Senate Finance Committee Chairman Chuck GrassleyCharles (Chuck) Ernest GrassleyColorado governor, partner take a look at constructive for COVID-19 McConnell halts in-person Republican lunches amid COVID-19 surge Rep. Rick Allen checks constructive for COVID-19 MORE (R-Iowa) and rating member Ron WydenRonald (Ron) Lee WydenTwo extra parting pictures from Trump aimed squarely at disabled staff On The Money: Push for student loan forgiveness places Biden in tight spot | Trump is wild card as shutdown fears develop | Mnuchin asks Fed to return 5 billion in unspent COVID emergency funds Grassley, Wyden criticize Treasury steering regarding PPP loans MORE (D-Ore.) on Thursday criticized new Treasury Department steering concerning the tax therapy of bills associated to Paycheck Protection Program (PPP) loans, asking the division to revisit its method.
“We encourage Treasury to reconsider its position on the deductibility of these expenses, and the timing of those deductions, to provide relief to the small businesses that need it most,” Grassley and Wyden said in a statement.
The PPP is a coronavirus relief program under which small businesses received loans that can be forgiven if the proceeds are used to maintain payroll. The legislation that created the PPP includes a provision stating that the loan forgiveness is not considered taxable income.
Under guidance Treasury and the IRS issued late Wednesday, if a business hasn’t had its PPP loan forgiven at the end of the year but expects the loan to be forgiven in the future, the company cannot deduct expenses related to the loan, even if the business hasn’t yet filed for forgiveness.
The guidance follows a notice Treasury and the IRS issued in the spring stating that expenses associated with loan forgiveness under the PPP are not deductible.
Treasury Secretary Steven MnuchinSteven Terner MnuchinMonumental economic challenges await Biden’s Treasury secretary Biden’s Treasury pick will have lengthy to-do list on taxes On The Money: Initial jobless claims rise for 2nd week | Dow dips below 30K | Mnuchin draws fire for COVID-19 relief move | Manhattan DA appeals dismissal of Manafort charges MORE said in a statement Wednesday that the new guidance gives taxpayers more clarity.
“These provisions ensure that all small businesses receiving PPP loans are treated fairly, and we continue to encourage borrowers to file for loan forgiveness as quickly as possible,” he added.
But Grassley and Wyden said in their statement that the new guidance, along with the guidance issued earlier this year, goes against lawmakers’ intention that small businesses receiving PPP loans be able to take deductions for ordinary and necessary business expenses.
“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,” the senators mentioned. “Small businesses need help maintaining their cash flow, not more strains on it.”