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.
Mallon is Bersin’s chief storyteller. He engages directly with Bersin members and the market to bring the Bersin’s insights to life. As a 10-year veteran with the organization, and the leader of Bersin’s Research team for six years, he is one of Bersin’s most knowledgeable thought leaders in all areas of HR, talent, learning, and leadership. As a pivotal force behind Bersin’s maturity research for the past decade, he brings a unique, integrated perspective to helping organizations solve their most vexing workforce challenges – wisely and with systematic purpose. Before joining Bersin, Mallon led the consulting practice for a major LMS provider. Prior to that, he held learning and organization development-related positions with EarthLink, where he was responsible for overall learning strategy for its global call center organization. He holds a B.A. in English Literature from Emory University and an M.S. in Digital Media from the Georgia Institute of Technology with focuses on computer-aided distance learning and on storytelling in digital environments. This column first ran on the Bersin web site
Al Leary is the senior vice president of Trust Company of America.
DeFrain is vice president, sales and account management, at Purchasing Power, a voluntary benefit provider of an employee purchase program. She has more than 18 years of experience in employee benefits including consulting services, ancillary products and voluntary benefits.
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.”