A Christmas Miracle - Bipartisan Support for Making Expenses Paid with PPP Loan Proceeds Deductible
Related Attorneys
Related Practices
As we reported last week, the IRS (a department operating under the U.S. Treasury) has issued guidance saying that any expense paid with proceeds from a PPP loan that is or will be forgiven are not deductible. The Treasury’s position has upset Congress.
On Thursday, December 19, Senate Finance Committee Chairman Chuck Grassley (R-Iowa) and Ranking Member Ron Wyden (D-Ore.) released a joint statement regarding the Treasury’s PPP loan expense deductibility guidance, saying that the IRS has missed the mark. Grassley and Wyden noted, “Since the CARES Act, we’ve stressed that our intent was for small businesses receiving Paycheck Protection Program loans to receive the benefit of their deductions for ordinary and necessary business expenses. We explicitly included language in the CARES Act to ensure that PPP loan recipients whose loans are forgiven are not required to treat the loan proceeds as taxable income.” They continued by noting that the Treasury’s position has effectively rendered Congress’ intent meaningless, stating, “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. Small businesses need help maintaining their cash flow, not more strains on it.”
In addition to encouraging Treasury to reconsider its position on the deductibility of expenses paid with PPP loan proceeds, Senators Grassley and Wyden noted that lawmakers are continuing their efforts to clarify in any end-of-year legislation the intended relief in the CARES Act—that is, that not only is the forgiveness of PPP loans non taxable but that taxpayer are entitled to deduct expenses paid with the proceeds from forgiven PPP loans.
It will be a true Christmas miracle if Republicans and Democrats are able to reach across the aisle and provide the desired relief to small businesses.
If you have any questions, please feel free to contact Kemp Smith’s Business Department at 915-533-4424.
On Thursday, December 19, Senate Finance Committee Chairman Chuck Grassley (R-Iowa) and Ranking Member Ron Wyden (D-Ore.) released a joint statement regarding the Treasury’s PPP loan expense deductibility guidance, saying that the IRS has missed the mark. Grassley and Wyden noted, “Since the CARES Act, we’ve stressed that our intent was for small businesses receiving Paycheck Protection Program loans to receive the benefit of their deductions for ordinary and necessary business expenses. We explicitly included language in the CARES Act to ensure that PPP loan recipients whose loans are forgiven are not required to treat the loan proceeds as taxable income.” They continued by noting that the Treasury’s position has effectively rendered Congress’ intent meaningless, stating, “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. Small businesses need help maintaining their cash flow, not more strains on it.”
In addition to encouraging Treasury to reconsider its position on the deductibility of expenses paid with PPP loan proceeds, Senators Grassley and Wyden noted that lawmakers are continuing their efforts to clarify in any end-of-year legislation the intended relief in the CARES Act—that is, that not only is the forgiveness of PPP loans non taxable but that taxpayer are entitled to deduct expenses paid with the proceeds from forgiven PPP loans.
It will be a true Christmas miracle if Republicans and Democrats are able to reach across the aisle and provide the desired relief to small businesses.
If you have any questions, please feel free to contact Kemp Smith’s Business Department at 915-533-4424.
