As 2020 winds down, businesses are still waiting for necessary fixes to the implementation of the Paycheck Protection Program that would protect the original intent of the critical COVID-19 relief bill. Chiefly, when the CARES Act passed earlier this year it included language stating that normally deductible expenses paid for through a PPP loan that was later forgiven would remain deductible. However, the IRS later ruled such expenses would not be eligible for a write-off, conflicting with the CARES Act.
FEDA and other associations, including the National Association of Wholesaler-Distributors (NAW), have been pushing to have this IRS rule reversed. Two pieces of legislation, S. 3612 and H.R. 6821, that would restore the intended ability for businesses to deduct expenses paid for by forgiven PPP loans have been stuck in committee since spring with no formal vote.
FEDA is asking members to reach out to their legislators to urge them to pass this much-needed correction. The Association of International Certified Professional Accountants recently distributed a draft email that businesses can use when contacting their representatives.
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.
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