin.
Monica S. Simon is head of legal at Forge Global and has over 15 years of experience as a securities lawyer in both public and private markets.
Before joining Forge, she was deputy general counsel at Carta, and general counsel for Carta's broker-dealer entity. Prior to that, Simon was an attorney with Willkie Farr, where she advised registered broker-dealers and investment advisors, and assistant general counsel at Goldman Sachs, where she covered equities sales and trading and was counsel for the Goldman Alternative Trading System.
Excluding the forgiven loan from tax “is essentially meaningless if the expenses funded by the loan are nondeductible,” Moran said.
Still, many taxpayers aren’t expecting to get permission to claim the deductions, from the IRS or Congress, in the short term.
“I think most of them are, at least for now, resigned” to not getting the write-offs, Joe Kristan, a partner at the accounting firm Eide Bailly LLP in Des Moines, Iowa. “They’d certainly like to be allowed by Congress to step in and allow their deductions, but they’re not counting on it.”