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.
Jeffery is a senior analyst serving financial services digital strategy professionals, helping them evaluate the implications of digital innovation on their businesses. His research focuses on the intersection of secular trends and technological advancements, such as the internet of things (IoT) and sensors, artificial intelligence and machine learning, and natural language processing, as these advancements are changing the way financial services firms do business and interact with their customers.
Jeffery has more than 10 years of experience working with C-suite executives and senior business leaders to shape business strategy at insurance clients. Prior to joining Forrester, he was an associate director at Ernst & Young (EY), where he led EY’s Americas’ insurance sector market research and insights program, working closely with senior engagement partners to drive growth at key global and US accounts. Before EY, Jeffery was a senior manager at PriceWaterhouseCoopers (PwC), where he delivered insurance industry and company research, analysis, and thought leadership support to client service partners and their engagement teams during consulting pursuits and engagements. Prior to PwC, Jeffery was employed for five years as an equity analyst at global and regional investment banks, covering the retail and consumer and automotive aftermarket industries.
Jeffery holds an MBA from the Darden School at the University of Virginia in Charlottesville, Virginia. He received his bachelor’s degree in agribusiness from Florida A&M University in Tallahassee, Florida.
Jay Clayton chaired the U.S. Securities and Exchange Commission from 2017 to 2020. He currently serves as chairman of the Board of Directors of Apollo Global Management, senior policy advisor and of counsel at Sullivan & Cromwell, and adjunct professor at the University of Pennsylvania Carey Law School.
Billy Leigh is managing director and senior vice president of strategy and transformation at Embark. He leads the company's efforts to expand the ways in which the company serves clients by leveraging data, technology and AI.
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.”