By Nick Goldstein, vice president of regulatory and legal issues, ARTBA
ARTBA and more than 150 other industry associations have asked congressional leaders to correct an Internal Revenue Service (IRS) decision that weakens how small businesses use emergency financial relief through the Paycheck Protection Program (PPP).
The program became law in March to provide loans to help small businesses retain employees during the COVID-19 pandemic. The money is available through the U.S. Small Business Administration. If all employees are retained for an eight-week period, the loans may be converted into grants.
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A recent IRS opinion, however, declared expenses related to PPP loans are non-deductible. ARTBA and its allies estimate this will increase the net after tax liability of PPP loan forgiveness by 21 to 37 percent, depending on the recipient’s corporate structure.
In a May 7 letter to House Ways and Means Committee Chairman Richard Neal (D-Mass.) and Senate Finance Committee Chairman Charles Grassley (R-Iowa), ARTBA and the other groups said the IRS action is contrary to the intent of Congress. “With many businesses struggling to stay afloat, it is imperative that the rescue measures enacted by Congress, including PPP loans, provide the maximum amount of flexibility to employers that they can,” the letter says.
Both chairmen have indicated they also disagree with the IRS action. ARTBA will continue to advocate for a legislative fix to the issue.