Washington, D.C. (December 18, 2020) – The American Institute of CPAs (AICPA) today said that any proposals for a compromise on PPP expense deductibility are extremely problematic for small businesses and further ignores Congressional intent. A compromise that would allow deductibility for PPP loans below a certain level but explicitly disallows deductibility for loans above that level could possibly result in an unexpected tax increase during a time that millions of businesses are struggling to survive.
Barry Melancon, CPA, CGMA, AICPA president and CEO said, “Businesses of all sizes – specially small and minority owned businesses in underserved and rural areas – are desperate for Congress to provide economic relief and cannot afford to be hit with a large tax increase next year. The vast majority of PPP borrowers requested the loan in good faith and in the face of great financial uncertainty. This proposal splits PPP borrowers into ‘good’ and ‘bad’ groups and distracts Congress from its important work of getting relief to small businesses and their employees. The U.S. needs a thriving business community to recover and proposals such as this risk further economic slowdown.”
The compromise proposal should not be allowed because:
The threshold, at any amount, encourages the thinking that small PPP borrowers are “good” and larger PPP borrowers are “bad.” When the PPP loans became available, companies feared the worst and faced significant economic uncertainty. They should not be penalized for the loan size granted by the Small Business Administration.
It would still burden many businesses with a significant tax bill in 2021. That was not Congress’ intent when it passed the CARES Act and legislative efforts are underway to clarify this.
It turns the PPP into a revenue raising tool, rather than a relief program for businesses struggling to remain open and employ staff.
AICPA has strongly advocated for legislation that would clarify Congress’ intent and supports the passage of S. 3612 and H.R. 6821, the Small Business Expense Protection Act of 2020, or of H.R. 6754, the Protecting the Paycheck Protection Program Act of 2020. Recently, AICPA asked its more than 431,000 members to contact their Congressional representatives and urge them to include legislation protecting PPP expense deductibility in any year-end must-pass bill (read more).
Background for Media
AICPA submitted letters to Congress on May 28, 2020, in support of H.R. 6754 and H.R. 6821, and on July 20, 2020, and Aug. 4, 2020 (with a coalition of organizations), urging inclusion of PPP expense deductibility in the next coronavirus relief legislation.
AICPA’s fourth-quarter AICPA Economic Outlook Survey reported that more than half of business executives (54 percent) say they expect some negative impact to their organizations if a renewed round of economic stimulus does not materialize by early 2021. (Read more.)
About the American Institute of CPAs
The American Institute of CPAs (AICPA) is the world’s largest member association representing the CPA profession, with more than 431,000 members in the United States and worldwide, and a history of serving the public interest since 1887. AICPA members represent many areas of practice, including business and industry, public practice, government, education and consulting. The AICPA sets ethical standards for its members and U.S. auditing standards for private companies, nonprofit organizations, and federal, state and local governments. It develops and grades the Uniform CPA Examination, offers specialized credentials, builds the pipeline of future talent and drives professional competency development to advance the vitality, relevance and quality of the profession.