Mnuchin defends IRS guidance on PPP loans
Treasury Secretary Steven Mnuchin 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.”
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 Grassley (R-Iowa) and House Ways and Means Committee Chairman Richard Neal (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.