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.
Jennifer King is Vice President – Customer Experience Service and Quality and Enterprise Project Management Office (EPMO) at Boston Mutual Life Insurance Company.
King oversees Customer Experience Service (which includes Reconciliation, Control & Reporting and Policy Holder Administration), Quality, Change Management, Implementation, and the EPMO areas in the company's Customer Experience, Innovation, Projects and Technology Strategic Business Center. She is responsible for the teams that facilitate the policyholder customer journey, and supports the strategic alignment of the EPMO with the voice of the customers and the company's needs. As leader of the EPMO, Policy Holder Administration, and Quality Center teams, she aligns project and operations resources to optimize customer and employee experience. Ms. King also serves as the Business Sponsor for BML Forward, the new policy administration system in development at Boston Mutual Life.
Ms. King joined Boston Mutual Life in 2020 as Director – Strategic Project Management Office. She was appointed to lead the new Policyholder Administration and Quality Center teams in 2022 after being promoted to Vice President – EPMO in 2021, which were renamed under the banner of Customer Experience and Quality in early 2023.
Prior to joining Boston Mutual Life, Ms. King holds 20 years of experience in project and program management within the financial services industry. Previously, she served as Finance & Risk Infrastructure & Business Solutions (FRIBS) Program Manager, Corporate Finance Vice President at State Street Bank, and held several positions during her tenure at the company from when she joined in 2007. Prior to State Street Bank, she worked at Investors Bank and Trust, where she began her career in 1996.
Shai Gabay is CEO and co-founder of Trustmi.
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.