Lawmakers wish to fix a mix-up within the economic relief CARES Act laws from March that may cost small businesses $120 billion in taxes, The Wall Street Journal (WSJ) reports.
Congressional members from both sides said businesses taking loans in the Paycheck Protection Program (PPP) ought to be allowed to deduct related expenses, like payroll, from taxes.
That provision is not in the present Republican draft for the next proposal. That may leave millions of small businesses without a lifeline for their next tax statements. Treasury Secretary Steven Mnuchin was opposed to the deductions, based on a resource WSJ spoken with. The Treasury Department's position is that allowing deductions could help as a kind of double benefit, allowing businesses to claim deductions and get tax-free income.
The issue comes from the way the CARES Act was originally constructed, permitting the PPP loans to become forgiven so long as businesses use them mostly for paying employees, with the forgiven loans not counting as taxable income. However the law doesn't specify if ordinary tax deductions for the same expenses are permitted – though in late April, the Treasury Department and IRS determined that the businesses couldn't also take deductions because of tax laws prohibiting double benefits.
In May, the House passed an invoice that would allow for the deductions, with support from numerous lawmakers including Oregon Democrat Ron Wyden and Texas Republican John Cornyn, and also the backing from the National Federation of Independent Businesses. All were disappointed to determine the concept absent from the GOP bill.
The deductions, according to analysts, could help businesses use current losses against income from years past to be able to claim refunds.
WSJ interviewed Mike McKenny, president of Kansas-based insurance claims firm Assured Vehicle Protection Inc., which has only 15 employees. He said the possible lack of deductions would make his PPP loan \”a little kick in the gut once you had a swift pat on the back.\”
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