Lawmakers Seek Deductibility for Forgiven PPP Loan Expenses
Lawmakers Seek Deductibility for Forgiven PPP Loan Expenses
- AuthorsHolding, GeorgeFletcher, Rep. LizzieFerguson, Rep. A. Drew, IV
- Institutional AuthorsU.S. House of Representatives
- Subject Areas/Tax Topics
- Jurisdictions
- Tax Analysts Document Number2020-48234
- Tax Analysts Electronic Citation2020 TNTF 237-12
December 9, 2020
The Honorable Nancy Pelosi
Speaker of the House
U.S. House of Representatives
H-232, U.S. Capitol
The Honorable Kevin McCarthy
Minority Leader
U.S. House of Representatives
H-204, U.S. Capitol
The Honorable Steny Hoyer
Majority Leader
U.S. House of Representatives
H-107, U.S. Capitol
The Honorable Steve Scalise
Minority Whip
U.S. House of Representatives
H-148, U.S. Capitol
Dear Speaker Pelosi, Leader McCarthy, Leader Hoyer, and Whip Scalise,
Thank you for your continued efforts to provide assistance to the American people through these challenging times. As we continue working on additional coronavirus assistance measures, we want to bring your attention to an important issue affecting small businesses across the United States and ask for your help in providing much-needed relief.
Over the past few months, statewide shutdowns in response to the pandemic have had devastating effects on small businesses throughout the country. Thousands of small businesses have permanently closed, while capacity restrictions and reopening costs have drastically cut revenue streams for those that have remained open.
In response to these dire economic conditions, Congress enacted the Paycheck Protection Program (PPP) to provide more than $600 billion for forgivable loans to small businesses to help keep employees on payroll and continue operating. Since its enactment, over 5 million loans have been made to businesses in all fifty states. This program has helped keep our economy from total collapse by providing a lifeline to small businesses with no alternative funding source.
The PPP was intended to provide vital tax-free assistance for certain business costs in unprecedented economic circumstances. Congress specifically included Section 1106(i) in the CARES Act to exclude forgivable loan assistance from taxable income. On April 30, however, the Internal Revenue Service (IRS) released Notice 2020-32 disallowing the deduction of forgiven expenses.
As Chairman Grassley, Chairman Neal, and Ranking Member Wyden wrote in a letter to Secretary Mnuchin on May 5, 20201, this notice is contrary to Congressional intent. Section 1106(i) of the CARES Act was put in place specifically to ensure forgivable loan proceeds would be tax free, stating that “any amount which (but for this subsection) would be includible in gross income of the eligible recipient by reason of forgiveness described in subsection (b) shall be excluded from gross income.” Notice 2020-32 essentially ignores this section and effectively makes forgivable loans taxable despite Congress's clear intent to allow the deduction of necessary business expenses.
To make matters worse, on November 18, 2020, the IRS released Revenue Ruling 2020-27 stating that PPP. recipients who had not even received or applied for forgiveness could not deduct normal business expenses if they reasonably expected their loans to be forgiven.
These notices are not only contrary to Congressional intent, but in fact changed the terms of the loan after a majority of PPP applicants had already applied for and received funds. Over 84% of total PPP applications were submitted prior to April 17, when the program first expired. This unfairly changed the rules of the program after the overwhelming majority of participants had joined.
Without Congressional action, small businesses are estimated to pay over $120 billion in taxes on forgivable PPP loans. At a time when many are struggling to keep their doors open each day, we cannot saddle small businesses with a massive surprise tax bill.
For this reason, we ask that you include a fix to clarify that recipients of forgivable PPP loans can claim normal business expense deductions in any end-of-year legislation. Thank you for your consideration of this request.
Sincerely,
George Holding
Member of Congress
Lizzie Fletcher
Member of Congress
Drew Ferguson
Member of Congress
CC:
Richard Neal, Chairman of the House Committee on Ways and Means
Kevin Brady, Ranking Member of the House Committee on Ways and Means
Rick Allen
Member of Congress
Colin Allred
Member of Congress
Mark Amodei
Member of Congress
Jodey Arrington
Member of Congress
Brian Babin, D.D.S
Member of Congress
James R. Baird
Member of Congress
Troy Balderson
Member of Congress
Andy Barr
Member of Congress
Joyce Beatty
Member of Congress
Ami Bera
Member of Congress
Jack Bergman
Member of Congress
Gus M. Bilirakis
Member of Congress
Suzanne Bonamici
Member of Congress
Mike Bost
Member of Congress
Anthony Brindisi
Member of Congress
Julia Brownley
Member of Congress
Larry Bucshon, M.D.
Member of Congress
Ted Budd
Member of Congress
Tim Burchett
Member of Congress
Michael C. Burgess, M.D.
Member of Congress
Cheri Bustos
Member of Congress
Bradley Byrne
Member of Congress
Ken Calvert
Member of Congress
Tony Cárdenas
Member of Congress
André Carson
Member of Congress
Earl L. "Buddy" Carter
Member of Congress
Sean Casten
Member of Congress
Steve Chabot
Member of Congress
Judy Chu
Member of Congress
David Cicilline
Member of Congress
Gilbert R. Cisneros, Jr.
