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.
Richard A. Royer has served as the chief executive officer of Primaris, a vendor of healthcare quality business solutions, since 2001. He has extensive administrative healthcare experience and is actively involved in several statewide healthcare initiatives.
Peyton Burch, CPA, CITP, is a senior channel executive with Intacct. He is a nationally recognized expert in managing high-performing value added reseller (VAR) organizations and building high impact relationships with both software publishers and customers. He joined Intacct in October of 2010 and is engaged in Channel Partner sales and enablement efforts. Mr. Burch is a sought-after speaker at AICPA and accounting industry conferences. His firm was awarded Accounting Technology’s Pacesetter designation for seven consecutive years. Mr. Burch is actively involved in the AICPA and the Information Technology Alliance (ITA). Mr. Burch began his career in 1986 as a Senior Consultant with Arthur Andersen & Co.’s Management Information Consulting Division and went on to lead several prestigious VAR businesses. As President of Houston-based Burch Consultants, he built the firm into a nationally recognized industry leader. As part of the Intacct team, Mr. Burch leverages his strong ties to the CPA and reseller communities to help evolve the Intacct VAR program. Previously, he served as Director of Partner Programs at Deltek.Mr. Burch obtained a bachelors degree in Business Administration from Southern Methodist University and a Masters in Professional Accounting) from the University of Texas at Austin. He became a Certified Public Accountant in 1989. Mr. Burch has served on the AICPA Technology Conference Committee for the past six years and as Chairman of the 2008 - 2011 Conferences. He currently leads the ITA Membership Committee and serves on the AICPA CITP Credential Committee. In 2010, he was recognized by Accounting Today as one of the Top 100 Most Influential People in Accounting.
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.”