Tell Congress we need SBA guidance on PPP loan forgiveness; AICPA challenging IRS released guidance
Saturday, May 2, 2020
Posted by: Ann Lupo
AICPA Challenging Nondeductibility of PPP-Related Expenses
The IRS released guidance (Notice 2020-32) to explain that a taxpayer that receives a loan through the Paycheck Protection Program (PPP) is not permitted to deduct expenses that are normally deductible under the Code, to the extent the expenses were reimbursed by a PPP loan that was then forgiven.
AICPA's position is that the intent of the CARES Act was to continue to allow businesses to deduct normal business expenses. AICPA is working on legislative language to get clarification. Read this Journal of Accountancy article explaining the provisions and the AICPA’s position.
If and when such legislation is introduced, AICPA and LCPA will likely seek members' involvement in advocating passage of the legislation.
LCPA Encourages You to Send Letters Now for Guidance on the PPP Loan Forgiveness Calculation
Friday, the AICPA, LCPA, and other state societies sent letters to U.S. Senators and Representatives asking them to reach out to the U.S. Treasury Department (Treasury) and the Small Business Administration (SBA) to request the immediate release of key guidance on the Paycheck Protection Program loan forgiveness calculation.
AICPA has been calling on the Treasury and the SBA to provide guidance and has even offered a list of recommendations. However, the SBA still has not released the guidance we know you all need.
But you can help us make sure they do. Please email your U.S. Senator and Representative as soon as possible. Ask them to exert pressure on Treasury and the SBA to issue needed guidance, using the profession's recommendations as their reference.
You can find your U.S. senators’ and representatives’ contact information at GovTrack.com.
To save time, you can copy and paste this draft email:
Please urge the Department of Treasury and the Small Business Administration to immediately release key guidance on PPP loan forgiveness calculations.
While existing guidance related to the PPP is appreciated, the lack of available guidance on the loan forgiveness calculations makes critical decisions (like staff retention) unnecessarily worrisome and difficult for current and prospective PPP borrowers. We have been told repeatedly that this guidance is forthcoming, but the guidance release date remains uncertain.
To ensure small businesses and eligible nonprofits can qualify for loan forgiveness in the PPP, we need a consistent and efficient approach to loan forgiveness that aligns with borrower operations and PPP intent. The American Institute of CPAs has released recommendations to help direct the SBA in the development of this guidance. The recommendations suggest that:
- The 8-week covered period under PPP should align with the beginning of a pay period, not the date loan proceeds are received;
- The 8-week period should commence when restrictions are lifted and the borrower is allowed to operate, not when loan proceeds are received, so small businesses have adequate funds to ramp up operations;
- Full-time job equivalents (FTEs) can be calculated using a simple wage-based proxy when hours worked are not tracked by the employer; and
- Payroll reduction calculations should be based on average payroll per employee per week, not total compensation per employee.
Without this guidance, small business, nonprofit PPP borrowers, and the CPAs who support them will face great difficulty with the forgiveness component of these loans.
Thank you for adding your voice to this effort. By banding together, we can better help the small businesses that truly need help during these times.
Ron Gitz CPA, CGMA
Society of Louisiana CPAs
Questions about the content of this Alert should be directed to LCPA State Government Relations Director Linda Babin.