The inability to deduct expenses paid for using forgiven Paycheck Protection Program loans will hurt small businesses that have already endured the consequences of an economic downturn caused by the novel coronavirus pandemic, the groups said in the letter.
Internal Revenue Service guidance that disallows deduction of loan-covered expenses essentially increases business taxable income while the virus is surging and further threatening businesses, according to the letter.
The IRS in April announced that businesses could not deduct expenses covered by PPP loans, which were authorized by the Coronavirus Aid, Relief and Economic Security Act
, saying that Internal Revenue Code Section 265 bars tax deductions for expenses paid for with forgiven loans. Further guidance released in November bars businesses from claiming deductions if they have a "reasonable expectation" of loan forgiveness.--Editing by Joyce Laskowski.
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