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.
Richard McKenney is president and chief executive officer for Unum Group, one of the world’s leading providers of workplace financial protection benefits. He became president in April 2015 and assumed the role of CEO in May of the same year.
McKenney served as executive vice president, chief financial officer for Unum Group from 2009 to 2015, where he was responsible for overall financial management of the company, including financial reporting, treasury and capital management, strategic planning and mergers and acquisitions, investments, financial planning, investor relations, and enterprise risk management. He also chaired Unum’s Operating Committee, which oversees the company’s business operations throughout the U.S. and U.K.
Prior to joining Unum in 2009, McKenney was executive vice president and chief financial officer of Sun Life Financial, an international financial services company based in Toronto.
McKenney graduated summa cum laude from Tufts University with a bachelor’s degree in mechanical engineering.
Philippa Lawrence is a global finance and accounting leader and is currently vice president and chief accounting officer at Workday. Prior to that, she held controller roles at Google, Brocade, Motorola, and Katerra.
The head of a federal watchdog agency had some direct experience with the shortcomings of one of the coronavirus stimulus programs — a check from the IRS made out to his late mother.
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.