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 meeting was the last in chairman Russell Golden’s term.
Paul Winghart, Market Economist, Founder & Chief Knowledge Officer, Wing-O-Metrics LLC.
Paul produces, distributes and charges for subscriptions for original economic commentary primarily for professional financial advisors.
Mr. Winghart is the author of ConsterNation!: The Economics Behind The Angst which examines the long-term economic fundamental that is holding the economy back from realizing enough of its potential, thereby causing all economic angst.
Since 2014, Paul has been an Adjunct Instructor of Business & Economics at Bethel University, North Central University and is currently teaching at the University of Northwestern -Saint Paul.
From 1998 to founding Wing-O-Metrics LLC, Paul was Vice President – Market Economist & Senior Fixed Income Strategist for RBC Wealth Management where he discerned and accurately prognosticated trends in U.S. interest rates. He also researched and interpreted evolutions in credit ratings to gain an understanding and appreciation of their implications on specific fixed income securities.
He has been published the Municipal Finance Journal Winter 2010 & Bloomberg News 2012. He was also nominated for selection to Financial Advisor / Private Wealth Magazine’s annual Research Manager / Due Diligence all-star team in 2011 & 2012.
Paul holds a Bachelor’s degree in Economics from the University of Minnesota and an MBA in Finance from Bethel University.
The ATM industry was already mired in the painful transition away from hardware to digital technology, and now it must try to persuade consumers and merchants that cash isn’t unsafe to handle.
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.”