PPP Expense Deductions For Small Businesses – Urgent Update

Many small businesses may be hit with a surprise tax bill related to Paycheck Protection Program (PPP) loans unless Congress acts soon.

As outlined by the American Institute of CPAs, in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, Congress clearly intended for recipients of forgiven PPP loans to be able to deduct otherwise-deductible expenses associated with those loans for tax purposes.

But the IRS has contradicted congressional intent. It has declared that borrowers who expect their PPP loan to be forgiven cannot deduct those expenses on their federal tax returns.

It is crucial for you to make your voice heard to your elected officials.

Tell your members of Congress to support small businesses by quickly passing S. 3612 and H.R. 6821, the Small Business Expense Protection Acts of 2020, or H.R.6754, the Protecting the Paycheck Protection Program Act.

Congressman Smucker is a co-sponsor of HR 6821 and has been advocating for this change.

This legislation will ensure that the receipt and forgiveness of coronavirus assistance through the PPP does not result in an unexpected and burdensome tax cost for organizations that complied with the terms of the PPP. Passing this legislation as soon as possible will allow small businesses more certainty as they focus on year-end business planning that is especially important in these challenging economic times.

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I am writing you today to strongly encourage you to include in any year-end, must-pass legislation language that will allow millions of small business owners a tax deduction for expenses paid with Paycheck Protection Program (PPP) forgiven loans.

Bills have been introduced in the Senate (S.3612 sponsored by Senator Cornyn (R-TX)) and in the House (H.R. 6821 sponsored by Representative Holding (R-NC) or H.R. 6754 sponsored by Representative Fletcher (D-TX)) that would ensure that PPP loan recipients are provided the full benefits intended in the CARES Act. 

All Americans have been impacted by the COVID-19 pandemic, and your actions in Congress have provided much-needed assistance to millions of struggling businesses.

It is important that you ensure that these same businesses are not also subject to additional and unexpected taxes as they continue to struggle to survive.

Borrowers who are eligible for forgiveness of their PPP loans have spent the funds as the program directed. Unless they are allowed to deduct these expenses, they may be forced to spend additional funds to pay taxes on the loan proceeds – funds they may not have. Passing this legislation as quickly as possible will provide small business owners more certainty as they focus on year-end business planning that is especially important in these challenging economic times.

I ask that you contact your Senate and House leaders to ensure that PPP loan forgiveness deductibility language is passed by Congress before the end of the year.

Questions?

If you have any questions, please reach out to Heather Valudes, Vice President of the Lancaster Chamber at hvaludes@lancasterchamber.com or contact your accountant.