Hundreds of business organizations have signed a letter urging Congress to address the tax treatment of PPP-grant loans as lawmakers negotiate another round of stimulus packages in the nation’s capital, which may include provisions allowing some borrowers to take out a second loan.
A group of 170 organizations, including the American Institute of CPA, this week sent the letter to House Speaker Nancy Pelosi and Senate Majority Leader Mitch McConnell, asking Congress to allow expense deductions for items paid for with borrowed money.
“When the PPP was adopted as part of the CARES (Aid, Relief and Economic Security) law against the coronavirus, [P.L. 116-136,] Congress clarified that any loan cancellations under the program would be excluded from the borrower’s taxable income, ”the letter read, saying businesses will face an additional tax burden of $ 100 billion if the treatment is not adjusted.
WILL THE NEW STIMULUS PACKAGE CHANGE THE TAX DEDUCTION DIRECTIONS FOR PPP LOAN?
As previously reported by FOX Business, the IRS issued guidelines earlier this year to prevent business owners whose PPP loans are canceled from claiming tax breaks on otherwise deductible expenses if they were paid to use the loan. government assistance.
The loans are tax exempt, so the guidelines were based on existing law, which is generally aimed at preventing people from enjoying a “double tax benefit”.
Congress has the power to overturn the IRS decision, which received some denial from lawmakers, who said it was not what Congress intended when drafting the legislation .
The allowance for deductions was not included in the HEALS law, detailed by Republicans last week.
MNUCHIN SUPPORTS IRS ON CORONAVIRUS PPP REPRESENTATION OF TAX REDUCTION, ‘TAX 101’
But it still has a chance of being included in potential legislation. It was part of the Democrat-sponsored HEROES law that was approved by the chamber in May.
A number of Republicans have expressed support for the policy change.
For example, Senator Chuck Grassley, a Republican from Iowa who is the chairman of the Senate Finance Committee, disagreed with the IRS decision, saying the issue was discussed during the development of the PPP.
However, US Treasury Secretary Steven Mnuchin backed the IRS guidelines in May, saying it was “essentially Tax 101”.
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Lawmakers are discussing provisions allowing some small business owners to take out a second P3 loan, although the policy may target smaller businesses that have been hit hardest during the pandemic.
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