This is from the weekly Politico tax newsletter, free to anyone who requests. Their daily report has a subscription fee. Congress could attach the clarification to the budget bill that has to be passed by December 11, but the risk of a government shutdown is more likely over some dispute involving VA funding.
"THE PPP SCENE: It probably shouldn’t have surprised anyone that Treasury Secretary Steven Mnuchin and the IRS just doubled down on their earlier finding that companies who received forgiven loans through the Paycheck Protection Program can’t write off normal business deductions paid for by those loans.
But the timing is interesting, right? President-elect Joe Biden is set to take office in less than two months, and the prevailing view among lawmakers is that Congress intended to allow the double-dipping on the PPP loans and the normal business deductions.
So is there a chance that a Biden administration could reverse Mnuchin on this? Or that Congress will throw its weight around to make it clear that businesses can have both? Let’s check this out from several different perspectives.
The IRS: It might sound odd, but on some level this is a pretty easy call for the tax collector. In short: If a company gets loans that they don’t have to pay back to the government, then they shouldn’t also get to deduct expenses paid for with that money.
With that in mind, Philip Hackney, a former lawyer in the IRS Chief Counsel’s office, said that — mechanically speaking — it wouldn’t be that hard for a new administration to revamp the revenue ruling just issued by Treasury and the IRS.
That said: “My guess is from a substantive position, though, the IRS would be hard pushed to change. This is because it is a pretty straightforward position for the IRS,” wrote Hackney, now a law professor at the University of Pittsburgh, in an email.
Which means that the best way for the IRS to change its mind is for Congress to give it no choice. Sen. John Cornyn (R-Texas) has sponsored a bill, S. 3612 (116), clarifying that businesses should still get normal business deductions even if they get forgiven PPP loans, along with a group of some three dozen bipartisan cosponsors.
Top tax writers have said they’re working to get that clarification into any year-end vehicle they can find. But given how this lame-duck session has kicked off, it’s no sure thing that an agreement like that is waiting to happen — and, so far at least, there’s no real momentum behind the legislation."
