Congress should allow businesses to claim deductions for expenses covered by forgiven PPP loans in its next round of pandemic relief, the National Restaurant Association said in a letter. The U.S. Department of the Treasury's decision to deny businesses such deductions has weakened the effectiveness of the program, according to the letter.
Restaurants have been particularly hurt by the economic slowdown caused by the pandemic, according to the letter, which said an estimated 17% of restaurants had closed.
The Internal Revenue Service in April announced that businesses could not deduct expenses covered by PPP loans, which were authorized by the Coronavirus Aid, Relief and Economic Security Act , saying that Internal Revenue Code Section 265 bars tax deductions for expenses paid through forgiven loans.
Further guidance released in November bars businesses from claiming deductions if they have a "reasonable expectation" of loan forgiveness.
--Editing by Neil Cohen.
For a reprint of this article, please contact email@example.com.