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.
Robert Mazur is the New York Times best-selling author of "The Infiltrator," a memoir about his undercover life, much of which was spent acting as a conduit between ruthless drug barons and corrupt legitimate appearing senior executives that cleaned billions in blood- stained money through otherwise respectable international banks and businesses. For years, in the eyes of organized crime leaders he was a highly successful, mob-connected money launderer who helped manage their illicit fortunes. His clients, some of the most famous and deadly drug cartel bosses, issued a $500,000 contract on his life when arrests were made around the world and he was revealed to be a highly trained U.S. federal undercover agent. After completing a highly decorated 27-year career as a federal agent in three U.S. agencies, Mazur is now the president of KYC Solutions Inc., a firm that provides speaking, expert witness and consulting services to companies worldwide. More information about Mazur, his book and the film based on his life can be found at https://www.robertmazur.com/. The views expressed are his own.
Josh Jones is a manager and client-facing consultant at aspirant Consulting, LLC --- an Atlanta, GA-based consulting firm which specializes in data analytics. With more than a decade of industry experience as a consultant, developer, and team manager; he is proficient in developing solutions that transform data into business-relevant insights. Josh works primary in Tableau, relational databases, and teaching best practices between the two. For more information, please visit, www.aspirent.com. He can be reached at josh.jones@aspirent.com.
Craig Roth is research vice president at Gartner Inc. focused on digital workplace trends, messaging, products, segmentation and best practices. This includes cloud office suites, collaboration tools, content services, and how they are dependent on digital dexterity and digital business trends. He researches how knowledge workers get their jobs done today and how they are likely to get them done in the future (the future of work). He speaks to a wide range of general managers, technology CEOs, product marketing, and product managers, service providers, and IT leaders on how to capture the productivity that new ways of work have to offer.
Mr. Roth is the creator of Gartner's Digital Dexterity Index, a scoring model for showing where workers ready for new ways of working are more likely to be found by country, industry, age grouping, and company size. This index helps vendors prioritize sales and marketing efforts and helps companies and agencies to assess their workforce's openness to changing how they work against benchmarks. He has also engaged in special research projects around Enterprise Attention Management (a response to information overload) and how AI and automation will impact the future of work.
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.”