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.
Drew Fekete is Underwriting Manager, Miscellaneous Medical, at Beazley. He joined Beazley's Miscellaneous Medical & Life Sciences team in 2018 as the sole west coast Allied Health underwriter with a focus on growing their presence in the region. Using Beazley's Medical Professional product as well as its pioneering Virtual Care form, Drew developed relationships and marketed throughout Southern California, growing his book of business with creative coverage solutions on some of the industry's most complex and difficult-to-place insureds. In 2019, Drew relocated to Denver to assist in the buildout of Beazley's newest office.
Anna is a Managing Director in Accenture's Insurance practice, based in Milan, and the Executive Sponsor for the Qorus-Accenture Innovation in Insurance Awards. She leads transformation programs for major insurance companies, focusing on data and AI, adoption of digital platforms for managing new risks and the regulatory challenges of the Italian market. Anna has a master's degree in Management Engineering and Financial Management from the Polytechnic University of Turin and a specialization in Financial Innovation Management from SDA Bocconi.
Brad Rapking is the portfolio manager Aptus Capital Advisors responsible for equity research, portfolio reviews and assisting in fund trading and operations. He is a CFA Charterholder and a member of the CFA Institute and CFA Society of Alabama.
Prior to joining Aptus, Brad was a research analyst at Driehaus Capital and a research analyst and equity trader at Opus Capital Management. Brad is a member of the CFA Institute and the CFA Society of Alabama. He graduated from Xavier University with a BSBA in finance.
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.