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.
Todd Waletzki joined BenefitMall in March, 2015 as the President of the Payroll Division. Todd brings more than 25 years of finance and payroll related experience to the organization and is responsible for maintaining the excellence of payroll operations for BenefitMall. Todd previously held the role as chief operating officer of CompuPay (now BenefitMall) from 2010 to 2012 , where he was responsible for all payroll operational functions.
Todd received his Bachelor of Science in economics from Bemidji State University, and his Master of Science in Economics from Southern Illinois University. He has previously served as a College Instructor at Webster University and Southern Illinois University. Todd and his family currently resides in Dallas.
Nadya Knysh is a managing director at a1qa, which is a software testing provider helping clients including Fortune 500 companies release high-quality solutions. Nadya has a Master’s Degree in informatics, management and modeling and is a certified scrum master. Nadya strives to transfer the knowledge on the significance of QA processes for improving overall quality of the products and eliminating a financial loss due to failures detected.
Christine Runnegar is senior director, Internet Trust at the Internet Society, a global non-profit organization that promotes the open development, evolution and use of the Internet.
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.”