On December 3, AGC, along with 564 trade associations, called on Congress to pass legislation reversing IRS policy that turns promised, tax-free PPP loan forgiveness into a taxable event.
The effect of this is to tax a business’s PPP loan forgiveness up to 37 percent. AGC is very engaged in exhorting Congress to include legislation to overturn the IRS Notice in any end of year tax or spending package, and we will continue to provide updates to members.
In May, the IRS issued Notice 2020-32, which denied tax deductions for any expenses associated with PPP loan forgiveness. After the IRS issued the Notice, AGC led a coalition letter calling on Chairmen Neal and Grassley to enact legislation to overturn the IRS ruling.
Since then, the IRS issued Revenue Ruling 2020-27, stating that expenses funded through a PPP loan are not deductible for 2020 if “the taxpayer reasonably expects to receive forgiveness of the covered loan on the basis of the expenses it paid or accrued during the covered period, even if the taxpayer has not submitted an application for forgiveness of the covered loan by the end of such taxable year.”
The recent Revenue Ruling has created renewed urgency for Congress to act now, during the lame duck, to address this issue before business owners start getting hit with surprise tax increases, at the same time as many states are issuing fresh orders to shutdown or slowdown business operations.
If you have any questions or concerns, please contact Matthew Turkstra, Director, Tax, Fiscal Affairs, and Accounting at (202) 547-4733, or [email protected](link sends e-mail).
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