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Letter to Hon. Nancy Pelosi, Speaker of the House; Hon. Kevin McCarthy, House Minor Leader; Hon. Steny Hoyer, House Majority Leader; Hon. Steve Scalise, House Minority Whip - Rep. Austin Scott Fights for COVID-19 Tax Relief for Small Businesses

Letter

By: Roger Marshall, Carol Miller, Alex Mooney, David McKinley, Mike Gallagher, Tom Tiffany, Glenn Grothman, Ron Kind, Derek Kilmer, Cathy McMorris Rodgers, Dan Newhouse, Jaime Herrera Beutler, Suzan DelBene, Peter Welch, Stacey Plaskett, Abigail Spanberger, Denver Riggleman III, Brian Babin, Marc Veasey, Colin Allred, Michael Burgess, Roger Williams, Chip Roy, Jodey Arrington, Sheila Jackson Lee, Vicente Gonzalez, Mike Conaway, Michael McCaul, Lizzie Fletcher, Lance Gooden, Van Taylor, David Kustoff, Jim Cooper, Tim Burchett, Dusty Johnson, Ralph Norman, Jr., Jeff Duncan, Joe Cunningham, David Cicilline, Conor Lamb, Mike Kelly, Jr., Guy Reschenthaler, Fred Keller, Lloyd Smucker, Dan Meuser, Susan Wild, Chrissy Houlahan, Brian Fitzpatrick, Kurt Schrader, Peter DeFazio, Suzanne Bonamici, Kendra Horn, Tom Cole, Markwayne Mullin, Kevin Hern, Anthony Gonzalez, Steve Stivers, Dave Joyce, Tim Ryan, Troy Balderson, Bob Gibbs, Bill Johnson, Bob Latta, Joyce Beatty, Brad Wenstrup, Steve Chabot, Chris Jacobs, Brian Higgins, Joe Morelle, John Katko, Anthony Brindisi, Antonio Delgado, Jerry Nadler, Grace Meng, Kathleen Rice, Thomas Suozzi, Lee Zeldin, Mark Amodei, Dina Titus, Xochitl Torres Small, Mikie Sherrill, Tom Malinowski, Joshua Gottheimer, Andy Kim, Jeff Van Drew, Ann Kuster, Chris Pappas, Jeff Fortenberry, Ted Budd, Richard Hudson, Jr., David Rouzer, David Price, Greg Murphy, George Holding, Greg Gianforte, Steven Palazzo, Bennie Thompson, Trent Kelly, Jason Smith, Billy Long, Vicky Hartzler, Ann Wagner, Peter Stauber, Tom Emmer, Angie Craig, Haley Stevens, Elissa Slotkin, Tim Walberg, Dan Kildee, John Moolenaar, Jack Bergman, Chellie Pingree, Jamie Raskin, David Trone, Dutch Ruppersberger, Andy Barr, John Yarmuth, James Comer, Jr., Ron Estes, Sharice Davids, Larry Bucshon, André Carson, Jim Baird, Jackie Walorski, Darin LaHood, Cheri Bustos, Adam Kinzinger, Lauren Underwood, Mike Bost, Bill Foster, Brad Schneider, Sean Casten, Mike Quigley, Mike Simpson, Russ Fulcher, Michael San Nicolas, Rick Allen, Drew Ferguson, Buddy Carter, Francis Rooney, Greg Steube, Charlie Crist, Jr., Gus Bilirakis, Daniel Webster, Darren Soto, Bill Posey, Michael Waltz, John Rutherford, Ted Yoho, Neal Dunn, Jahana Hayes, Jim Himes, Joe Courtney, John Larson, Jason Crow, Ken Calvert, Mark Takano, Gil Cisneros, Tony Cárdenas, Judy Chu, Julia Brownley, Jimmy Panetta, Jim Costa, Josh Harder, Ami Bera, Mike Thompson, Jared Huffman, Greg Stanton, Ruben Gallego, David Schweikert, Paul Gosar, Ann Kirkpatrick, Tom O'Halleran, Rick Crawford, Terri Sewell, Bradley Byrne, Austin Scott
Date: Dec. 9, 2020
Location: Tifton, GA
Issues: Business, Consumers, and Employees Legislative Branch

Dear Speaker Pelosi, Leader McCarthy, Leader Hoyer, and Whip Scalise,

Thank you for your continued efforts to provide assistance to the American people through these challenging times. As we continue working on additional coronavirus assistance measures, we want to bring your attention to an important issue affecting small businesses across the United States and ask for your help in providing much-needed relief.

Over the past few months, statewide shutdowns in response to the pandemic have had devastating effects on small businesses throughout the country. Thousands of small businesses have permanently closed, while capacity restrictions and reopening costs have drastically cut revenue streams for those that have remained open.

In response to these dire economic conditions, Congress enacted the Paycheck Protection Program (PPP) to provide more than $600 billion for forgivable loans to small businesses to help keep employees on payroll and continue operating. Since its enactment, over 5 million loans have been made to businesses in all fifty states. This program has helped keep our economy from total collapse by providing a lifeline to small businesses with no alternative funding source.

The PPP was intended to provide vital tax-free assistance for certain business costs in unprecedented economic circumstances. Congress specifically included Section 1106(i) in the CARES Act to exclude forgivable loan assistance from taxable income. On April 30, however, the Internal Revenue Service (IRS) released Notice 2020-32 disallowing the deduction of forgiven expenses.

As Chairman Grassley, Chairman Neal, and Ranking Member Wyden wrote in a letter to Secretary Mnuchin on May 5, 2020 , this notice is contrary to Congressional intent. Section 1106(i) of the CARES Act was put in place specifically to ensure forgivable loan proceeds would be tax free, stating that "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." Notice 2020-32 essentially ignores this section and effectively makes forgivable loans taxable despite Congress's clear intent to allow the deduction of necessary business expenses.

To make matters worse, on November 18, 2020, the IRS released Revenue Ruling 2020-27 stating that PPP recipients who had not even received or applied for forgiveness could not deduct normal business expenses if they reasonably expected their loans to be forgiven.

These notices are not only contrary to Congressional intent, but in fact changed the terms of the loan after a majority of PPP applicants had already applied for and received funds. Over 84% of total PPP applications were submitted prior to April 17, when the program first expired. This unfairly changed the rules of the program after the overwhelming majority of participants had joined.

Without Congressional action, small businesses are estimated to pay over $120 billion in taxes on forgivable PPP loans. At a time when many are struggling to keep their doors open each day, we cannot saddle small businesses with a massive surprise tax bill.

For this reason, we ask that you include a fix to clarify that recipients of forgivable PPP loans can claim normal business expense deductions in any end-of-year legislation. Thank you for your consideration of this request.

Sincerely,


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