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.
The U.S. Chamber of Commerce and other organizations are sounding the alarm about the impact of President Trump’s order.
Kirstin Marr is the Chief Analytics Officer at Insurity, a leading provider of cloud-based core system solutions and data analytics for the world's largest insurers, brokers and MGAs. Previously, Marr was the president of Valen Analytics and one of the pioneers of the Insurance Careers Movement coalition, a grassroots initiative of more than 1,000 insurance organizations raising awareness of what insurance has to offer millennials. Before Valen, Marr ran B2B marketing for internet technology pioneer and market leader ServiceMagic.com (now HomeAdvisor). She has a passion for building companies that invent leading-edge technologies to improve customers' lives and solve the inefficiencies that exist in traditional marketplaces.
Gerard Griffin is CEO and founder of AnyDay, the world’s first vertically integrated provider of end-to-end earned wage access and other financial wellness solutions. Thanks to the payments infrastructure of its parent QRails, the AnyDay platform enables payroll processors, human capital management companies, workforce management providers, and large corporations to deliver instant payment of earned wages to employees at low to no cost.
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.”