On May 7, AGC organized 152 trade associations in calling for Congress to nullify recent Internal Revenue Service (IRS) guidance essentially making business expenses—which are usually deductible—paid by forgiven Paycheck Protection Program (PPP) loan funds fully taxable. The impact of this IRS guidance is significant. The effect will be to substantially increase the tax liability of PPP loan recipients at the worst possible time. For C-Corporations, it means an increase in the net after tax liability of PPP loan forgiveness by as much as 21%. For pass-through businesses, such as S Corporations, the marginal increase could be as high as 37%. Once state income taxes are included, the impact will be even greater. AGC is committed to ensuring a fix to this IRS guidance is enacted in the next COVID-19 relief bill.
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