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.
Eric Spacek has more than 15 years of insurance risk control experience and joined Church Mutual in January 2020 as Risk Control program manager. He was promoted to his current role in January 2022.
Spacek earned a bachelor's degree in English from Eastern University in St. David's, Pennsylvania, and his juris doctor degree from American University in Washington, D.C.
Spacek earned the Associate in Risk Management (ARM) designation. He has also received the Cambridge Certificate in Risk Management for Churches and Schools.
Brett E. Heineman is FSA general manager of health products at Gradient AI.
Heineman is a health actuary with broad experience in the health insurance industry, ranging from provider contracting analysis for carriers to actuarial valuation and actuarial transformation for consulting firms. His professional interests include organizational and personal productivity, actuarial process automation, practical applications of predictive modeling and actuarial modernization/actuarial transformation.
Leo Bernstein is the founder and CEO of LineSlip, a solution that transforms commercial insurance documents into actionable insurance intelligence for risk managers. LineSlip is currently used by industry leaders in diverse sectors including private equity, real estate, healthcare, hospitality, retail and more. A two-time entrepreneur, Leo has many years of experience in finance and real estate, which inspired him to found LineSlip.
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.”