The American Institute of CPA (AICPA) joined a group of more than 170 organizations in a letter to House Speaker Nancy Pelosi (D-CA) and Senate Majority Leader Mitch McConnell (R-KY) encouraging a technical correction to address the tax treatment of loan forgiveness under the Paycheck Protection Program (PPP).
The PPP was adopted earlier this year as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act which stated that any loan forgiveness under the program would be excluded from the borrower’s taxable income. Although the intent of the CARES Act was clearly to allow the deductibility of expenses related to loan forgiveness, the statute was silent. However, the publication of IRS Notice 2020-32 settled this policy by denying borrowers the ability to deduct the same expenses that qualified them for the loan forgiveness.
The group states in the letter that, “…denying the correct tax treatment of these loans will result in hardship for many struggling businesses,” highlighting the more than five million businesses that have participated in the program.
“Millions of businesses across the country received much-needed relief during a time of global crisis and it’s imperative that the receive the full measure of assistance intended by Congress,” said AICPA Vice President of Taxation, Edward Karl, CPA, CGMA. “Many small businesses are still in economic distress and we urge Members of Congress to take action to ensure that the necessary corrections are included in the next relief package.”