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.
Paul R. Bahnson is a professor at Boise State University. His views are not necessarily those of his institution or Accounting Today.
Butler, MS, MCHES, is the senior wellness program management consultant at SelectHealth. His career in healthcare and health promotion spans over four decades, including 17 years of hospital-based experience at Intermountain Healthcare's LDS Hospital and 24 years working with Intermountain Healthcare’s SelectHealth. Butler was manager of health promotion services at SelectHealth from 1992-2002 and pioneered initiatives to develop and implement health promotion and disease management programs that were integrated with SelectHealth insurance products. He has a bachelor’s degree in health and physical education and earned his master’s degree in rehabilitation counseling psychology from the University of Utah. He is also a Master Certified Health Education Specialist.
Groppel, Ph.D., is the co-founder of the Johnson & Johnson Human Performance Institute. He is an internationally recognized authority and pioneer in the science of human performance and co-chair of the newly formed Global Alliance for Health & Performance. Dr. Groppel currently serves on an academic appointment as Professor of Kinesiology & Community Health at the University of Illinois @ Urbana-Champaign, and served as an Adjunct Professor of Management at the J.L. Kellogg School of Management at Northwestern University for several years. Dr. Groppel has addressed the issue of worksite wellness and performance at such policy events as the United Nations Side Event for Physical Activity and Non-Communicable Disease, a U.S. Congressional Briefing on Worksite Health Promotion, and represented the worksite wellness industry at the historic Surgeon General’s Call to Action on Walking and Walkable Communities.
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.”