Before Thanksgiving, the U.S. Treasury Department and Internal Revenue Service issued a ruling that expenses that were forgiven by Paycheck Protection Program loans would not be tax-deductible. This decision prompted a bi-partisan response from U.S. senators who hope to overturn the Treasury ruling via legislation, and make PPP-forgiven business expenses tax deductible before 2020 comes to an end.
The federal government’s current funding bill only runs through December 11, so the best opportunity for additional tax-deductibility language to be passed into law will likely be ahead of that deadline. The HEROES Act, which the House passed in the spring but has since languished in the Republican-controlled Senate, would have codified tax-deductibility status for business expenses that were covered by PPP loans.
On Tuesday, a bi-partisan group of congressional members proposed a $908 billion compromise bill that is far short of the trillions in spending that the HEROES Act contained, but almost double the size of the bill that Senate Majority Leader Mitch McConnell countered with later in the day.
It is unclear if the bi-partisan proposal would include tax-deductibility for forgiven expenses (it appears that Sen. McConnell’s proposal does not), but any legislation would likely need to clear the Senate Finance Committee, whose chairman and ranking member authored the letter advocating for a legislative fix that ensures forgiveness.
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