| MHI, along with a coalition of business organizations, sent a letter to Congress challenging guidance by the Internal Revenue Service on deductible expenses covered by funds from the Small Business Administration’s Paycheck Protection Program (PPP). The IRS guidance, which was released last week, states that tax deductible expenses covered by PPP loan funds will not be eligible for deduction. In the letter, the coalition argues that this guidance does not conform with Congress’ intent in passing the Coronavirus Aid, Relief and Economic Security Act (CARES Act), which established the PPP. Several members of Congress have publicly affirmed that the IRS guidance conflicts with the intent of the bill. Eliminating those deductions per the guidance could substantially increase the tax liability of PPP loan recipients. For C-Corporations, it means an increase in the net after tax liability of PPP loan forgiveness by as much as 21 percent. For pass-through businesses, such as S-Corporations, the marginal increase could be as high as 37 percent. Once state income taxes are included, the impact could be even greater. |