A group of more than 170 trade associations is urging Congress to allow businesses to obtain tax deductions for expenses associated with loan forgiveness under the Paycheck Protection Program (PPP).
“As part of the next round of COVID-19 relief, we request that Congress reaffirm its intent and restore the tax benefits it intended to give distressed Main Street businesses as part of the CARES Act,” the groups wrote in a letter to House and Senate leaders.
Groups that signed the letter include the American Farm Bureau Federation, the National Association of Home Builders, and the National Retail Federation.
Under the PPP, small businesses can get loans that are forgivable if the proceeds are used for payroll, rent, mortgage interest and utilities. The CARES Act, the broad law that includes PPP, specified that forgiveness of PPP loans is not taxable income.
The IRS in April issued guidance stating that expenses are not deductible if their payment results in a PPP loan being forgiven. The guidance has been criticized by some key lawmakers on both sides of the aisle, who argue it goes against congressional intent. Treasury Secretary Steven Mnuchin has defended the guidance, saying that businesses cannot “double dip.”
The groups pushed back against arguments supporting the guidance.
“Congress intended for the loan forgiveness under PPP to be tax-free. The IRS notice reverses that position and eliminates any benefit, let alone a double benefit,” the groups wrote.
The groups also said that denying tax deductions for expenses paid with PPP loans would be burdensome for businesses that have experienced financial hardship during the pandemic. They said the IRS’s position represents a tax increase of about $100 billion.
Source: The Hill