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.
Jody Padar, CPA, also known as The Radical CPA, is a well-known advocate for tech adoption and general forward-thinking behavior inside the profession, and has been consistently named one of the Top 100 Most Influential to the Profession by Accounting Today. She is the author of "Radical Pricing," which was just published in May 2024, as well as two other books, "From Success to Significance: The Radical CPA Guide" and "The Radical CPA: New Rules for the Future-Ready Firm." She is a regular contributor to a number of industry publications, including Accounting Today and CPA Trendlines, where she offers practical tips and advice on running a next-generation firm. She previously owned her own small firm, and is urrently a senior tax advisor at april, Jody loves the idea of using AI and automation to transform taxes, and she's excited to help develop, evolve and share a simplified and pleasurable tax experience. Padar is married with two adult children and currently resides in Door County, Wisconsin. She earned her BBA from Saint Mary's College and MST from Northern Illinois University. Follow her on LinkedIn, X, Instagram and Facebook.
Osler is senior vice president of business development at GetInsured. Osler leads business development at GetInsured, where he manages contracts for the company’s SaaS solution for state governments, insurance companies, employers and channel partners.
Paul Bridgewater has nearly 20 years of experience and achievement in the international payments industry, spanning Europe and the America, and currently serves as chief executive officer for Sage Payment Solutions, the payments division for Sage North America. Prior to joining Sage, he served in various executive roles with TSYS, Digital River, and Citibank.
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.”