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.
Kerry Ryan, CPWA, is senior director of financial services industry marketing at Seismic. She leads marketing for asset management, wealth, banking, insurance and industry ecosystem providers at Seismic. Previously, she has held roles at Salesforce, Citi, Legg Mason and other companies.
Alec Miloslavsky has more than 20 years of experience in technology and entrepreneurial leadership. Prior to EIS, he co-founded Exigen Services (now Return on Intelligence), a company that has grown to revenues exceeding $70 million. Earlier in his career, Alec co-founded Genesys Telecommunications Laboratories and served as CTO from its inception where he helped lead the company to its successful initial public offering and subsequent sale to Alcatel for $1.9 billion in 1999. Following the acquisition, he played a key role with the integration of Genesys into the Alcatel organization.
As Globant's Chief Operations Officer, Patricia is responsible for sustainably growing the company's operations, and enabling it to execute its strategy with maximum value for clients and stakeholders. She also focuses on turning strategy into actionable targets for growth, helping to implement organization-wide goal setting and performance management. She is an advocate for having more women in management positions and recognizing the gender gap in the tech industry, for this reason, she has actively participated in Globant's Women that Build program.
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.