Small businesses that manage to get their Paycheck Protection Program loans forgiven may find themselves losing valuable tax breaks, according to new guidance from the Internal Revenue Service.
Companies that qualify for loan forgiveness under legislation Congress approved won’t be able to deduct the wages or other businesses expenses they paid for using the loan, according to an IRS notice published Thursday.
“This treatment prevents a double tax benefit,” the agency said in the notice. “This conclusion is consistent with prior guidance of the IRS.”
The guidance clarifies a point of confusion in the $670 billion small business loan program to help businesses struggling as the coronavirus has brought the economy to a standstill. The law states that the forgiven loan won’t be taxed, but didn’t specify whether companies could still write off the expenses they covered with that money.
Kate Mitchell is the chief executive officer at Edge Intelligence. Prior to that she was CEO of CopperEye. She possesses nearly three decades of wide-ranging, customer-facing executive success with such database leaders as Oracle and IBM. Prior to joining CopperEye, Mitchell was senior vice president of marketing and business development for SeeBeyond Technology Corporation, where she worked with such customers as Target, barnes&noble.com, JP Morgan Chase and General Motors to grow revenues 400 percent in her four-year tenure and establish SeeBeyond as the global leader in business integration. Contact her at kate.mitchell@edgeintelligence.com.
Andrew Hewitt is an analyst at Forrester Research serving infrastructure and operations professionals. Andrew’s research focuses on enterprise mobility and how organizations can create better mobile experiences for employees that, in turn, improve customer outcomes. He is a contributor to Forrester's employee experience research, and his key coverage areas include enterprise mobility, unified endpoint management, enterprise mobility management, and bring-your-own-device (BYOD). He also looks at how companies can employ IoT technologies in the workplace to improve employee experience and productivity.
Previous Work Experience
Prior to his role as analyst, Andrew served as a researcher on Forrester's infrastructure research team, focusing on enterprise mobility and IoT-connected smart buildings. Before that, he was a senior research associate; he spent his time researching the cloud and hyperconverged infrastructure market. Before joining Forrester, Andrew worked as a help desk assistant for the Aspen Institute in Aspen, Colorado.
Education
Andrew graduated summa cum laude from The George Washington University in Washington, D.C. with a B.A. in international relations.
Dave Dyell is president and CEO of Jellyfish Health.
The tax code permits companies to write off businesses expenses, such as wages, rent and transportation expenses, but generally doesn’t allow write-offs for tax-exempt income.
The ruling adds to the list of stumbling blocks facing businesses as they try to qualify for the Paycheck Protection Program loans.
Small businesses have reported technical issues in trying to apply for the funds, which restarted Monday after the first round of funding ran out after just 13 days.
The program, run by the Small Business Administration, provides funds to cover eight weeks of payroll costs and the loans are forgiven if the employers keep workers on the job or quickly rehire laid-off workers.