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.
Jin Chang is the CEO and Co-founder of Fieldguide, the leading purpose-built, professional-grade agentic AI platform for audit and advisory firms. A former Big Four practitioner, Jin spent years in the field wrestling with outdated tools and manual workflows - experiences that inspired him to return to the profession as a founder and build the platform he wished he had. Under Jin's leadership, Fieldguide has become the trusted AI partner to nearly half of the top 100 CPA firms, helping firms unlock new capacity, improve quality, and elevate the work of practitioners. Jin's work has been recognized by Accounting Today's Top 100 Most Influential People and CPA Practice Advisor's 20 Under 40 list. Jin speaks regularly on AI, audit innovation, and professional services transformation, bringing a grounded, team-first perspective shaped by his background as a CPA, technologist, and first-generation founder.
Jack Hooper is the CEO and co-founder of Take Command, a Dallas-based SaaS company that offers health reimbursement arrangement administration. Jack is a founding member of the HRA Council and has served as Chairman of the Board. He is a graduate of the Wharton School of Business and has been featured in The New York Times, BenefitsPro, Dallas Morning News, Bloomberg, and more. His motto? "Health insurance was never meant to be this complicated."
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.”