PPP Expense Deductions – Urgent Update

by | Dec 10, 2020 | News, Policy Updates

Overview

Small businesses may be hit with a surprise tax bill related to Paycheck Protection Program (PPP) loans, unless Congress acts soon.

Outlined in a coalition letter from national trade associations, Congress intended in the Coronavirus Aid, Relief, and Economic Security (CARES) Act for recipients of forgiven PPP loans to be able to deduct otherwise-deductible expenses associated with those loans for tax purposes.

IRS has contradicted congressional intent, as it has declared that borrowers who expect their PPP loan to be forgiven cannot deduct those expenses on their federal tax returns. This is resulting into a surprise tax increase of up to 37 percent for these small businesses when they file their taxes for 2020.

What’s Next?

We’re reaching out to our officials to learn about their support for bills introduced in the U.S. Senate as S.3612 and in the U.S. House of Representatives as H.R. 6821 or H.R. 6754 that would ensure that PPP loan recipients are provided the full benefits intended in the CARES Act.

This legislation will ensure that the receipt and forgiveness of coronavirus assistance through the PPP does not result in an unexpected and burdensome tax cost for organizations that complied with the terms of the PPP. Passing this legislation will allow small businesses more certainty as they focus on year-end business planning that is especially important in these challenging economic times.

Small businesses who secured a PPP loan need to raise concern with elected officials. Only our Federal Officials can act to reverse the IRS decision. Outreach from local recipients can aid in Congress’ action on the bills.

Please note: Congressman Smucker is a co-sponsor of H.R. 6821 and has been advocating for this change. YCEA has reached out to Congressman Perry, Senators Casey and Toomey to inquire on their support for the legislation listed above.

Suggested Outreach Text

To assist in your outreach, there is sample text below that is available for you to copy and use when reaching out to your elected officials. Feel free to customize the message for your own circumstances or send it as is.

Here is a helpful way to find your elected officials contact forms. Click here to review the list of Federal Officials representing York County. Senators Bob Casey and Pat Toomey represent all Pennsylvania’s. Congressman Perry represents the 10th Congressional District – see map. Congressman Smucker represents the 11th Congressional District – see map.

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 can 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.

I ask that you contact your Senate and House leaders to ensure that PPP loan forgiveness deductibility language is passed by Congress before the end of the year.


Questions?

If you have any questions, please reach out to David Gonzalez, Advocacy Manager for YCEA at dgonzalez@yceapa.org. For all tax planning, please be sure to contact your accountant.

 

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