Thanks.
by EricCartman (2024-02-26 14:32:42)

In reply to: Outdated. Congress codified in the next COVID bill  posted by gregmorrissey

Cannot Reply Return to Political

It is funny how the IRS went with the correct approach, only to be nuked by Congress.

FWIW, I agree that double-dipping here is wrong. Props to Mnuchin for taking the proper stance.

Last week, the IRS said it would deny those deductions, citing a tax code section that prevents companies from taking deductions tied to tax-exempt income. Allowing the deductions, the agency argued, would offer a double benefit.

Treasury Secretary Steven Mnuchin has defended the decision.

“If the money that’s coming is not taxable, you can’t double dip,” he said on Fox Business on Monday. “This is basically tax 101.”

If the deductions are allowed, businesses could use them to offset other income. If companies are losing money, they could use the deductions to offset past years’ income and get refunds.

For example, consider a company that gets a $100,000 loan and whose owner has a 22% tax rate. If the business pays $100,000 worth of deductible expenses and has the loan forgiven, that would provide a $22,000 tax benefit on top of the loan forgiveness.

Members of Congress say this benefit is exactly what they intended.

“As was expressed to Treasury during the development of the PPP, we did not intend to deny the deductibility of ordinary and necessary business expenses, nor did these small businesses expect to lose deductions for their business expenses when they applied for a PPP loan,” wrote Sen. Chuck Grassley (R., Iowa), Sen. Ron Wyden (D., Ore.) and Rep. Richard Neal (D., Mass.) in a letter to Mr. Mnuchin. All are leaders of the congressional tax-writing committees.

Their letter also argued that the IRS misinterpreted the existing tax code section that denies deductions related to tax-exempt income.

Messrs. Grassley and Wyden are also backing a bill from Sen. John Cornyn (R., Texas) that would expressly allow the deductions, according to Mr. Cornyn’s office. Rep. Lizzie Fletcher (D., Texas) is introducing a similar bill in the House.



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