Senate Finance Chairman Chuck Grassley co-sponsored a bill introduced Wednesday that would allow business expense deductions from coronavirus-related loans. (AP)
"Unfortunately, Treasury and the IRS interpreted the law in a way that's prevented businesses from deducting expenses associated with PPP loans," Grassley said. "That's just the opposite of what we intended and should be fixed. This bill will do just that."
The loan program and several tax relief provisions aimed to help businesses endure the economic downturn caused by the coronavirus pandemic were included in the Coronavirus Aid, Relief and Economic Security Act , or CARES Act, legislation President Donald Trump signed in March.
The CARES Act will provide more than $2 trillion to address the economic fallout from the global outbreak of COVID-19, the respiratory disease caused by the novel coronavirus.
Last week, the Internal Revenue Service issued Notice 2020-32 , which concluded that businesses may not take deductions for qualified expenses covered by Paycheck Protection Program loans, including wages, rent, mortgage interest, employees' health care benefits and utilities.
Wyden said the IRS guidance was a "gut punch" for businesses relying on the loans to meet payroll and other obligations, making clear that those entities could face a major tax bill without the ability to deduct those qualified business expenses the following year.
"It defies common sense for Treasury to provide help on the front end, but then take it away on the back end," Wyden said.
The American Institute for Certified Public Accountants announced support for the legislation in a blog post Wednesday.
Grassley, Wyden and House Ways and Means Committee Chairman Richard Neal, D-Mass., sent a joint letter to Treasury Secretary Steven Mnuchin on Tuesday, arguing that the IRS notice was contrary to lawmakers' intent in exempting loan forgiveness from income.
In the House of Representatives, Rep. Lizzie Fletcher, D-Texas, announced Tuesday that she would introduce similar legislation in her chamber that would allow Paycheck Protection Program loan recipients to deduct qualified expenses, also arguing that the proposed language would reflect congressional intent.
Cornyn's office didn't respond to a request for comment about how the legislation could fit into negotiations between the House, Senate and White House on a potential future round of legislation to aid businesses, first responders and families during the novel coronavirus pandemic.
During a weekly briefing, Senate Majority Leader Mitch McConnell, R-Ky., said Republicans would like to wait to see how the provisions in the CARES Act are performing before considering another relief package.
--Additional reporting by Alan K. Ota and Stephen Cooper. Editing by Neil Cohen.
For a reprint of this article, please contact firstname.lastname@example.org.