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.
Dr. John Alchemy, MD, QME, and Dr. Anne E. Weilepp, MD, are a husband-and-wife medical team and founders of RateFast, a workers' compensation predictive data company in Northern California. Both are specialty boarded and trained at UC San Diego. They hold seven total patents, with more patents pending, in data analytics and impairment rating, including the development of the Variable Thread Analytic Computation (VTAC) model for multilayered logic calculations.
Javier de la Torre is Founder and Chief Strategy Officer at CARTO. One of the pioneers of location intelligence, Javier founded the company in 2012 with a vision to democratize data analysis and visualization. Under his leadership, CARTO has grown from a groundbreaking idea into one of the fastest-growing geospatial companies in the world.
CARTO empowers organizations to harness the power of spatial data for everything from network planning to portfolio risk management. As a truly cloud-native geospatial platform, CARTO ensures all data processing and visualization occur within your existing cloud data warehouse, boosting both security and performance.
Javier started his career as a conservation scientist, applying data-sharing technologies to analyze and visualize endangered species. In 2007, he founded Vizzuality, a renowned geospatial company dedicated to bridging the gap between science and policymaking by the better use of data.
Chason Forehand is the founder of HR-4U Inc.
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.