Interesting debate over Internal Revenue Code §265(a). The IRS and Treasury Secretary Steven Mnuchin say: “The money coming in the PPP is not taxable. So if the money that is coming is not taxable, you cannot double dip,” Mnuchin said in a televised interview this week. “You cannot say that you are going to get deductions for workers that you did not pay for.” This means companies receiving PPP funds that are forgiven cannot deduct the wages and business expenses that the PPP paid for.
Congress disagrees, so stay tuned for further possible legislation. Senate Finance Committee Chairman Chuck Grassley, R-Iowa, ranking member Ron Wyden, D-Ore., and House Ways and Means Committee Chair Richard Neal, D-Mass., wrote in a May 5 letter to Sec. Mnuchin: “[A]s was expressed to Treasury during the development of the PPP, we did not intend to deny the deductibility of ordinary and necessary business expenses, nor did these small businesses expect to lose deductions for their business expenses when they applied for a PPP loan.”