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.
Stephen Goldstein is Vice President, Client Experience Lead for RGAX, the transformation engine of Reinsurance Group of America, Incorporated (RGA). Stephen works closely with insurance companies in the U.S., Canada, Mexico, and South America to develop needs-based solutions.
He most recently spent four years with Prudential Assurance in Malaysia in a range of business development roles culminating with Director, PD Sales Management. Previously, he was with Prudential plc, where he first led agency operations into Eastern Europe and Ireland, and then served as Principal Auditor for the Group Head office in London. Before then, he was a wholesaler with Jackson National Life Insurance Co.
Stephen’s global experience in the insurance and financial services industries spans corporate roles in the U.S., Europe and Asia, with a focus on distribution, operations, audit, market entry, consumer financial advice, and corporate strategy. Through his consulting practice, Stephen has also helped insurtech startups with their sales and go-to-market initiatives.
Stephen’s Bachelor of Science (B.S.) degree in Business Management and Entrepreneurship from the University of Arizona includes coursework at the University’s Eller College of Management business school.
By incentivizing businesses to rehire employees laid off or furloughed due to COVID-19, states will generate a faster economic recovery and provide valuable assistance for companies to get back on their feet.
The Internal Revenue Service and the Treasury Department provided guidance to employers requiring them to report the amount of qualified sick and family leave wages they have paid to their employees under the Families First Coronavirus Response Act on Form W-2.
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.”