Blog Post

NAFC Urges Congress to Allow PPP Loan Tax Deductions

In a letter sent to leaders on Capitol Hill, ATA's National Accounting and Finance Council is urging Congress to allow tax deductions for ordinary business expenses paid for using SBA Paycheck Protection Program loans. While Congressional intent was for these funds to be entirely untaxed, Treasury Secretary Mnuchin has firmly opposed deductions for these types of expenses and the IRS has issued guidance disallowing any deduction for expenses paid using forgiven PPP funds. Bipartisan support exists for a fix on this issue, which could come from the next round of stimulus funding or from a standalone bill, H.R. 6754, the Protecting the Paycheck Protection Program of 2020.

Below is the text of the letter sent by NAFC Executive Director Jennifer Wieroniey:

As you consider additional stimulus efforts to combat the economic effects of the COVID-19 pandemic, the American Trucking Associations’ National Accounting and Finance Council urges you to consider making a technical correction to the deductibility of ordinary business expenses paid using forgiven Paycheck Protection Program (PPP) loans. Specifically, this organization supports the passage of H.R. 6754, the Protecting the Paycheck Protection Program of 2020.

In keeping with the Congressional intent of the program, these expenses should be fully deductible to provide America’s small businesses with much-needed liquidity. The majority of trucking companies in the U.S. are small businesses, 70% of ATA members are companies with 20 or fewer trucks. While the effects of the COVID-19 crisis have been varied among motor carriers, many have suffered a tremendous economic loss and are at risk of closing their doors for good.

When the CARES Act was passed, Congress made clear that any loan forgiveness under the PPP program would be excluded from the borrower’s taxable income.  Further, it is clear that IRS Notice 2020-32 which disallows deductions for expenses paid using those loans is contrary to Congressional intent. Senate Finance Committee Chairman Chuck Grassley (R-Iowa) and Ranking Member Ron Wyden (D-Ore.) issued a statement on November 19, 2020, “We explicitly included language in the CARES Act to ensure that PPP loan recipients whose loans are forgiven are not required to treat the loan proceeds as taxable income. As we’ve stated previously, Treasury’s approach in Notice 2020-32 effectively renders that provision meaningless.”  

IRS and Treasury have reasoned that they are preventing double dipping by disallowing these deductions, however their actions remove any tax benefit from the tax-free loans. If a business has $100,000 of PPP loans forgiven and excluded from its income, but then is required to add back $100,000 of denied business expenses, the result is the same as if the loan forgiveness was fully taxable – this business would be faced with an unexpected $21,000 federal tax obligation, potentially much more if they are a pass-through business. Failure to pass a technical correction on this matter would provide an undue hardship for thousands of America’s small businesses. 

On behalf the tens of thousands of small trucking businesses and the millions of drivers they employ, the ATA’s National Accounting & Finance Council thanks you for the economic relief that you have provided so far and for your tireless efforts to help American businesses cope with this unprecedented crisis. The liquidity provided by the Paycheck Protection Program has enabled fleets across America to keep on trucking during these difficult times and a technical correction regarding business expense deductibility is a necessary step toward a strong economic recovery. We appreciate your consideration and welcome the opportunity to discuss further.