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.
Ryan Miller is the vice president and senior counsel of innovation policy at the American Bankers Association.
Max Bruner is the CEO of Anzen Insurance and is making life easier for retail brokers, carriers, and clients when it comes to executive liability risks. He has a proven track record in building technology companies over the past 10 years across a variety of sectors, from data science and drone hardware to agriculture, consumer auto insurance, and now executive liability.
Max has an extensive background in U.S. agriculture, energy and technology policy. He's been recognized by Forbes on its "30 Under 30" list and was a Harry S. Truman Scholar- awarded by the U.S. government for public service. He is an alumnus of the University of Cambridge and the University of Wisconsin-Madison.
Prathamesh Khedekar is a senior program manager at Creospan, where he leads technology programs for Fortune 100 clients. With a background in Silicon Valley, he has contributed to the launch of AI services across banking, pharmaceutical and technology industries. Previously, as a senior staff engineer at Motorola Solutions, he developed secure communication systems for government agencies in the U.S., U.K. and the Netherlands. He holds a master's in electrical engineering from the University of Southern California.
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.”