A Republican Senate Finance Committee member says he remains hopeful that a measure to allow companies to deduct Paycheck Protection Program (PPP) expenses will be passed by the Senate.
John Cornyn, R-Texas, told Tax Notes June 9 that he hopes the bill will get a vote by unanimous consent this week, saying “it appears to have broad support.” Cornyn, along with Senate Finance Committee Chair Chuck Grassley, R-Iowa, and ranking member Ron Wyden, D-Ore., are cosponsors of the Small Business Expense Protection Act of 2020 (S. 3612), which would allow businesses to claim a deduction on expenses incurred while using PPP loan money.
The lawmakers argue that Congress intended the expenses to be deductible despite the IRS's release of Notice 2020-32, 2020-21 IRB 837, which takes the opposite stance. Treasury Secretary Steven Mnuchin stood behind the agency’s notice and said allowing businesses to deduct expenses associated with their PPP loans would give them the opportunity to double dip. That argument has also thwarted the quick passage of the bill, Cornyn said.
“We’re slowly chipping away at these holds,” Cornyn said, though he wouldn't say how many lawmakers are blocking the bill. He later said on the Senate floor that without this change, the PPP loan program “will fail to deliver to the maximum of its most basic objective.”
Lawmakers made revisions to the program created by the Coronavirus Aid, Relief, and Economic Security (CARES) Act (P.L. 116-136) by passing the Paycheck Protection Program Flexibility Act of 2020 (H.R. 7010) to give businesses 24 weeks to use PPP loan money and still qualify for forgiveness.
The bill, signed into law June 5, also reduced the threshold for the amount of loan money required to be spent on payroll from 75 percent to 60 percent.
Potential Trouble in the House
While key lawmakers on the Finance Committee have backed the proposal to make PPP-related expenses deductible, some in the House don’t think the congressional intent was misinterpreted by the IRS.
House Ways and Means Committee ranking member Kevin Brady, R-Texas, told reporters in May that it was a discussion worth having, but that he doesn’t think lawmakers, when drafting the provision, intended to allow for double dipping. This is in stark contrast to Ways and Means Committee Chair Richard E. Neal, D-Mass., who signed a May 5 letter along with Grassley and Wyden asking Mnuchin to reverse the IRS notice.
Democrats included a provision in the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act (H.R. 6800) that would allow for the deductibility of PPP-related expenses.