Business groups push Congress to change tax treatment of forgivable PPP loans
Can Congress find ‘middle ground’ on stimulus, unemployment benefits?
Washington Examiner chief political correspondent Byron York argues coronavirus stimulus negotiations have become a “classic Washington standoff.”
Hundreds of business organizations signed onto a letter asking Congress to address the tax treatment of forgivable PPP loans as lawmakers negotiate another round of stimulus in the nation’s capital, which may include provisions allowing some borrowers to take out a second loan.
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A group of 170 organizations, including the American Institute of CPAs, sent the letter to House Speaker Nancy Pelosi and Senate Majority Leader Mitch McConnell this week, asking Congress to allow deductions of expenses for items paid for with the borrowed money.
“When the PPP was adopted as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, [P.L. 116-136,] Congress made clear that any loan forgiveness under the program would be excluded from the borrower’s taxable income,” the letter read, claiming that businesses will face an extra $100 billion tax burden if the treatment is not adjusted.
WILL NEW STIMULUS PACKAGE CHANGE PPP LOAN TAX DEDUCTION GUIDANCE?
As previously reported by FOX Business, the IRS issued guidance earlier this year preventing business owners who have their PPP loans forgiven from claiming tax breaks on otherwise deductible expenses if they were paid for using the government aid.
The loans are tax-exempt, so the guidance was based on existing law, which generally aims to prevent people from receiving a “double tax benefit.”
Congress has the power to override the IRS’ decision, which received some pushback from lawmakers, who have indicated that it is not what Congress intended when crafting the legislation.
The allowance of the deductions was not included in the HEALS Act, detailed by Republicans last week.
MNUCHIN BACKS IRS ON CORONAVIRUS PPP LOAN TAX BREAK DENIAL, ‘BASICALLY TAX 101’
But it still has a chance of being included in potential legislation. It was part of the Democratic-sponsored HEROES Act that was approved by the chamber in May.
A number of Republicans have expressed support for changing the policy.
For example, Sen. Chuck Grassley, a Republican from Iowa who is the Senate Finance Committee chairman, disagreed with the IRS’ decision, saying the issue was discussed when PPP was being developed.
However, U.S. Treasury Secretary Steven Mnuchin supported the IRS’ guidance in May, saying it is “basically tax 101.”
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Lawmakers are discussing provisions to allow some small business owners to take out a second PPP loan, though the policy may be targeted at the smallest businesses that have taken the hardest hit during the pandemic.
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