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.
Gregory D. Squires is a research professor and professor emeritus in the sociology department at George Washington University. He is also a member of the Philadelphia Home Appraisal Bias Task Force.
Brian Swanson is a partner at Flashpoint Marketing, a marketing consulting firm that focuses on providing traditional and digital lead generation services exclusively to the accounting profession. In 2008 he joined Flashpoint to lead the development of the firm's digital services practice. Prior to joining Flashpoint, Swanson worked for a Big Four firm assisting with audit practice marketing and development. He has also worked as the director of marketing & business development for a regional accounting firm in the Southeast United States. In 2009 he earned his Master in Business Administration in Finance from Benedictine University. He also holds a Bachelor of Arts in Secondary Education from Northeastern Illinois University. He was the first accounting marketing professional to earn certification from the Search Engine Marketing Professionals Organization in internet marketing and advanced search engine optimization. He is currently a member of the Association of Accounting Marketing and SEMPO.
Jennifer Briggs, CAE, is president and CEO of the Indiana CPA Society. She joined the society staff in 2002 and served as the special projects manager, marketing manager, marketing director, director of member services, vice president of member services, senior vice president and chief operating officer. Before joining the society, Briggs spent three years at KWK Management Group as executive director of five state-wide associations overseeing all activities of the organizations, including education programs, marketing, membership recruitment, and various government relations activities. Prior to that, she worked for the Indiana Apartment Association and for five years at the National Association of Mutual Insurance Companies. Briggs earned a degree in marketing from Marian College and an MBA from Butler University, and is a member of the American Society of Association Executives and the Indiana Society of Association Executives. In 2009, she was awarded the Association Professional of the Year award from ISAE. She has served on the American Society of Association Executives CAE Exam Committee, the AICPA’s Future of Learning Committee and various community boards of directors.
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.”