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 Internal Revenue Service and the Treasury Department released proposed regulations and temporary regulations to offer guidance for consolidated groups on net operating losses in the wake of changes under both the Tax Cuts and Jobs Act of 2017 and the CARES Act.
George Friedlander is widely recognized as a leader in the municipal bond marketplace. He is frequently quoted in the financial press on his ideas related to trends and investment patterns in the municipal bond market. Prior to joining Court Street Group, he was employed by� Citigroup and its predecessor firms for 41 years.� He has a BS in Math from the State University at Stony Brook and an MBA with Distinction in Finance from Pace University. Mr. Friedlander� has perennially been ranked within the top three� in municipal strategy in various investor surveys. More recently, he has adjusted his focus to policy analysis within the muni market, as well as the implications of accelerating technological change for state and local governments. Mr. Friedlander has further been recognized with awards from SIFMA and its predecessor firms, the Bond Market Association and the Public Securities Association, and from the National Federation of Municipal Analysts. He was voted the National Federation’s Analyst of the Year in 1989, and received the Chairman’s Contribution Award of the Bond Market Association in 1997. In 2011 Mr. Friedlander received the Lifetime Achievement Award in a poll of institutional investors by Smith's Research and Gradings. �He is currently actively working with state and local public interest groups on ways to respond to potential threats to the tax-exempt status of municipal bonds.
Bobbi Kloss is the director of human capital management services for the Benefit Advisors Network
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.”