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.
David Tobias serves as the General Manager of Insurance at Nearmap. Previously, he co-founded Betterview, the leading Property Intelligence Platform for P&C insurers, which was acquired by Nearmap in December 2023. David plays a pivotal role in driving the insurance market strategy for the Betterview Platform, enabling insurers to effectively identify and mitigate risk, enhance operational and inspection efficiency, and build a more transparent customer experience throughout the policy lifecycle.
Before founding Betterview, David was instrumental in scaling Research Specialist Incorporated, an insurance loss control company. Under his leadership, the company expanded to conduct over 30,000 inspections annually with a network of more than 500 inspectors across the United States. Research Specialist Incorporated was later acquired by Alpine Intel. A veteran of the insurance industry and property inspection business, Tobias is focused on finding actionable, usable solutions to insurance-specific problems.
John Bowers is the Actuarial Product Director from RNA Analytics.
Craig West is founder and chairman of Capitaliz, a digital platform for exit planners and advisors to deliver scalable business valuation, succession and exit planning outcomes.
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.