Rep. Chip Roy, R-Texas, wrote a letter to Treasury Secretary Steve Mnuchin demanding that he stop “sticking it to small businesses” by denying deductibility for Paycheck Protection Program loans.
“Small businesses are getting destroyed in America,” Roy wrote in the letter, which was obtained by FOX Business. “Many big businesses are making tons of money. Stop sticking it to small businesses by denying the intended deductibility of business expenses paid with forgiven PPP loans when the program is a public policy designed to make them whole after having their livelihoods taken by the force of government. Moreover, please order Treasury to get on with completing loan forgiveness ASAP so banks can be free to lend. That was the whole point."
The Small Business Administration’s PPP provided loans that could be forgiven so long as the money was used to cover expenses such as payroll, rent and utilities, in appropriate proportions.
FORGIVEN CORONAVIRUS PPP LOAN RECIPIENTS INELIGIBLE FOR TAX DEDUCTIONS
Tucked into Congress’ pending $908 bill COVID-19 relief bill is a provision allowing businesses to deduct expenses from the government’s Paycheck Protection Program, but one administration official standing in the way is Mnuchin.
The CARES Act, which funded the PPP, originally said such loans weren’t included in gross income, but the IRS determined after the fact that expenses paid with it were not deductible.
PPP deductibility has broad bipartisan support, and was included in the House’s HEROES Act.
The IRS and the Treasury issued a statement saying that since businesses aren’t taxed on the proceeds of a forgiven PPP loan, the expenses aren’t deductible.
“The money coming in the PPP is not taxable. So if the money that’s coming is not taxable, you can’t double-dip,” Mnuchin said on FOX Business. “You can’t say you’re going to get deductions for workers that you didn’t pay for.”
BUSINESS GROUPS PUSH CONGRESS TO CHANGE TAX TREATMENT OF FORGIVEABE PPP LOANS
In May, Sen. John Cornyn and a bipartisan group of senators, including Sen. Chuck Grassley, R-Iowa, chairman of the Finance Committee, and ranking member Ron Wyden, D-Ore., introduced the “Small Business Expense Protection Act,” which would have clarified that businesses that receive a loan from the PPP, and the loan is forgiven, can deduct expenses paid for with the money.
Cornyn’s legislation was consistent with Congress’s intent with the CARES Act and therefore doesn’t cost the Treasury any funds, according to a letter from the Joint Committee on Taxation.
A December letter from over 700 business groups said that not allowing deductibility amounted to a “surprise” tax increase of up to 37 percent on small businesses when they file taxes for 2020.