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.
Patrick Bermingham is CEO of Adflex.
With Forrester since July 2005, Diego primarily contributes to and advises on Forrester's offerings for Application Development & Delivery Professionals. He partners with Forrester's global application leaders and is a leading expert on SDLC processes and practices, covering topics such as Agile development, Agile and Lean transformations, Agile development sourcing strategies and services, Agile testing practices and tools, DevOps, and software testing and quality, with a key focus on systems of engagement. Diego also covers software delivery metrics, artificial intelligence, and open source governance.
His 28 years of industry experience, in addition to application development, allow him to give expert advice on change management programs for optimizing the overall modern application delivery process, execute technology management assessments, review technology management strategies, and make comparisons. He also has experience in complex mission-critical project and client engagement management.
Previous Work Experience
Prior to joining Forrester, Diego held international management positions covering various roles, such as director consultant at Meta Group and head of Agile product development for advanced reuse methods and technologies at Quartersoft. He was also regional VP and director for consulting at Genesis/Iona, where he helped many clients transition to distributed applications. He also worked as an enterprise architect and project/product manager, participating in various pan-European projects. He started out as a software engineer, developing AI tools and early graphical user interface technologies at Olivetti.
Diego has also been very active in global open software standards consortia such as OMG, contributing to the early specifications of middleware standards such as CORBA and model-driven architecture. He has been a frequent speaker and panelist at many European conferences on software development.
Diego has published various research reports on open source, software reuse, semantic Web, and object technology, including the AI book Practical Experience in Building Expert Systems.
Education
Diego received a master's degree in computer science from Pisa University in Italy, and he specialized in artificial intelligence through on-site courses at Stanford University and SRI Palo Alto during a two-year working internship with Olivetti in the US.
David Flower is chief executive officer at VoltDB.
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.