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.
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Steve Benjamin has worked very actively in community initiatives with numerous public and private organizations dating back to his years at the University of South Carolina where he served as President of the Student Government and as Student Bar Association President at the USC School of Law. Mayor Benjamin has continued that service through the present, serving on numerous boards for nonprofit organizations such as the Columbia Urban League, Benedict College, the Greater Columbia Chamber of Commerce and as a Founding Board Member of the Eau Claire Promise Zone. He also served as a founding member of Choose Children First. In 1999, at age 29 Benjamin was appointed to Governor Jim Hodges' Cabinet as director of the state's second largest law enforcement agency, the Department of Probation, Parole, and Pardon Services. In 2009, Benjamin drew national attention by representing prominent radio host Tom Joyner and securing a pardon for Joyner's great uncles wrongfully convicted in the death of a 73-year-old Confederate veteran and executed in 1913. In a landmark decision, the South Carolina Board of Paroles and Pardons voted unanimously to grant the posthumous pardon, the first for South Carolina in a capital case. Having taken office in July 2010 and reelected by a 30% margin in November 2013, Mayor Benjamin's administration has been characterized by his firm belief in Columbia's potential and intense focus on job creation. In his first term alone his leadership helped cut Metro Unemployment by more than 42% secured billions of dollars in new regional capital investment in the midst of a national recession. Combined with the rebirth of Main Street, these accomplishments have drawn national attention and accolades including his being awarded an Aspen Rodel Fellowship, receiving an Honorary Doctor of Humanities from Francis Marion University, twice being named to The Washington Post's "The Root 100 List� (2011 and 2013) as well as the 2014 GRIO 100 and being elected in 2012 as US Conference of Mayors Trustee. In addition to his work as Mayor, Benjamin practices law with Parker Poe law firm.
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.”