NFDA needs your voice to avoid a “surprise” tax on small businesses that took advantage of COVID-19 loans from the federal government!
As many of you know, the Paycheck Protection Program (PPP) loans made possible through the Coronavirus Aid, Relief, and Economic Security (CARES) Act earlier this year were a lifeline for many small businesses, including funeral homes.
The concept of the PPP loans was simple: if a qualifying small business used a federally-guaranteed loan to pay their employees and cover certain non-payroll expenses, the loan would be forgiven. Congress included a provision in the CARES Act stating that any portion of a PPP loan that was forgiven would be excluded from gross income for tax purposes.
In spite of Congress’ clear intent, the IRS recently issued Notice 2020-32 that reversed this ruling and turned a tax-free loan forgiveness into taxable income! This could result in a surprise tax increase of up to 37% on small businesses when they file their taxes in 2020.
With the potential for additional financial harm to small businesses, the recent IRS Revenue Ruling 2020-27 states that expenses funded through a PPP loan are not deductible for 2020 if the taxpayer expects their loan to be forgiven, regardless of whether an application for forgiveness has been submitted.
While Republicans and Democrats in Congress have expressed their displeasure with the recent IRS notice and ruling, America’s small businesses need them to take action by passing legislation to address the tax treatment of PPP loan forgiveness.
According to the Small Business Administration, about 5.2 million small businesses – including funeral homes – received $525 billion in PPP loan funds during the pandemic, enabling them to pay their employees and keep their doors open. Without action by Congress, the IRS’s recent actions could mean even more small businesses would be forced to permanently close, putting millions of people out of work and causing further damage to the economy.
You have successfully helped us move important policy issues forward during the pandemic. Most recently, your voice made a tremendous difference in our push to get the National Academies of Science Engineering and Medicine to prioritize funeral directors in their guidance to state and federal public health officials on the forthcoming COVID-19 vaccine.
You can make a difference on this issue too!
Show your support for your colleagues and other small business owners, like yourself, by sending a message to your members of Congress asking them to pass legislation before the end of the year reversing the unfair steps taken by the IRS to change the tax treatment of PPP loans. Doing so will take just a few minutes of your time – we even have a pre-written message you can send.
Click here to get started!