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.
Pat True is a senior risk analyst at ProfitStars.
Founder of True North Data (www.truenorthdm.com), a data strategy, analytics and governance 2.0 data consultancy. Peter Kapur is an Industry leader, Innovator, speaker and product advisor to data companies and is a former ddata executive with AIG, Depository Trust Co., Credit Suisse, Goldman Sachs & Deutsche Bank. Peter’s True North is about focusing on delivering business value thru innovative solutions using a collaborative approach to bring data producers and consumers into the eco-system as equal partners to solve business critical initiatives such as data privacy, data analytics and digitization.
![Thumbnail[RSE][LauraKersey].jpg](https://arizent.brightspotcdn.com/dims4/default/d098c91/2147483647/strip/true/crop/125x170+0+0/resize/1024x1392!/format/webp/quality/90/?url=https%3A%2F%2Fsource-media-brightspot.s3.us-east-1.amazonaws.com%2Fcb%2F0c%2F0b6e356e4b12a339190d15d94333%2Fthumbnail-rse-laurakersey.jpg)
Laura Kersey is responsible for managing the National Council on Compensation Insurance (NCCI)’s relationships with insurance industry trade associations and state legislative organizations.
Prior to joining NCCI in 2011, Kersey worked for the American Insurance Association (AIA), first as counsel in AIA’s law department and then as assistant vice president for government relations in its Northeast regional office.
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.”