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.
Paul Burrin is the Head of Insights and Evangelism, HR and Payroll at Sage.
As a co-founder and managing director of BrandCulture, Eric leads BrandCulture's strategy practice. Across his career, Eric has worked with big and small organizations alike to put their respective best feet forward through strategic branding, naming, print and digital media.
Prior to BrandCulture, Eric served in a variety of client- and agency-side executive positions, including Head of Corporate Affairs and Head of Strategic Marketing for LRN Corporation and Senior Vice President at global branding and interactive media consultancy Siegel + Gale. Earlier, Eric was an attorney with Wilson Sonsini Goodrich & Rosati in Palo Alto, where he specialized in representing technology clients.
Eric is an honors graduate of Harvard Law School, holds Bachelor's and Master's degrees from Stanford University where he was elected to Phi Beta Kappa. He also studied at St. Catherine's College, Oxford and the University of Urbino in Italy.
Jon is a pioneer in wedding the disciplines of strategic branding and culture development united in Shared Purpose. From the time he had the prescience to purchase the domain "BrandCulture.com" back in the last Millennium, Jon cultivated the idea of forming a new kind of agency that integrates brand and organizational development as the flip sides of the same coin. With BrandCulture now in its second decade, Jon takes singular satisfaction in finding that the world has, at long last, come around to his point of view.
Jon has previously held senior strategic and business development roles within Wolfgang Puck, Siegel + Gale, Imagination and Caribiner International, where his clients have included BMW, BEA Systems, Ford, The Coca-Cola Company, Holiday Inn Worldwide, Jiffy Lube, Lexus, Motorola, Philips Electronics and other global organizations.
Jon serves on the board of the Michael Hoefflin Foundation and holds a BS in Finance from the University of Wisconsin La Crosse and an MS in Real Estate and Urban Affairs from J. Mack Robinson College of Business at Georgia State University.
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.