Small Businesses Shouldn’t Be Stuck with Tax Bill for PPP Loan

This week Congressman Chris Pappas (NH-01) continued to fight for New Hampshire’s small businesses by co-sponsoring legislation and calling on House leadership to restore the tax deductibility of forgiven Paycheck Protection Program (PPP) loans for small businesses impacted by COVID-19. 

Pappas joined these calls following the Internal Revenue Service (IRS) issuing guidance that would prevent business owners with forgiven PPP loans from claiming tax deductions on otherwise deductible expenses. Without action, Granite State small businesses may face crippling surprise taxes.

The IRS’s guidance not only goes against how Congress intended the small business lending program to operate, it was also issued after a vast majority of the loans were given out by the Small Business Administration. This has left tens of thousands of small businesses in New Hampshire with significant tax bills that many had not planned for when they received the loan. 

Congressman Pappas has previously voted to override this IRS guidance and provide tax deductibility on PPP loans when he supported the passage of the Heroes Act in the House, which included a provision to restore original Congressional intent. 

“The Paycheck Protection Program has been a lifeline for so many small businesses, allowing them to keep their lights on and retain employees as we continue to grapple with the impacts of COVID-19,” said Congressman Pappas. “The guidance issued by the IRS goes against the very intent of this program by saddling our struggling businesses with an additional, unexpected financial burden when they can least afford it. Congress must correct this problem and make this much-needed clarification to protect small businesses from a surprise tax.”

Congressman Pappas co-sponsored H.R. 6754, Protecting the PPP Act, which would supersede recent IRS guidance and ensure tax deductibility of PPP Loans are restored. 

Additionally, he joined his colleagues in two bipartisan letters to House Speaker Nancy Pelosi and Minority Leader Kevin McCarthy calling on them to restore the PPP loan deductibility back to its original intent. 

As of this summer, PPP helped retain more than 123,000 jobs in the First District through its ability to support more than 14,500 employers with more than $1.1 billion in loans. Statewide, New Hampshire small businesses have received more than $2.5 billion in PPP loans. 

Pappas has also been a strong advocate for transparency and reform within the PPP program. He called on Treasury Secretary Steve Mnuchin to release all PPP data, and supported the TRUTH Act in the House, which would direct the Small Business Administration (SBA) to explain and justify all disbursements of coronavirus relief funds, ensuring transparency and accountability from the agency.

In May, following conversations with hundreds of business leaders from across New Hampshire, Congressman Chris Pappas proposed recommendations to help ensure that the Payroll Protection Program will more effectively serve the needs of Granite State small businesses.

Pappas was also an original co-sponsor of the Paycheck Protection Program Flexibility Act of 2020, which extends the covered period during which a loan recipient may use such funds for certain expenses while remaining eligible for forgiveness, raises the non-payroll portion of a forgivable covered loan amount from the current 25% up to 40%, and increases the repayment time period of the loans.