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.
Mike Ehrle is senior vice president of strategic partnerships for benefits delivery innovator at Hodges-Mace. He is responsible for deepening corporate ties with national brokers, technology consultants, HCM/payroll companies, medical and group carriers, private-equity firms and other key players in the Hodges-Mace ecosystem. Employee benefits firm Hodges-Mace aims to help employees and employers make smarter benefits decisions through a blend of innovative technologies and intelligent service solutions.
Mike was SVP of Sales for two years at Hodges-Mace before being named SVP of strategic partnerships. During this time Mike expanded the sales team from 14 to 35 people, introduced multiple new functions and processes, sold over 200 new accounts and generated approximately $40M of new revenue.
Prior to Hodges-Mace, Mike was responsible for numerous new business development, client retention, sales operations, and strategic initiatives across payer and large employer clients for Davis Vision/Highmark Health and nearly ten years at UnitedHealth Group. In addition, Mike has helped a major consulting house redesign their middle-market healthcare exchange from a product, financial and technological viewpoint. Mike has a Bachelor’s of Science in Business Administration from Drake University and a Masters of Business Administration from the University of Notre Dame.
Jeaneth Johansson is a professor of accounting and control at Halmstad University and Luleå University of Technology.
Malin Malmstrom is a professor of entrepreneurship and innovation at Luleå University of Technology.
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.”