Bipartisan momentum is building in Congress to let small businesses get tax-free loan forgiveness while also deducting their expenses, a move that would provide clarity and unusually generous tax benefits, the Wall Street Journal reported. Top lawmakers in both parties yesterday asked the Internal Revenue Service to reverse a ruling that would deny those deductions. And senior senators backed legislation that would overturn the IRS ruling if the agency doesn’t change its position, though how quickly such a bill could move through Congress is far from certain. The outcome could have hundreds of billions of dollars of consequences for businesses benefiting from the Paycheck Protection Program, which Congress created in March to help small-businesses weather the economic effects of the coronavirus pandemic. Under that program, companies can get low-interest loans and then have those loans turn into grants if the money is used to maintain payrolls and pay other expenses. The program has proven exceptionally popular, and Congress replenished it after the money ran out within weeks. PPP is now authorized for $660 billion. The economic-relief law from March explicitly says that the loan forgiveness doesn’t count as taxable income, as it would under normal tax rules. But that law was silent on whether companies could still deduct the associated wages and other expenses.
