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.
Dmitry Bestuzhev is director of the global research and analysis team for Kapersky Labs in Latin America.
Peter Smith is a Vice President and has full operational responsibility for Centric Digital's West region including market, client and product strategy and execution. He has worked in innovation and growth strategy throughout his career, with a focus on building differentiated digital platforms and lasting brands. Prior to Centric Digital, Mr. Smith led Digital Strategy & Innovation at Capgemini, led product strategy for two successful technology startups, and has industry experience in consumer products, diversified financial services, and technology verticals. He holds a B.A. in Political Science and Economics from Franklin & Marshall College.
Tom Super is Director of J.D. Power’s Insurance Practice and is responsible for leading the continued expansion of the P&C practice.
Super, who most recently served as Director of Strategy for Farmers Insurance Group, has spent 15 years in strategy and general management for such high-profile companies as Booz & Company, The White House and AT&T Corp. While at Farmers, he was a key contributor to the revitalization of the brand, serving in strategy and consumer research areas during his tenure. Prior to joining Farmers, Super was a consultant with Booz & Company as part of the firm’s premier organization and strategy management team. There he advised clients across several industries including consumer, retail, financial services, automotive, media, transportation, health, bio-tech and defense. As an Aide in the White House, Super worked on a wide range of economic and budgetary policy issues on behalf of the President George W. Bush.
Having written or contributed to a number of articles on trends affecting the industry, Tom is a recognized thought-leader in the P&C Insurance space. He has a master’s degree in public administration from the American University School of Public Affairs and received his bachelor’s degree in business from Robert Morris University.
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.”