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.
George Avetisov is CEO of HYPR Corp. He has experience in developing cyber fraud and e-commerce, coupled with a strong drive to build a secure Internet ecosystem, and has worked on technology for connected devices.
Rob Blackwell is the chief content officer of IntraFi Network and the host of the Banking with Interest podcast. He is the former editor-in-chief of American Banker.
He covered the financial services arena for nearly two decades, working first as a reporter covering Fannie Mae and Freddie Mac, the banking regulators, and anti-money laundering rules, among other topics. In 2005, he was named Washington Bureau Chief and subsequently helped guide the paper through its coverage of the worst financial crisis since the Great Depression, including articles on “too big to fail” and the drafting and passage of the Dodd-Frank Act.
In 2014, he was promoted to Group Editorial Director for Regulatory Policy for SourceMedia, leading the coverage of financial policy issues for American Banker, National Mortgage News, Credit Union Journal and PaymentsSource. He was promoted to Editor-in-Chief of American Banker in September 2017.
In 2017, Rob was given the Neal Award's Tim White Award, which recognizes editors "whose work displays extraordinary courage, integrity, and passion." He has helped American Banker win several Neal and Azbee awards as a reporter and editor, covering topics such as deposit insurance reform, the Wells Fargo phony-accounts scandal, American Samoa's effort to charter its own public bank, and the leadership fight at the CFPB. He has appeared on NPR, BBC, CNBC, Fox Business and C-SPAN as an expert on financial regulatory policy. He is also the author of six novels.
Ryan Gilbert is a general partner with Propel Venture Partners in San Francisco, Calif.
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.”