WASHINGTON, D.C. — Last week, the IRS issued guidance (Notice 2020-32) that any expenses covered by forgivable portions of a PPP loan will not be considered a business deduction, effectively levying an unforeseen tax on small businesses, completely contrary to the original intent of the CARES Act.
On Monday, Senator Braun along with Senator John Hoeven, Senator Kelly Loeffler, and Senator Lisa Murkowski introduced the Safeguarding Small Business Act to remove all tax liability associated with loan forgiveness under the Paycheck Protection Program.
“The CARES Act was intended as a lifeline to small businesses, but forcing them to shoulder tax liability for these forgivable loans would be like throwing them a cinder block. I urge my colleagues to quickly pass the Safeguarding Small Business Act to protect the lifeblood of our economy from eating this unintended expense when they need relief most.” – Senator Mike Braun “We need to do all we can to help our nation’s small businesses weather this public health emergency,†said Senator John Hoeven. “Our legislation would ensure that the IRS is able to administer the Paycheck Protection Program as Congress intended by making small business expenses covered by the PPP deductible. This will ensure that our small businesses are able to keep more of their cash to help them recover from this pandemic.â€
“Small businesses are the lifeblood of our economy and have been hit hard by this pandemic,â€Â said Senator Kelly Loeffler. “Without our legislative fix, the government is effectively taxing the very businesses we have been advocating for in their critical time of need. Small businesses and their employees need Congress to provide relief and stability during these uncertain times, not taxes and red tape.â€
“As a part of the Cares Act, the Paycheck Protection Program or PPP was put in place to help keep small businesses that have been impacted by COVID-19 afloat. Our local, mom-and-pop shops make up a huge percentage of Alaska’s businesses, and ultimately, our economy. We must do all we can to give our small businesses whatever help we can to make sure they are able to keep their workers employed and their doors open,â€Â said Senator Murkowski. “Passing this legislation will help ensure Alaska’s small business owners are protected under the PPP as intended, giving them much-needed support to overcome the impacts of this pandemic. We must not give to communities with one hand and take back with the other, right now.â€
FOOTNOTE BACKGROUND
- The Safeguarding Small Business Act is a technical correction that makes clear that section 1106(i) of the CARES Act allows deductions otherwise allowable under the Code for payments of eligible section 1106 expenses by a recipient of a covered loan are allowed if the covered loan is subsequently forgiven under section 1106(b) of the CARES Act as a result of the payment of those expenses.
