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.
John Arensmeyer is an economics expert and former small- business owner who is the founder and chief executive of Small Business Majority.
Fatemeh Khatibloo is a principal analyst at Forrester Research. Fatemeh serves B2C marketing professionals, with a focus on the shifting global consumer data ecosystem. She helps marketers navigate the complex connections between privacy, trust, and ethical data use, including the practices and vendors that can help them bridge the privacy/personalization paradox. Her seminal research on personal identity management (PIDM) describes how consumers will soon manage the sharing of their personal data with each other and with businesses. Her report "Adaptive Intelligence" further defines a framework for privacy-compliant data sharing between organizations to gain insight, reduce risk, and increase profitability.
Fatemeh focuses on privacy, identity, customer insights (CI) services, CI strategy, data monetization, data sharing, adaptive intelligence and consumer preference.
Previous Work Experience
Prior to joining Forrester, Fatemeh was principal of Times Two Marketing, where she built social and multichannel marketing programs designed to engage consumers, drive brand loyalty, and deliver relevant, actionable data to her clients. Prior experience at Binger Catalog Marketing, Abacus, and HagginGroup (now Epsilon) provided her with a deep understanding of the challenges and opportunities facing multichannel organizations across a spectrum of channels, market verticals, and disciplines. She has also held multichannel marketing positions on the client side, with firms like The Flax Companies and The Sharper Image.
Fatemeh is a member of the International Associate of Privacy Professional (IAPP) and is a Certified Information Privacy Manager (CIPM). She has served as a judge for the Multichannel Merchant Awards and the ECHO Awards.
Education
Fatemeh studied journalism at The George Washington University.
Mr. Allburn is a 20+ year industry veteran and President/CEO of DataDelta, Inc. which provides CDI-MDM consulting and patent-pending, vendor-neutral match accuracy analysis software used to analyze & optimize the match accuracy of Data Quality, CDI & MDM vendor match engines including custom, in-house match engines. Mr. Allburn has held senior technical and strategic management positions in the fields of Database Marketing, Data Quality, CDI and MDM for industry leading companies such as Metromail / Experian, the IBM TJ Watson Research Center, Firstlogic and Group 1 Software. During his career Mr. Allburn has been responsible for over 200 successful CDI projects in banking, telecom, catalog and other industries. He is an international speaker and instructor for CDI-MDM Workshops, a contributor to DM Review and other publications, and a recognized Expert Witness in the Data Quality and CDI-MDM industries.
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.