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.
Founder and Director of the IoT Insurance Observatory, and Global Ambassador of the Italian InsurTech Association.
Internationally recognized as an insurance industry strategist and a world-renowned authority on InsurTech, he has worked in 20 different international insurance markets. Co-author of a book, 18 papers and more than 100 thought-leadership articles on insurance innovation. He has been invited to speak at more than 200 events across the world.
Accomplished business leader who co-founded Archimede, a SPAC that raised €47M and acquired the Italian insurance carrier Net Insurance in 2018. As board member and chairperson of the innovation advisory board, played a key role in the success of the listed combined entity. This journey resulted in Poste Italiane's acquisition of Net Insurance in May 2023, generating a 120% return for SPAC investors.
Before creating Observatory and co-founding Archimede, he spent 11 years in Bain & Company. He received his Business Administration degree from Bocconi University, also executive program certificates in IoT and data monetization from the MIT Sloan School of Management.
Rachel Lin is a co-founder and CEO of SynFutures, a decentralized derivatives trading platform. She previously worked in the global markets division at Deutsche Bank, where she specialized in derivatives, and is also a founding partner of Matrixport, one of Asia's largest crypto neobanks.
The 20 finalists will be celebrated during a dedicated recognition dinner at the DIGITAL BANKING conference in Florida this June, where one top winner will be named
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.