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.
Scott Weinstein has more than 36 years of actuarial experience. Throughout his professional career, he has worked extensively with national and global insurance and reinsurance companies as well as with numerous self-insured programs. He specializes in identifying and quantifying exposure to risk and improving actuarial processes and reporting.
Ian Sterling has more than 18 years of actuarial experience. Throughout his professional career, Ian has worked with actuaries, claims, underwriting, and finance professionals at regional and global insurance and reinsurance companies, as well as self-insured corporations. Ian has assisted clients in both an audit and advisory capacity. This has included a focus on transformation and innovation, such as, advising on actuarial and finance modernization, machine learning claim / policy level modeling, advanced data exploration and reporting with data visualization. Ian has been a frequent speaker at conferences and written articles on topics, including robotics and automation within actuarial, the changing actuarial role, and loss reserving in the future.
Brett Jurgens is the CEO and Co-founder of Notion, a Comcast company (acquired in 2020), empowering home and property owners to be proactive in monitoring their spaces and most valued possessions. Through partner programs, Notion helps insurance carriers, agents and service providers provide value to their customers with Notion’s DIY smart monitoring technology.
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.”