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.
Wolf Ruzicka is chairman of EastBank Technologies. He has been a leader in the technology industry for more than two decades. Since joining EastBanc Technologies in 2007, originally as CEO, he has overseen the organic growth of the company taking it from 35 employees to over 150.
Lynne Doughtie is U.S. chairman and CEO of KPMG LLP. She also is a member of KPMG’s Global Board and Executive Committee. From 2011 to 2015, Lynne served as vice chair of KPMG’s Advisory business, establishing Advisory as the firm’s fastest growing business. She also oversaw the expansion of KPMG’s capabilities in innovative services and solutions, including information security, strategy, digital/mobile, and transformation. Lynne began her career in KPMG’s Audit practice in 1985 and has served in a number of national, regional, and global leadership roles, including lead partner for several of KPMG’s major clients. Lynne is a governing board member for the Center for Audit Quality and a member of The Committee of 200. She also serves as a board member for NAF, the Partnership for New York City, and LUNGevity.
Alexandre Bilger is president and chief executive officer at Sinequa. With over eighteen years of experience as a top executive within enterprise software, Alexandre has a proven ability to build and lead high performing organizations. In addition of being a thought leader, he is passionate about cutting edge technologies i.e. artificial intelligence, machine learning, cognitive computing and NLP. Prior being appointed CEO of Sinequa, Alexandre co-founded and was chief technology officer at E-Front, a data-processing software vendor specializing in the financial industries. He started his career as a lead architect at NAT System, a leading client server development tools vendor.
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.