Mnuchin defends IRS guidance on PPP loans

Mnuchin defends IRS guidance on PPP loans
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Treasury Secretary Steven MnuchinSteven Terner MnuchinCoronavirus talks on life support as parties dig in, pass blame On The Money: Pessimism grows as coronavirus talks go down to the wire | Jobs report poised to light fire under COVID-19 talks | Tax preparers warn unemployment recipients could owe IRS Top Democrats say postmaster confirmed changes to mail service amid delays 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 GrassleyMcConnell goes hands-off on coronavirus relief bill GOP chairmen hit back at accusation they are spreading disinformation with Biden probe On The Money: Unemployment debate sparks GOP divisions | Pandemic reveals flaws of unemployment insurance programs | Survey finds nearly one-third of rehired workers laid off again MORE (R-Iowa) and House Ways and Means Committee Chairman Richard NealRichard Edmund NealConservatives urge Trump to take unilateral action to suspend payroll tax collection Treasury to conduct policy review of tax-exempt status for universities after Trump tweets Stimulus checks debate now focuses on size, eligibility 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.