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.
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Christian Greyenbuhl, Chief Financial Officer at Ministry Brands, is a high performing finance leader who brings operations and finance experience through a variety of senior roles in global public and private companies. He was most recently responsible for leading Xplor Technologies' FP&A, M&A, and Investor Relations functions. While at ADP he was the General Manager of Globalview North America; prior to which he held various senior finance leadership roles including SVP Investor Relations. He is both a Chartered Accountant with the Institute of Chartered Accountants of Scotland as well as a C.P.A. Christian has lived on four continents, speaks three languages, and currently lives in Georgia with his wife, four children and their Golden Retriever, Leo.
Phillip Toews is the CEO and a portfolio manager of the Toews Funds and Toews Agility Shares ETFs. He is a co-founder of the Behavioral Investing Institute and has appeared on CNBC, Bloomberg TV/Radio, Fox Business News and is quoted frequently in financial publications. His most recent book is "The Behavioral Portfolio: Managing Portfolios and Investor Behavior in a Complex Economy" (Harriman House 2025).
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.