SMACNA Encourages Congress to Support the Small Business Expense Protection Act, S. 3612/H.R. 6821
In a recent letter to the U.S. House, SMACNA expressed its support for the bipartisan Small Business Expense Protection Act (S. 3612/H.R. 6821), which will ensure that small businesses can deduct eligible expenses paid with a forgiven Paycheck Protection Program (PPP) loan from their taxes. Without this relief, millions of small businesses will face significant tax liabilities at a time when they can least afford additional financial burdens.
When Congress approved the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the PPP was designed to help small businesses survive major liquidity shortfalls, retain employees, and withstand an unprecedented economic disruption due to the COVID-19 pandemic. However, the Internal Revenue Service’s (IRS) Notice 2020-32 undermines the PPP and creates a severe challenge for small businesses by stating that normally deductible business expenses will not be deductible if the business pays the expense with a PPP loan that is subsequently forgiven. Congressional intent was clear within Section 1106(i) of the CARES Act, which states:
(i) TAXABILITY — For purposes of the Internal Revenue Code of 1986, any amount which (but for this subsection) would be includible in gross income of the eligible recipient by reason of forgiveness described in subsection (b) shall be excluded from gross income.
The Small Business Expense Protection Act or related amendments will fix this misinterpretation and reestablish the ability of small businesses that have received PPP loans to deduct business expenses as the CARES Act intends. SMACNA’s membership includes thousands of firms specializing in energy saving performance contracting, facility energy management and residential, commercial, public and industrial energy system efficient retrofits. Based upon our extensive experience with PPP loans across the nation we strongly support efforts to reverse this misguided IRS interpretation of the CARES Act as passed by Congress and signed into law.