CEO DATELINE - Associations seek tax deductibility of expenses paid for with PPP loans
CEO DATELINE - Associations seek tax deductibility of expenses paid for with PPP loans
- December 4, 2020 |
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WILLIAM EHART
More than 560 national, state and local associations have sent a letter to congressional leaders asking them to prevent the IRS from collecting additional taxes on organizations that received forgivable Paycheck Protection Program loans.
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According to the letter, forgiven loan amounts were to be excluded from the gross income of loan recipients under the PPP legislation. Yet an IRS notice contradicts that, the letter says, by disallowing deductions for expenses—such as payroll—paid for with PPP loan proceeds.
"The effect of this ruling is to transform tax-free loan forgiveness into taxable income, raising the specter of a surprise tax increase of up to 37 percent on small businesses when they file their taxes for 2020," the letter states.
"Notice 2020-32 clearly circumvents the original intent of Congress with regard to the PPP program," American Institute of CPAs Vice President of Taxation Edward Karl said in a Dec. 3 statement. "The COVID-19 pandemic has had a severe economic impact on our country and now, more than ever, thousands of businesses need a little extra relief to help them survive."
Signatories of the letter, in addition to AICPA, include the U.S. Chamber of Commerce, the National Association of Realtors, the National Association of Manufacturers, the National Retail Federation, the National Beer Wholesalers Association and the Association of Equipment Manufacturers.
As part of the Coronavirus Air, Relief, and Economic Security Act, the Small Business Administration guaranteed $525 billion in PPP loans to more than 5 million small businesses and other qualifying organizations.
"At the (beginning) of the COVID-19 pandemic, Congress responded with speed, cooperation and an eye to preventing the worst potential economic outcomes. We ask that you bring that same spirit of urgency and cooperation during this ‘lame duck' session to prevent an avoidable catastrophe for millions of small businesses that, without congressional action, will face a surprising and, in many cases, insurmountable tax bill next year," the letter states.
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