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.
Trish Coughlin is corporate controller at Workday, which provides financial management and human capital management software. She is responsible for all aspects of accounting and external reporting.
Trish has more than 25 years of experience in corporate finance and accounting. Prior to Workday, Trish was a managing director at Goldman Sachs where she spent more than 10 years in finance and operational leadership roles. Trish previously held roles at Honeywell where she was controller of a $4 billion business, and PricewaterhouseCoopers (PwC) where she provided services to multinational clients in the audit and transaction advisory practices. Trish is also an active volunteer in her community and is currently on the board of directors at the Community Foundation of Utah.
Trish holds bachelor’s degrees in international relations and accounting from Lehigh University.
Joseph Cioffi is chair of the insolvency, creditors' rights and financial products practice group at the New York-based law firm Davis & Gilbert LLP.
Jerry Buckley was a founder of Buckley LLP, a leading national financial services law firm that combined with Orrick in 2023.
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.”