Member of Congress
Tom Cole
Member of Congress
James Comer
Member of Congress
Mike Conaway
Member of Congress
Jim Cooper
Member of Congress
Jim Costa
Member of Congress
Joe Courtney
Member of Congress
Angie Craig
Member of Congress
Rick Crawford
Member of Congress
Charlie Crist
Member of Congress
Jason Crow
Member of Congress
Joe Cunningham
Member of Congress
Sharice L. Davids
Member of Congress
Peter A. DeFazio
Member of Congress
Suzan DelBene
Member of Congress
Antonio Delgado
Member of Congress
Jeff Duncan
Member of Congress
Neal P. Dunn, M.D.
Member of Congress
Tom Emmer
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Ron Estes
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Brian Fitzpatrick
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Jeff Fortenberry
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Bill Foster
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Russ Fulcher
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Mike Gallagher
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Ruben Gallego
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Greg Gianforte
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Bob Gibbs
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Anthony Gonzalez
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Vicente Gonzalez
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Lance Gooden
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Paul Gosar
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Josh Gottheimer
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Glenn Grothman
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Josh Harder
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Vicky Hartzler
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Jahana Hayes
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Kevin Hern
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Jaime Herrera Beutler
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Brian Higgins
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Jim Himes
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Kendra Horn
Member of Congress
Chrissy Houlahan
Member of Congress
Richard Hudson
Member of Congress
Jared Huffman
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Sheila Jackson Lee
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Chris Jacobs
Member of Congress
Bill Johnson
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Dusty Johnson
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John Joyce, M.D.
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David P. Joyce
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John Katko
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Fred Keller
Member of Congress
Mike Kelly
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Trent Kelly
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Daniel T. Kildee
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Derek Kilmer
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Andy Kim
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Ron Kind
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Adam Kinzinger
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Ann Kirkpatrick
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Ann McLane Kuster
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David Kustoff
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Darin LaHood
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Conor Lamb
Member of Congress
John B. Larson
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Robert E. Latta
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Billy Long
Member of Congress
Tom Malinowski
Member of Congress
Roger Marshall, M.D.
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Michael McCaul
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David B. McKinley, P.E.
Member of Congress
Cathy McMorris Rodgers
Member of Congress
Grace Meng
Member of Congress
Dan Meuser
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Carol D. Miller
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John Moolenaar
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Alex Mooney
Member of Congress
Joseph D. Morelle
Member of Congress
Markwayne Mullin
Member of Congress
Gregory F. Murphy, M.D.
Member of Congress
Jerrod Nadler
Member of Congress
Dan Newhouse
Member of Congress
Ralph Norman
Member of Congress
Eleanor Holmes Norton
Member of Congress
Tom O'Halleran
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Steven Palazzo
Member of Congress
Jimmy Panetta
Member of Congress
Chris Pappas
Member of Congress
Chellie Pingree
Member of Congress
Stacey E. Plaskett
Member of Congress
Bill Posey
Member of Congress
David Price
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Mike Quigley
Member of Congress
Jamie Raskin
Member of Congress
Guy Reschenthaler
Member of Congress
Kathleen M. Rice
Member of Congress
Denver Riggleman
Member of Congress
Francis Rooney
Member of Congress
David Rouzer
Member of Congress
Chip Roy
Member of Congress
Dutch Ruppersberger
Member of Congress
John H. Rutherford
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Tim Ryan
Member of Congress
Michael F.Q. San Nicolas
Member of Congress
Bradley S. Schneider
Member of Congress
Kurt Schrader
Member of Congress
David Schweikert
Member of Congress
Austin Scott
Member of Congress
Terri A. Sewell
Member of Congress
Mike Sherrill
Member of Congress
Mike Simpson
Member of Congress
Elissa Slotkin
Member of Congress
Jason Smith
Member of Congress
Lloyd Smucker
Member of Congress
Darren Soto
Member of Congress
Abigail D. Spanberger
Member of Congress
Greg Stanton
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Pete Stauber
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W. Gregory Steube
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Haley Stevens
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Steve Stivers
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Tom Suozzi
Member of Congress
Mark Takano
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Van Taylor
Member of Congress
Bennie G. Thompson
Member of Congress
Mike Thompson
Member of Congress
Tom Tiffany
Member of Congress
Dina Titus
Member of Congress
Xochitl Torres Small
Member of Congress
David Trone
Member of Congress
Lauren Underwood
Member of Congress
Jefferson Van Drew
Member of Congress
Marc Veasey
Member of Congress
Ann Wagener
Member of Congress
Tim Walberg
Member of Congress
Jackie Walorski
Member of Congress
Michael Waltz
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Daniel Webster
Member of Congress
Peter Welch
Member of Congress
Brad R. Wenstrup, D.P.M
Member of Congress
Susan Wild
Member of Congress
Roger Williams
Member of Congress
John Yarmuth
Member of Congress
Ted S. Yoho, D.V.M
Member of Congress
Lee Zeldin
Member of Congress
FOOTNOTES
1https://www.finance.senate.gov/imo/media/doc/2020-05-05%20CEG,%20RW,%20RN%20to%20Treasury%20(PPP%20Business%20Deductions).pdf
END FOOTNOTES
- AuthorsHolding, GeorgeFletcher, Rep. LizzieFerguson, Rep. A. Drew, IV
- Institutional AuthorsU.S. House of Representatives
- Subject Areas/Tax Topics
- Jurisdictions
- Tax Analysts Document Number2020-48234
- Tax Analysts Electronic Citation2020 TNTF 237-12