The Paycheck Protection Program was rolled out by Congress and the White House with great fanfare to help save small businesses during the coronavirus pandemic. Many of us have applied for and received PPP loans to protect our employees and businesses during the Covid-19 downturn.   The Small Business Administration as well as our local banking community has done, for the most part, an admirable job, in administering the program.  Moving forward, business owners are focussed on staying within the PPP guidelines on expense reimbursement, preparing for the next stage of the program, tax free forgiveness of those loans.

Well, as can happen with institutional programs, other governmental departments may want their two cents… and so enters the Internal Revenue Service.

At the beginning of May, the IRS released guidance that essentially nullifies a good portion of the benefit of the Paycheck Protection Program. They have stated that those who receive PPP loans may not receive tax deductions for using those funds to pay expenses. That includes expenses like payroll and rent, the very point of the PPP.

Most of us came into the program with a common understanding that we would not have taxable income associated with forgiveness of our PPP loans.  If the IRS does not allow deduction of what are our normal business expenses, this accomplishes the exact same thing as if we are being taxed on the forgiveness of the loans themselves.

If they want to, Congress can override the IRS’s stance and they should.  The OAAA is already on this.  The State Associations as well as each of us should  contact our representatives and urge them to get this changed.

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