A fix to allow deductions for Paycheck Protection Program expenses may have to wait until after the November elections despite its overwhelming support among lawmakers.
The Trump administration continues to stand firm behind Notice 2020-32, 2020-21 IRB 837, released April 30, which prevents businesses from deducting expenses associated with their PPP loans, and it has blocked attempts to overturn the guidance.
House Ways and Means Committee Chair Richard E. Neal, D-Mass., said that could change as more information becomes available on how businesses used their loans in the coming months.
“In conversations I’ve had with [Treasury] Secretary [Steven] Mnuchin, I’ve encouraged him to be very flexible and keep liquidity in the system,” Neal told Tax Notes September 16.
But without a bipartisan COVID-19 relief bill, businesses are unlikely to receive more certainty from Congress anytime soon. Neal said lawmakers would continue to work on the issue even without a bipartisan bill in place, but warned that it will likely have to wait. “I think a better picture will emerge once we get back after the elections,” he said.
Mnuchin has the power to reverse Notice 2020-32 and acknowledge Congress’s original intent when it included the provision as part of the Coronavirus Aid, Relief, and Economic Security Act (P.L. 116-136).
Sen. John Cornyn, R-Texas, who introduced legislation (S. 3612) to clarify the rule, said he agrees that Congress should not give up on the matter if a resolution isn't reached before the November 3 elections. “We’ll keep at it until it's done,” he said.
Bipartisan Consensus
Cornyn said he doesn't care how the issue is fixed — whether through Congress or the IRS — but that other lawmakers want Congress to clarify it. Ways and Means ranking member Kevin Brady, R-Texas, said it would be best if Congress passes a measure.
Brady was the only major taxwriter who didn't sign a letter urging the IRS to reverse its notice, arguing that it was the intent of Congress to make some PPP expenses deductible. Brady said no consensus existed at the time, but that he fully supports a measure through Congress given the bipartisan support it has received.
Ways and Means Committee member Tom Reed, R-N.Y., told Tax Notes that both parties recognize that a resolution is necessary to help businesses shore up liquidity.
Reed, who co-chairs the Problem Solvers Caucus, said the provision didn't make it into the group's bipartisan platform released September 15 because members tried to provide a broad overview of what needs to be done, but he said both sides clearly support it.