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 of True North Data (www.truenorthdm.com), a data strategy, analytics and governance 2.0 data consultancy. Peter Kapur is an Industry leader, Innovator, speaker and product advisor to data companies and is a former ddata executive with AIG, Depository Trust Co., Credit Suisse, Goldman Sachs & Deutsche Bank. Peter’s True North is about focusing on delivering business value thru innovative solutions using a collaborative approach to bring data producers and consumers into the eco-system as equal partners to solve business critical initiatives such as data privacy, data analytics and digitization.
![Thumbnail[RSE][LauraKersey].jpg](https://arizent.brightspotcdn.com/dims4/default/d098c91/2147483647/strip/true/crop/125x170+0+0/resize/1024x1392!/format/webp/quality/90/?url=https%3A%2F%2Fsource-media-brightspot.s3.us-east-1.amazonaws.com%2Fcb%2F0c%2F0b6e356e4b12a339190d15d94333%2Fthumbnail-rse-laurakersey.jpg)
Laura Kersey is responsible for managing the National Council on Compensation Insurance (NCCI)’s relationships with insurance industry trade associations and state legislative organizations.
Prior to joining NCCI in 2011, Kersey worked for the American Insurance Association (AIA), first as counsel in AIA’s law department and then as assistant vice president for government relations in its Northeast regional office.
Pat Bermingham is CEO at Adflex.
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.