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.
Glenn Hall is Executive Vice President, Information Services and oversees Arizent's editorial and subscription sales teams. Over the course of three decades, Hall has held senior leadership roles in journalism, digital content strategy, and business information services. Before joining Arizent, he was a Partner and Executive Editor at Brunswick Group, where he led global content initiatives that helped business leaders navigate complex issues, including cybersecurity, sustainability, and regulatory change. Previously, Hall served as Global Chief Editor of Dow Jones Newswires and Head of Professional News at The Wall Street Journal, overseeing the WSJ Pro and C-Suite news, data and research services. His career also includes top editorial roles at MarketWatch, TheStreet, The Orange County Register, and Bloomberg, where he played a pivotal role in shaping business intelligence products, expanding audience engagement, and developing innovative research and data-driven content offerings.
Gary Carrai serves as chief product officer with LPL Financial.
Earlier in his career, he was a financial advisor with Lydian Wealth Management, a multifamily office based in the Washington, D.C. area.
Kelly leads strategic partnerships, industry alliances, and go-to-market strategy for Vertafore's insurance carrier and MGA suites of products. Maheu's career in insurance and financial services spans nearly 15 years and includes serving as Vice President of Professional Publishing and Training at The National Underwriter Company and as Executive Director at The National Association of Independent Life Brokerage Agencies (NAILBA).
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.