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.
Ellen Friedman is principal technologist for MapR, a scientist, and O'Reilly author currently writing about a variety of open source and big data topics. Ellen is a committer on the Apache Drill and Mahout projects, and she has a PhD in biochemistry. Ellen is coauthor of a number of short data books published by O’Reilly Media, including Machine Learning Logistics, Streaming Architecture, thePractical Machine Learning series, Time Series Databases, and Introduction to Apache Flink. Ellen has been an invited speaker at Strata + Hadoop in London, Berlin Buzzwords, Nike Tech Talks, the University of Sheffield Methods Institute, and Philly ETE as well as a keynote speaker for Big Data London and for NoSQL Matters in Barcelona.
Ted Dunning, PhD, is a board member of the Apache Software Foundation, chief application architect at MapR, and author of the newly released "AI and Analytics in Production," a short book that addresses finding value with AI and machine learning. Ted has a long history in building successful startups where machine learning made a big difference in the value of the company. He is listed as inventor on dozens of patents and continues to develop new algorithms and architectures.
Michael Lewis is chief information officer at Copper State Communications.
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.”