A liberal tax group is urging Congress to not allow businesses to deduct expenses paid for with forgiven Paycheck Protection Program (PPP) loans, arguing that such a move would amount to "double dipping."
"Since forgiven PPP loans are excluded from income for tax purposes, permitting such deductions amounts to businesses double dipping: they receive tax-free income from taxpayers when the loan is forgiven, then deduct expenses that public income paid for to cut their own taxes," Americans for Tax Fairness (ATF) Executive Director Frank Clemente wrote in a letter to Congress.
ATF is a coalition that includes labor unions, think tanks and other left-leaning organizations.
The PPP is a coronavirus-relief program, created by the CARES Act that Congress passed in March, under which small businesses could receive loans that are fully forgivable if used for payroll and certain other expenses. The IRS has issued guidance stating that expenses associated with PPP loan forgiveness are not tax deductible because the loan forgiveness is not considered taxable income.
Lawmakers on both sides of the aisle have criticized the IRS guidance, arguing that it goes against congressional intent. A bipartisan proposal for a $908 billion coronavirus relief package that has been the focus of congressional discussions includes making the expenses tax deductible.
But ATF argues that allowing the expenses to be tax deductible would disproportionately help wealthy people.
"Wealthy business owners will benefit most from this double dipping, since they got the lion’s share of PPP loans and benefit the most from tax deductions," the group wrote.
ATF also urged Congress to exclude other tax provisions that would benefit businesses and wealthy individuals from a coronavirus relief package. These provisions — which are not in the $908 billion plan but have been floated for inclusion in a relief package by lawmakers and business groups — include allowing business meals to be fully deductible, extending a series of temporary tax provisions and expanding 529 educational savings accounts.
"In the midst of a national health and economic emergency, legislative efforts should be focused on getting relief to those who need it most," ATF wrote. "No time, effort or money should be wasted on tax breaks that mostly or exclusively benefit the wealthy and corporations that have best weathered the crisis and in some cases thrived during it."