AICPA joins enterprise teams in contacting for PPP expenditure forgiveness legislation

The American Institute of CPAs has joined about 560 company and trade companies in urging Congress to pass legislation to let providers that have obtained forgiveness on their Paycheck Safety System loans to be capable to deduct expenses from their taxes.

The AICPA is objecting to latest steerage from the Inside Revenue Support and the Treasury Section that it argues goes from the intent of the CARES Act, the monthly bill passed by Congress in March in response to the COVID-19 pandemic that recognized the Little Enterprise Administration’s PPP loans.

The AICPA sent a letter Thursday to congressional leaders inquiring them to include PPP cost defense, warning of “the specter or a surprise tax increase of up to 37 {f13b67734a7459ff15bce07f17c500e58f5449212eae0f7769c5b6fbcf4cc0c4} on tiny companies when they file their taxes for 2020.”

“At the onset of the COVID-19 pandemic, Congress responded with speed, cooperation and an eye to protecting against the worst possible financial results. We talk to that you bring that identical spirit of urgency and cooperation through this ‘lame duck’ session to prevent an avoidable disaster for thousands and thousands of smaller companies that, without Congressional action, will facial area a shocking and, in a lot of conditions, insurmountable tax monthly bill up coming 12 months,” the letter study.

The letter is only the hottest stage in the exertion by the AICPA to drive for the improvements. Previous month, the AICPA asked CPAs to make contact with their members in Congress and urge them to back the laws, recognized as the Compact Business Expense Safety Act (see story). Previously that month, the IRS and the Treasury issued both equally a income ruling Rev. Rul. 2020-27, and a revenue technique, Rev. Proc. 2020-51, basically stating that considering the fact that businesses are not taxed on the proceeds of a forgiven PPP financial loan, the expenditures are not deductible (see story). Earlier this calendar year, the IRS had indicated its position in Notice 2020-32 about deducting costs for PPP financial loans. The detect clarifies that no deduction is allowed under the Tax Code for an price that is or else deductible if the payment of the price effects in forgiveness of the personal loan less than the CARES Act, and the cash flow connected with the forgiveness is excluded from gross earnings. In August, the AICPA joined with a lot more than 170 organizations in sending a letter to House Speaker Nancy Pelosi, D-California, and Senate The vast majority Chief Mitch McConnell, R-Kentucky, encouraging a technological correction to tackle the tax treatment method of mortgage forgiveness PPP.

The AICPA argues that the IRS advice contradicts the intent of Congress, reworking tax-no cost financial loan forgiveness into taxable profits.

“Notice 2020-32 evidently circumvents the unique intent of Congress with regard to the PPP application,” explained AICPA vice president of taxation Edward Karl in a statement. “The COVID-19 pandemic has experienced a extreme economic influence on our country and now, a lot more than ever, 1000’s of businesses will need a minimal added relief to support them endure. It’s essential that Congress functions on this difficulty quickly and we strongly stimulate them to do so.”

A letter cosigned by point out CPA societies from all 50 states and 4 territories, including the New York Condition Culture of CPAs, together with the AICPA has also been sent to congressional leadership urging motion on this problem.

“We keep on to hear from state CPA societies, our associates and CPAs’ consumers that the PPP bank loan authorized them to pivot their business, stay open and hold staff hired all through the pandemic,” Karl stated in a assertion. “PPP financial loans have helped corporations regulate troubles this sort of as offer chain interruptions, sick employees and customers’ switching buying behavior. To stress businesses with extra, most likely substantial taxes at this time does not mirror Congressional intent.”

The AICPA has also been calling for the SBA to simplify its questionnaire for forgiveness of PPP loans of $2 million or more (see story). It joined with extra than 80 other trade and company groups in a letter past month expressing worry about the loan requirement questionnaires currently being sent by the SBA to PPP debtors who acquired loans of $2 million or additional. The AICPA complained that the questionnaires are prolonged and burdensome and call for in depth documentation.

Accounting companies have been listening to complaints about the questionnaires from some of their purchasers. “For a lot of of our clients, the questionnaires have induced issue pertaining to their ‘need’ for the PPP personal loan,” said Justin Elanjian, an assurance spouse at Aprio. “The questionnaires ask for info that debtors ended up not privy to when certifying their will need. We at Aprio, alongside with debtors, lenders and other interested get-togethers as evidenced in the AICPA’s letter, ended up hopeful that the comment period would provide the SBA with enough induce for revising the questionnaires, but it appears we’ve appear up quick.”

Creditors have also been voicing their complaints. “The very first enterprise day after the comment period ended, we commenced hearing from several loan companies that numerous requests for the originally proposed questionnaire were being submitted by the SBA by way of their portal,” added Elanjian. “This is disappointing to us, our shoppers and business enterprise who manufactured their certification in good religion centered on the pertinent info at the time of application. When looking at eligibility, it is crucial to keep in thoughts that the questionnaires, as overreaching as they might seem to be, might not only provide as a likely disqualifier, but also as a qualifier of have to have for the PPP financial loan.”