As if things weren’t hard enough for small businesses, news comes from the National Newspaper Association that the Trump administration plans to claw back a chunk of the Paycheck Protection Program (PPP) funds businesses have used as a lifeline to keep their employees on the payroll.
When Congress passed PPP, the legislation made it clear that these loans would ultimately be forgiven if businesses used them for approved purposes, mostly payroll. And, the law ensured — in writing — that any forgiven amounts would not be taxable, meaning that businesses could use all those funds to keep folks employed.
Thousands of businesses in Maryland, including many in the resort area, signed up in good faith, secure in the knowledge that if they used those funds as Congress intended, they would be forgiven and not taxed. This program saved hundreds of jobs along the coast.
Well, Congress may have said one thing, but President Trump’s Treasury Secretary, Steve Mnuchin, has other ideas. According to the Treasury Department, forgiven funds may not be taxable, but the payroll businesses paid with those funds can no longer be considered a business expense. No matter how you look at it, disallowing businesses from claiming that payroll as an expense is the same thing as taxing the forgiven loan.
Now some members of the U.S. Senate weren’t amused by this bait and switch. Sens. Chuck Grassley (R-Iowa) and John Cornyn (R-Texas) have led a fight in the Senate to tell the Treasury Department that they meant what they said: the forgiven loans should not be taxable, including through the back door. Other senators are worried about the “optics” of standing up for small businesses, if you can imagine.
Treasury cannot be allowed to override Congress’ promise to our small business community. Business operators need to make that clear to its representatives in Congress.