Rep. Chip Roy, R-Texas, wrote a letter to Treasury Secretary Steve Mnuchin urging him to stop “joining small businesses” by refusing deductibility for Wage Protection Program loans.
“Small businesses are being destroyed in America,” Roy wrote in the letter, which was obtained by FOX Business. “Many big companies make tons of money. Stop sticking it to small businesses by denying the intentional deductibility of business expenses paid with forgiven PPP loans when the program is a public policy meant to make them whole after their livelihoods are taken over by the government. Furthermore, please order the Treasury to proceed with the forgiveness of the loan as soon as possible so that the banks can borrow freely. That was the point. “
The Small Business Administration’s PPP provided loans that could be forgiven as long as the money was used to cover expenses such as pay, rent and utilities, in appropriate proportions.
CORONAVIRUS FORGETTERS PPP LOAN PROVIDERS ELIGIBLE FOR TAX DEDUCTIONS
Inscribed in Congress’ $ 908 bill, the COVID-19 bill is a provision that allows businesses to deduct expenses from the government’s Wage Protection Program, but an administration official standing in the way is Mnuchin.
The CARES Act, which funded PPPs, initially stated that such loans were not included in gross income, but the IRS determined after the expenses paid with it were not deductible.
PPP deductibility has broad bipartisan support and has been included in the House’s HEROES Act.
The IRS and the Treasury issued a statement saying that because businesses are not taxed on the income of a forgiven PPP loan, the expenses are not deductible.
“The money that comes in PPP is not taxable. So if the money that comes in isn’t taxable, you can’t double it, “Mnuchin told FOX Business.” You can’t say you get deductions for workers you didn’t pay for. “
PUSH BUSINESS GROUPS CONGRESS FOR CHANGING THE TAX TREATMENT OF FORGIVEN PPP LOANS
In May, Sen. John Cornyn and a bipartisan group of senators, including Sen. Chuck Grassley, R-Iowa, Finance Committee Chair and senior Ron Wyden, D-Ore., Introduced the “Small Business Expense Protection Act.” which would have clarified that companies that receive a loan from PPP, and the loan is forgiven, can deduct the expenses paid with the money.
Cornyn’s legislation was in line with Congress’ intent with the CARES Act and therefore does not cost the treasury any funds, according to a letter from the Joint Taxation Committee.
A December letter from more than 700 business groups said that not allowing deductibility amounted to a “surprise” tax increase of up to 37% for small businesses when they file taxes for 2020.
“Many PPP loan recipients kept their employees on payroll, even when there was too little work to be done, in line with the program’s intention to keep employees off the unemployment lists as well. The IRS changed the rules after businesses took out PPP loans, and business owners are now being asked to pay the amount that amounts to an additional labor tax, “the letter read. Without congressional action, businesses will face an unexpected tax bill when they file their taxes for 2020 as they continue to struggle with government-imposed shutdowns or slowdowns. Many of these companies will close and never reopen. This meaningless fiscal policy is based on both the letter and the spirit of the PPP. “
Some tax policy experts are part of Mnuchin. Fiscal Policy Center’s Steven Rosenthal wrote that deductible PPP loans would be “for the benefit of the wealthiest Americans.”
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“There are hundreds of billions of dollars in deductions at stake that will benefit the richest Americans (the top 1% of American taxpayers, by income, report more than 50% of past income; the top 1% of Americans, by wealth , hold 50% of the shares). The congress can better aim at helping the most needy, without offering double dives to those who are not “, he wrote.