The American institute of CPAs (AICPA) has joined more than 170 organisations in a letter to US House of Representative speaker Nancy Pelosi and Senate majority leader Mitch McConnell to encourage a technical correction to address the tax treatment of loan forgiveness under the Paycheck Protection Program (PPP).
PPP was adopted earlier in the year as part of the US’ Coronavirus Aid, Relief, and Economic Security (CARES) ACT which allowed for loan forgiveness under the programme to be excluded from the borrowers taxable income.
AICPA noted that although the intent of the CARES Act was to allow the deductibility of expenses related to loan forgiveness, the statute was silent. However, the publication of IRS Notice 2020-32 settled this policy by denying borrowers the ability to deduct the same expenses that qualified them for the loan forgiveness.
The group of organisations in their letter said: “denying the correct tax treatment of these loans will result in hardship for many struggling businesses”, in reference to more than five million businesses that have participated in the programme.
AICPA vice president of taxation Edward Karl said: “Millions of businesses across the country received much-needed relief during a time of global crisis and it is imperative that they receive the full measure of assistance intended by Congress. Many small businesses are still in economic distress and we urge Members of Congress to take action to ensure that the necessary corrections are included in the next relief package.”
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