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.
Erin Hartley is a Licensed Marriage & Family Therapist (LMFT) and the VP of Clinical Operations at Meru Health, an online mental healthcare provider setting the new standard in how we treat depression, anxiety, and burnout.
In her clinical career, Erin has focused on working with individuals suffering from mood disorders including depression and anxiety in a wide variety of clinical and research settings. At Meru Health, she is working alongside passionate researchers, entrepreneurs, and clinicians to develop mental healthcare with immediate access and long-lasting outcomes.
Erin earned her undergraduate degree at Boston University where she studied Anthropology and her Master’s degree in Counseling Psychology from the California Institute for Integral Studies.
With more than 35 years of combined experience, and known as authentic, transformational leaders, Gig Talent Co-Founders, Hema Crockett and Jamie Jacobs, have built strong reputations for creating and developing high impact human resources teams that drive business results within tech, biotech and global Fortune 50 companies. They have taken this experience directly to the Gig Economy where they help HR Consultants and Leadership Coaches do the work they love by matching them with organizations who think about talent differently.
Rob Shavell is co-founder and CEO of Abine.
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.”