By Alan Wolf, YSN
Over 500 state and national trade associations, including the National Retail Federation (NRF), the National Association of Manufacturers (NAM) and the U.S. Chamber of Commerce, are pressing Congress to restore tax deductibility for business expenses paid with forgivable Paycheck Protection Program (PPP) loans.
Under recently clarified Treasury Department and IRS rules, businesses cannot write off typical expenses such as payroll, rent or utilities that were paid for with funds from PPP loans that were either forgiven or are expected to be forgiven, since the forgivable loans are not taxable. Doing so, Treasury Secretary Steve Mnuchin has said, would amount to a “double dip.”
But without the deductions, small businesses could face a “surprise tax increase” of up to 37 percent when they file their 2020 taxes, the trade groups argued in a letter to House and Senate leaders, and urged them to amend the PPP’s deductibility rules before the end of the year. “This tax will hit small business owners after their PPP loan has already been spent, and just as many states are re-imposing mandatory closures of thousands of businesses in the face of spiking numbers of COVID-19 cases,” the coalition wrote.
BrandSource member and PPP loan recipient Mark Pardini of Pardini Appliance & Mattress in Ukiah, Calif., said he was alerted to the tax consequences of deductibility and loan forgiveness by his accountant. Mark’s advice to fellow members: be sure to consult a tax professional.
BrandSource, a unit of YSN publisher AVB Inc., is a nationwide buying group for independent appliance, mattress, furniture and CE dealers.