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.
Neycho Tepavicharov is co-founder of Flashcloud, a web hosting company. He has spent nearly two decades in the hosting industry and co-founded and sold a hosting company before starting Flashcloud.
David Seider is the Chief Commercial Officer of TheZebra.com, the company simplifying the insurance shopping experience. In this role, David oversees a broad scope related to revenue-generating activities, partner relationships, agency initiatives, and corporate development efforts. He is an excellent source on discussing auto and home insurance industry trends, the impact of macroeconomic factors on insurance rates, M&A activity and more.
Prior to joining TheZebra.com, David was a Partner at Weatherford Capital, a growth equity firm with over $1 billion in committed capital. He led the firm's investment analysis, transaction execution, and portfolio management activities. During his time at Weatherford Capital, David served on the board of directors of SOMA Global, Branch, HDVI, Stellar, and TheZebra.com. In past roles, he has also led merger and acquisition execution and capital raising efforts.
David earned his B.S. in business administration from the University of Florida and is a member of the Florida Blue Key leadership honorary. He earned his M.B.A. degree from Duke's Fuqua School of Business and graduated with highest honors as a Fuqua Scholar.
Madhu Reddiboina is the founder and CEO of RediMinds, a healthtech firm specializing in AI-assisted contested medical review.
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.”