Last week the Internal Revenue Service (IRS) issued guidance on the Paycheck Protection Program (PPP) that would prevent businesses from deducting expenses like rent and wages that are covered with the loans from the PPP.
The IRS interpretation is the opposite of how Congressional lawmakers intended it. U.S. Senators Chuck Grassley (R-IA), Ron Wyden (D-OR), and Congressman Richard Neal (D-MA), sent a letter to U.S. Department of Treasury Secretary Steven Mnuchin to reverse the rule.
In the letter, lawmakers state:
This interpretation means that whatever income a small business is able to produce will be taxed on a gross basis to the extent of the loan forgiveness, leaving substantially less after-tax capital for the swift economic recovery we hope is on the horizon.To read the letter lawmakers sent to Secretary Mnuchin, click here.