Senate Finance Committee Chairman Chuck Grassley (R-Iowa), Senate Finance Committee Ranking Member Ron Wyden (D-Ore.), and House Ways and Means Committee Richard Neal (D-Mass.) sent a letter to Treasury Secretary Steven Mnuchin urging him to reverse the Treasury’s and the IRS’s position on forgiven loans from the Paycheck Protection Program (PPP). Last week, the IRS issued guidance that states that normally deductible expenses, such as wages, would be made non-deductible if covered by loans from the PPP.
“Providing assistance to small businesses, only to disallow their business deductions as provided in Notice 2020-32, reverses the benefit that Congress specifically granted by exempting PPP loan forgiveness from income,” the letter states. “This interpretation means that whatever income a small business is able to produce will be taxed on a gross basis to the extent of the loan forgiveness, leaving substantially less after-tax capital for the swift economic recovery we hope is on the horizon.”