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.
Fouad Khalil is head of compliance at SecurityScorecard, Inc.
As Strategic Research Actuary for RGA’s Global Research and Data Analytics (GRDA) team, Julianne Callaway researches emerging areas of interest to the insurance industry. Her insights on wellness, wearable technology, genetics, and other strategic research initiatives are shared with clients in presentations, white papers and articles.
Julianne joined RGA in 2013 as an Assistant Actuary in GRDA, where she oversaw research development for the department. Later Julianne was part of RGAx, the wholly-owned innovation incubator subsidiary of Reinsurance Group of America, Incorporated, for two years where she developed economic models for business concepts and market intelligence in support of innovative business initiatives.
Prior to joining RGA, Julianne spent nine years with Towers Watson, where she was a Senior Actuarial Analyst, responsible for loss reserving for several lines of business, establishing funding amounts for self-insurance funds, developing predictive models, and developing methods to estimate asbestos liabilities for corporations and insurers. She began her actuarial career at American Family Insurance, where she priced business lines insurance and was responsible for rate adequacy in several states.
Julianne has Bachelor of Science (B.S.) and Master of Arts (M.A.) degrees, both in economics, from the University of Missouri – Columbia. She is a Fellow in the Society of Actuaries (FSA), an Associate in the Casualty Actuarial Society (ACAS), and Member of the American Academy of Actuaries (MAAA). A prolific author, she has written and published several articles and white papers on a broad range of insurance topics. She is also a frequent speaker at industry conferences, and is currently a member of the Society of Actuaries’ General Insurance Research
Ted Tozer is a senior fellow in the housing finance program at the Milken Institute Center for Financial Markets. He was president of Ginnie Mae from 2010-2017.
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.”