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Mnuchin defends IRS guidance on PPP loans

Mnuchin defends IRS guidance on PPP loans
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Treasury Secretary Steven MnuchinSteven Terner MnuchinThe Hill's Morning Report - Presented by the UAE Embassy in Washington, DC - Trump OKs transition; Biden taps Treasury, State experience On The Money: Democrats accuse Mnuchin of sabotaging economy in dispute with Fed | Trump administration proposal takes aim at bank pledges to avoid fossil fuel financing | JPMorgan: Economy will shrink in first quarter due to COVID-19 spike Democrats accuse Mnuchin of sabotaging economy in dispute with Fed MORE on Monday defended IRS guidance that expenses associated with forgivable loans under the Paycheck Protection Program (PPP) are ineligible for tax deductions.

Key lawmakers have expressed concerns that the guidance goes against congressional intent, but Mnuchin said in an interview on the Fox Business Network's "Mornings with Maria" that "the guidance is correct."

"The money coming in the PPP is not taxable. So if the money that's coming is not taxable, you can't double dip," Mnuchin said. "You can't say you're going to get deductions for workers that you didn't pay for."

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Under the PPP, small businesses can receive loans from the federal government that will be fully forgiven if the money is used to retain workers. The coronavirus relief law that created the program states that loan forgiveness under the program is not taxable income.

The IRS issued guidance on Thursday, saying that businesses cannot take deductions for expenses if the payment of the expenses results in forgiveness of a PPP loan.

Senate Finance Committee Chairman Chuck GrassleyCharles (Chuck) Ernest GrassleyRep. Rick Allen tests positive for COVID-19 On The Money: Biden to nominate Yellen for Treasury secretary | 'COVID cliff' looms | Democrats face pressure to back smaller stimulus Loeffler to continue to self-isolate after conflicting COVID-19 test results MORE (R-Iowa) and House Ways and Means Committee Chairman Richard NealRichard Edmund NealOvernight Health Care: Trump announces two moves aimed at lowering drug prices | Sturgis rally blamed for COVID-19 spread in Minnesota | Stanford faculty condemn Scott Atlas Trump announces two moves aimed at lowering drug prices IRS races to get remaining stimulus checks to low-income households MORE (D-Mass.) have both taken issue with the guidance.

“I’m disappointed by the IRS’ determination that these business expenses are not deductible, especially since this issue was discussed during the development of the Paycheck Protection Program," Grassley said in a statement. "The intent was to maximize small businesses’ ability to maintain liquidity, retain their employees and recover from this health crisis as quickly as possible. This notice is contrary to that intent.”

A spokeswoman for Neal told Tax Notes last week that the congressman wants to fix the issue in the next coronavirus relief package.

Mnuchin told Fox Business that he personally reviewed the IRS guidance. He said that the deductions would have been allowed if the loan forgiveness was taxable.

"This is basically tax 101. It's a simple rule," he said.