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.
Michael S. Grant leads the Employee Benefits Services unit for Crystal & Company as Executive Managing Director. This department provides brokerage and consulting services in Group Benefits, Executive Benefits and Retirement Services, and HR Operations Support, working collaboratively with clients across all industries to provide customized solutions for business and human capital needs.
Grant is an accomplished executive and client-focused business leader with more than 25 years of industry experience. Before joining Crystal & Company, Grant was President, Employee Benefits for a national brokerage in New York, where he was accountable for all facets of insurance brokerage operations, including sales and client retention programs. Prior to that, he was Senior Vice President, Commercial Sales and Account Management for United HealthCare and MetraHealth, the combined Medical entity of MetLife and Travelers. In this role, he directed a team that served the full spectrum of clients from two to 10,000 employees, including many Fortune 500 and multi-site companies.
Grant earned his undergraduate degree from Boston College's School of Management and his Masters in Business Administration from Fordham University. Among the many honors and distinctions he has received, Grant was named one of the top business leaders living on Long Island by Long Island Business News.
Grant serves as a board member and active supporter of various religious organizations, including St. Ignatius Retreat House, Sisters of Charity Halifax, Dominican Village, the Seminary of the Immaculate Conception, and Tomorrow’s Hope Foundation.
Pawlowski, LCPC, CEAP, SAP, is vice president of adminstration at CuraLinc Healthcare.
Michael Jabbbara is director of digital development markets for Visa.
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.”