Kerrigan Applauds Tax Writing Chairmen’s Work to Fix Flaws in IRS Notice Related to PPP

By at 6 May, 2020, 9:57 am



Washington, D.C. – Following a notice issued by the Internal Revenue Service (IRS) informing Paycheck Protection Program (PPP) loan recipients that otherwise deductible expenses are not deductible if forgiven under a PPP arrangement, the Small Business & Entrepreneurship Council (SBE Council) praised congressional tax writers for pushing back on this interpretation, which is not consistent with the clear intent of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).

On May 5, U.S. Senate Finance Committee Chairman Chuck Grassley (R-Iowa) and Ranking Member Ron Wyden (D-Ore.), along with U.S. House Ways and Means Chairman Richard Neal (D-Mass.) sent a letter to U.S. Treasury Secretary Steven Mnuchin urging the IRS to reconsider their determination “in light of congressional intent and the importance of maximizing liquidity for businesses receiving PPP loans to survive and recover from the ongoing health crisis.”

SBE Council president & CEO Karen Kerrigan praised this intervention, as sticking to PPP congressional intent and the text of the CARES Act is critical to small business survival.

“As noted in the letter sent to Secretary Mnuchin from Chairman Grassley, Ranking Member Wyden and Chairman Neal, the text of the CARES Act and discussions that occurred during the development of the legislation make it very clear what was intended on this matter. The loan becomes a tax-free grant once forgiven and tax writers in no way intended to deny small businesses the deductibility of ordinary and necessary business expenses,” said Kerrigan.

“SBE Council is very grateful to Chairman Grassley, Ranking Member Wyden and Chairman Neal for taking immediate action on this important matter. Small business owners are facing massive pressures as they work to grind it out every day to keep their doors open. Navigating unexpected shifts in PPP rules does make their herculean work any easier,” she added.

The letter specifically identifies the CARES Act section that makes congressional intent very clear. According to their letter to Secretary Mnuchin:

“Section 1106(i) was specifically included in the CARES Act to exclude from income loan forgiveness, which would otherwise be taxable, to provide a tax benefit to small businesses that received the PPP loan.  Had we intended to provide neutral tax treatment for loan forgiveness, Section 1106(i) would not have been necessary.”

Kerrigan added that changing PPP rules following a small business owner’s decision to apply for a loan adds to their burdens and risks, and the rules are unclear enough in other areas.

“The intent of PPP was to save small businesses and small business jobs. We know that small business closures and bankruptcies are going to occur at a level that will be pretty shocking. That means programs such as PPP that were meant to salvage our small business economy must support these firms in every way possible. The rules must stick with congressional intent, and Congress must update key provisions of the PPP program to make it more effective for small business loan recipients,” said Kerrigan.

SBE Council recently sent a letter to congressional leaders outlining key PPP areas for improvement and reform, which can be accessed here.

Karen Kerrigan, SBE Council president & CEO

SBE Council is nonpartisan advocacy, research and education organization dedicated to protecting small business and promoting entrepreneurship. For 25 years, SBE Council has worked on and advanced a range of private sector and public policy initiatives to strengthen the ecosystem for strong startup activity and small business growth. Visit @SBECouncil


News and Media Releases