Small businesses that manage to get their Paycheck Protection Program loans forgiven may find themselves losing valuable tax breaks, according to new guidance from the Internal Revenue Service.
Companies that qualify for loan forgiveness under legislation Congress approved won’t be able to deduct the wages or other businesses expenses they paid for using the loan, according to an IRS notice published Thursday.
“This treatment prevents a double tax benefit,” the agency said in the notice. “This conclusion is consistent with prior guidance of the IRS.”
The guidance clarifies a point of confusion in the $670 billion small business loan program to help businesses struggling as the coronavirus has brought the economy to a standstill. The law states 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.
As chief information officer at Wiss, Hrishikesh Pippadipally is responsible for creating and executing technology strategies and roadmaps. This includes leading efforts to build and modernize products and platforms that provide security, flexibility, and scalability, allowing partners to manage operations successfully and deliver services to end users. In addition to the firm's internal CIO responsibilities, he provides his CIO and CTO advisory expertise to clients with IT strategy, digital transformation, cloud acceleration, enterprise architecture, business process optimization, info security, cybersecurity and infrastructure needs. In prior roles, he worked as a senior technology leader with nearly two decades of experience in delivering enterprise-class solutions in the Financial Services industry with a strong understanding of both technology and business.
Berend de Jong is the Global Insurance and Finance Lead at Planet, a leading provider of global, daily satellite imagery and geospatial solutions. Planet is driven by a mission to image the world every day and make change visible, accessible and actionable. Founded in 2010 by three NASA scientists, Planet designs, builds and operates the largest Earth observation fleet of imaging satellites. The company provides mission-critical data, advanced insights and software solutions to customers across agriculture, forestry, intelligence, education and finance, as well as government agencies, enabling users to simply and effectively derive unique value from satellite imagery.
As director of account anagement, Jill Dobbe builds strong relationships with Orgvue clients, guiding them to enhance their organizational planning capabilities through technological solutions. With more than two decades of expertise in strategic planning, human resources, and organizational development—including extensive experience supporting Fortune 100-500 organizations and serving within John Deere and a non-profit healthcare system—Jill is dedicated to empowering organizations to define and achieve their future strategies. Her comprehensive background encompasses successful leadership of initiatives in strategic workforce planning, analytics, organizational design, transformation, and change management across diverse industries and global environments.
The tax code permits companies to write off businesses expenses, such as wages, rent and transportation expenses, but generally doesn’t allow write-offs for tax-exempt income.
The ruling adds to the list of stumbling blocks facing businesses as they try to qualify for the Paycheck Protection Program loans.
Small businesses have reported technical issues in trying to apply for the funds, which restarted Monday after the first round of funding ran out after just 13 days.
The program, run by the Small Business Administration, provides funds to cover eight weeks of payroll costs and the loans are forgiven if the employers keep workers on the job or quickly rehire laid-off workers.