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.
Yaroslav Kuflinski is an IT consultant, and observer of artificial intelligence and machine learning best practices, at Iflexion.
Captain Andrew Kinsey spent 23 years in the U.S. Merchant Marine and U.S. Naval Reserve, sailing in all licensed ranks, including Master. His sailing experience was primarily with Maersk Lines, sailing as Master of three different Container ships.
He also served as Master aboard two Military Sealift Command (MSC), Large Medium Speed RORO (LMSR) ships, the USNS “Sisler” and USNS “Red Cloud.” He served in Operations Desert Shield & Desert Storm, Restore Hope, Enduring Freedom and Iraqi Freedom, and received numerous decorations and awards.
After coming ashore in 2006, Andrew worked as an independent Marine Surveyor in the Tri-state area and joined the ACE/US Commercial Marine - Marine Advisory Service, in 2009. At ACE he was responsible for providing a wide range of Risk Control services to support its commercial book of marine business, including Cargo, Project Cargo, Hull & Machinery, Terminal Operators, and related Inland Marine LOB’s.
Andrew is a graduate of the United States Merchant Marine Academy at Kings Point, NY (1984) and holds a Bachelor’s degree in Marine Transportation/ Nautical Science. He also holds an Unlimited U.S. Coast Guard Masters License, for vessels of any gross tonnage upon oceans.
Mariel Beasley is co-founder of the Common Cents Lab at Duke University
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.”