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.
Britt Steckman is a senior associate at Bracewell.
Paul is a partner in the Washington, D.C. office of Bracewell.� Paul’s career has intertwined with the SEC’s regulation of the municipal market from the very beginning, when as a young lawyer in the SEC’s Division of Enforcement he participated in preparing the SEC’s September 1977 and 1979 Staff Reports on New York City.� After practice as a securities, project finance, and bond lawyer in New York and Boston, �Paul returned to the SEC in 1994 to work for Chairman Levitt and serve as the first Director of the SEC’s Office of Municipal Securities. During that time, he participated in drafting the continuing disclosure amendments to Rule 15c2-12, oversaw SEC activity relating to Orange County California and advised the Commission on institution and settlement of over 100 enforcement actions in the municipal securities market.�Today, Paul defends states, local governments, and their officials, brokers, dealers, municipal securities dealers, municipal advisors, and their officers and employees, as well as individuals in investigations and enforcement proceedings by the SEC, Department of Justice, FINRA, and states Attorneys General.� Paul also serves as Counsel to a NRSRO, or Rating Agency, on regulatory and enforcement matters.� He advises clients on compliance with SEC and MSRB regulations, and corporate governance matters, conducts internal investigations, and serves as special disclosure counsel in securities transactions.Paul received the "Chairman's Award for Excellence" for his work in developing the amendments to Rule 15c2-12, while at the SEC, and received "The National Federation of Municipal Analysts�Industry Contribution Award" in 2001. Paul is listed in The Best Lawyers in America� in securities law, 2005 - 2010; in corporate governance and compliance law, 2006 -�2010;�and public finance law, 2005�- 2010.� Additionally, he is listed in Who's Who and What's What on Wall Street, Who's Who in America, Who's Who in American Law,The Lawdragon 500 Leading Lawyers in America 2005 edition, and Washington D.C. Super Lawyers 2007 for securities and corporate finance.Paul is frequently interviewed and quoted as an authority on securities regulation in international news media including The National, FTSE Global Markets, BBC News, The Business Times Singapore, and The Singapore American, as well as U.S. media, including The New York Times, The Wall Street Journal, Bloomberg News, the Associated Press, Reuters, and The Bond Buyer.
Jeff Curie is the President of Bitvore Corp., a provider of A.I.-based products that identify risk and opportunity for professionals in the municipal bond, banking and insurance industries.
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.”