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.
Matt VanderZwaag is director of product development at US Signal.
Mr. Lockard joined as co-founder knowing the power of a broker-dealer combined with distribution reach for public finance opportunities. Prior to 280 CapMarkets, Tom Lockard worked at Fundrise, a pioneering fintech company specializing in commercial real estate.
Previously, Tom was a Managing Director at Stone & Youngberg and a member of the company’s Executive committee and Board of Directors. Mr. Lockard served as a Public Finance Banker specializing in California municipal finance, special tax, assessment, tax increment, housing, utility, nonprofit, general obligation, and lease. Over his 30-year career at Stone & Youngberg Mr. Lockard structured more than 500 municipal bond issues representing more than $6 billion.
Mr. Lockard earned degrees from the University of Pennsylvania, Wharton School, Claremont Graduate University, and Stanford University.
Keith Smith is CEO of Payability.
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.