The $900 billion coronavirus relief package hammered out by federal lawmakers includes language to ensure that small businesses who borrowed money under the Paycheck Protection Program can deduct expenses covered using the program’s forgivable loans. See text of bill.
The IRS released a notice on April 30 disallowing the deduction of expenses paid with PPP loan proceeds if the loan is forgiven. Last month, the IRS issued a revenue ruling stating that those expenses cannot be deducted if the loan is forgivable, whether or not the recipient has applied for forgiveness.
The rulings took small business owners who had availed themselves of the program by surprise, with many saying the unexpected tax liabilities could force them to close their doors. See prior coverage: “‘It’s going to kill us:’ Small business owners face surprise tax bite in PPP loan program”
On Dec. 9, a bipartisan coalition of 179 members of the House of Representatives, among them NY-1 Rep. Lee Zeldin, asked House leadership to include “a fix” in the new coronavirus assistance package to allow Paycheck Protection Program loan recipients to take normal business expense deductions paid with the loan proceeds.
Bipartisan leadership of the House Ways and Means Committee and the Senate Finance Committee had already issued public statements saying that the IRS ruling was contrary to Congressional intent for the PPP, which was part of the CARES Act.
“The Paycheck Protection Program has helped provide relief to so many of these small businesses, which have either been shut down by the government or are otherwise struggling, and we must ensure that the small business owners who desperately need this funding to survive do not go under thanks to a surprise tax bill caused by the very relief that’s supposed to keep them afloat,” Rep. Lee Zeldin said in a statement this afternoon.
Since March, over 5 million PPP loans have been made to businesses in all fifty states.
Without Congressional action, small businesses would be liable for an estimated $120 billion or more in taxes on forgivable PPP loans, according to the lawmakers’ letter.
We need your help.
Now more than ever, the survival of quality local journalism depends on your support. Our community faces unprecedented economic disruption, and the future of many small businesses are under threat, including our own. It takes time and resources to provide this service. We are a small family-owned operation, and we will do everything in our power to keep it going. But today more than ever before, we will depend on your support to continue. Support RiverheadLOCAL today. You rely on us to stay informed and we depend on you to make our work possible.