A push for Paycheck Protection Program deductibility


Common Ground profiles members of opposing parties who are working together to advance issues important to hoteliers.



The Paycheck Protection Program (PPP) has been a centerpiece of the federal government’s efforts to assist small businesses impacted by the COVID-19 pandemic. Since applications opened, the Small Business Administration has approved over 5 million PPP loans totaling over $525 billion. The average PPP loan size for small businesses is $100,729.

One month after the PPP became available, the Internal Revenue Service (IRS) issued a notice to clarify that recipients of a PPP loan would not be able to file deductible business expenses if their loan was subsequently forgiven, thereby disallowing any otherwise allowable deduction for expenses paid by the recipient. In the Coronavirus Aid, Relief, and Economic Security (CARES) Act which created the PPP, Congress specifically excluded PPP loan forgiveness from income to provide a tax benefit to PPP recipients, boosting their after-tax capital to spur economic recovery.


Several members of Congress were swift to chastise the IRS’s PPP notice, yet regulatory change remains elusive. In response to this burdensome tax guidance, Sen. John Cornyn (R-TX) introduced the Small Business Expense Protection Act of 2020 (S.3612), a bipartisan bill to clarify Congress’s intent so that “no deduction shall be denied or reduced, no tax attribute shall be reduced, and no basis increase shall be denied, by reason of the exclusion from gross income.” Members in the House of Representatives also introduced a companion bill in May, yet Congress has not passed a COVID-19 relief package to serve as a vehicle for this clarification.

Sen. John Cornyn (R-TX), Sponsor of the Small Business Expense Protection Act of 2020
“The Paycheck Protection Program has been a lifeline to small businesses in Texas during the coronavirus pandemic. This legislation would erase any confusion by clarifying that expenses paid with a forgiven PPP loan can still be deducted from small businesses’ taxes.”

Sen. Ron Wyden (D-OR), Cosponsor of the Small Business Expense Protection Act of 2020
“Treasury’s guidance barring deductions for expenses paid by PPP loans is a gut punch for businesses struggling to stay afloat. It defies common sense for Treasury to provide help on the front end, but then take it away on the back end. Our bipartisan bill would fix this mistake and ensure businesses feel confident using PPP funds to keep their workers employed.”


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