Representative Chip Roy tells Mnuchin to stop “sticking with small businesses”
Representative Chip Roy, R-Texas, wrote a letter to Treasury Secretary Steve Mnuchin asking him to stop “sticking with small businesses” by denying loan deductibility from the Paycheck Protection Program.
“Small businesses are destroyed in America,” Roy wrote in the letter, which was obtained by FOX Business. “A lot of big companies make tons of money. Stop sticking with small businesses by denying the intended deductibility of business expenses paid with canceled PPP loans when the program is a public policy designed to restore them after their livelihoods were taken by government force. In addition, please order the Treasury to cancel the loan as soon as possible so that the banks can be free to lend. That was the whole point. “
The Small Business Administration’s PPP offered loans that could be canceled as long as the money was used to cover expenses such as payroll, rent, and utilities, in appropriate proportions.
Tucked away in the $ 908 bill pending from Congress, the COVID-19 relief bill is a provision allowing businesses to deduct expenses from the government’s paycheck protection program, but an official impeding administration is Mnuchin.
The CARES Act, which funded the P3, originally stipulated that these loans were not included in gross income, but the IRS determined after the fact that expenses paid with it were not deductible.
The deductibility of PPPs enjoys broad bipartite support and has been included in the House’s HEROES law.
The IRS and the Treasury have issued a statement saying that since businesses are not taxed on the proceeds of a canceled P3 loan, the expenses are not deductible.
“The money that goes into the PPP is not taxable. So if the money that comes in isn’t taxable, you can’t double it, ”Mnuchin said on FOX Business. “You can’t say you’re going to get deductions for workers you haven’t paid. “
In May, Senator John Cornyn and a bipartisan group of senators, including Senator Chuck Grassley, R-Iowa, chairman of the finance committee, and rank member Ron Wyden, D-Ore., Presented the “Small Business Expense. Protection Act, ”which would have clarified that companies that receive a loan from the PPP, and the loan is canceled, can deduct expenses paid with the money.
Cornyn’s legislation was in line with Congress’ intention with the CARES Act and therefore does not cost the Treasury funds, according to a letter of the Joint Tax Commission.
A December letter from more than 700 business groups said that not allowing deductibility amounted to a “surprise” tax increase of up to 37% for small businesses when they file taxes for 2020.
“Many PPP loan recipients kept their employees on their payroll, even when there was little or no work to be done, in line with the program’s intention to keep people employed and out of unemployment. The IRS changed the rules after businesses took out P3 loans, and business owners are now being asked to pay what amounts to a surtax on their workforce, ”the letter said. “Without congressional action, businesses will face an unexpected tax bill when they file their taxes for 2020, as they continue to fight government-imposed shutdowns or slowdowns. Many of these businesses will close and never reopen. This insane fiscal policy turns both the letter and the spirit of the PPP upside down.
Some tax policy experts side with Mnuchin. Steven Rosenthal of the Tax Policy Center wrote that allowing PPP loans to be tax deductible “would benefit the wealthiest Americans.”
“There are hundreds of billions of dollars in deductions at stake, which will benefit the richest Americans (the Richest 1% of U.S. taxpayers, by income, report more than 50% income transmitted; the richest 1% of Americans, in terms of wealth, own 50% of stock). Congress can better target relief on those who need it most, without providing double dips for those who are not, ”he wrote.