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.
Russell Berger is vice president of IT and network services at InTouch Health, and was instrumental in securing the vendor’s HITRUST CSF Certified designation in December 2017.
Johannes-Tobias Lorenz leads McKinsey’s work in digital insurance in Europe, helping insurers build their digital strategies, expand and serve direct markets, and strengthen their customer-service experience.
He also oversees the firm’s global customer experience for financial-services activities, helping financial institutions around the world transform the ways they meet the needs of increasingly demanding customers.
Some of his recent client work includes building a digital strategy for a leading global insurer and helping launch direct insurance players in Germany and other European markets. He also assists clients across Europe in areas such as social-media strategy and digital enablement of the tied-agents channel. Other projects include working with a number of insurers to digitize their customer journey for processes such as claims, life-insurance onboarding, and auto-insurance sales.
Furthermore, Lorenz helps private-equity firms on due diligences and portfolio work.
Lorenz has coauthored several McKinsey articles about issues confronting the insurance industry, such as insurance fraud and digital transformation.
Tanguy Catlin leads McKinsey's North American P&C Insurance Practice.
In addition, he is a leader of McKinsey’s Digital Strategy Practice and Digital Quotient™ (DQ) initiative, and helps companies build out their digital capabilities to deliver rapid results and sustained growth. DQ is an assessment that allows organizations to clearly identify their digital strengths and weaknesses across different parts of the organization, and compare them against hundreds of organizations around the world.
Catlin works with leading global financial service firms on multichannel distribution strategies, digitally enabled business model transformations, large scale marketing and sales programs. He also serves insurance clients more broadly on topics ranging from strategy and organization to operations, technology, claims, and underwriting.
His recent client engagements include assisting a top-ten property-and-casualty and life insurer in building an internal digital agency, helping a US multiline carrier accelerate test-and-learn capabilities and a personalization engine for its online channel, and working with a number of major multiline players to optimize their marketing spending across media, channels, and products.
Catlin frequently contributes to industry publications and has authored several McKinsey white papers on issues confronting the insurance industry.
Catlin is member of the Alumni Board of the MIT Sloan School of Management and a former board member of the Massachusetts chapter of March of Dimes, a nonprofit organization that works to improve the health of mothers and babies.
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.”