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.
LouAnn Bala, MSN, RN, is VP and chief nursing officer for clinical solutions for GetWellNetwork, a precision engagement healthcare company.
Robert Lajdziak is the Insurance Business Consultant for the Insurance Practice at J.D. Power. He is responsible for the company’s syndicated research studies on both personal Home and Auto insurance in North America as well as Life insurance. He is also responsible for developing research-based solutions that drive measurable results for clients within the insurance industry in North America. His primary focus is on improving product quality, while building client relationships and delivering actionable insights.
Lajdziak joined J.D. Power in 2012 and has served in several positions in the Services Industries-Americas Practices, in both Financial Services and Insurance, including Senior Wealth Management Analyst, Research Supervisor, Research Specialist and Research Associate prior to joining the Insurance Practice team.
During his tenure at J.D. Power, Lajdziak has contributed to several thought leadership pieces—which were covered by trade publications and at industry seminars—regarding such topics as shopping with online chat; self-service and the future role of agents; transparency of commissions and fees; goals-based investing; and women in the wealth management sector.
Mr. Lajdziak earned a bachelor’s degree in marketing-management from Hillsdale College in Hillsdale, Michigan.
Greg Rivera is a senior vice president at Accruent, a global software company that helps companies optimize all stages of real estate, facilities and asset management. He has responsibility for the company’s retail industry, and also leads its big data and lease accounting initiatives.
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.