11/25/20 – Letter to Congress to Fix PPP Tax Deduction
Last week, the IRS and Treasury came out with regulations that confirmed there would be no tax deduction for any expense used to forgive Borrower’s PPP loans. The new regulations went on to say that the income will need to be reported in the current tax year if the Borrower reasonably expects that the loan will be forgiven, regardless of whether a forgiveness application is submitted in the current year or not. What this practically means is every Borrower’s taxable income will be increased in the current tax year by the amount of their forgivable PPP loans and will be taxed at ordinary income tax rates. We believe these new rulings clearly contradict congressional intent and urge you to reach out to your members of Congress to reverse these actions. We have provided a sample letter below as well as a link to find your representatives’ email addresses. Please feel free to reach out to us with any questions you may have.
I am writing you today to strongly encourage you to include in any year-end, must-pass legislation language that will allow millions of small business owners a tax deduction for expenses paid with Paycheck Protection Program (PPP) forgiven loans.
Bills have been introduced in the Senate (S.3612 sponsored by Senator Cornyn (R-TX)) and in the House (H.R. 6821 sponsored by Representative Holding (R-NC) or H.R. 6754 sponsored by Representative Fletcher (D-TX)) that would ensure that PPP loan recipients are provided the full benefits intended in the CARES Act.
All Americans have been impacted by the COVID-19 pandemic, and your actions in Congress have provided much-needed assistance to millions of struggling businesses.
It is important that you ensure that these same businesses are not also subject to additional and unexpected taxes as they continue to struggle to survive.
Borrowers who are eligible for forgiveness of their PPP loans have spent the funds as the program directed. Unless they are allowed to deduct these expenses, they may be forced to spend additional funds to pay taxes on the loan proceeds – funds they may not have. Passing this legislation as quickly as possible will provide small business owners more certainty as they focus on year-end business planning that is especially important in these challenging economic times.