Today, Congresswoman Lizzie Fletcher (D-TX-07), Congressman George Holding (R-NC-52), and Congressman Drew Ferguson (R-GA-03) led a bipartisan coalition of more than 170 colleagues calling on Congressional leadership to restore the tax deductibility of forgiven Paycheck Protection Program (PPP) loans for small businesses in any end-of-year COVID-19 relief legislation. 

“Keeping businesses operating and employees paid through the PPP is central to our efforts to mitigate the devastating impacts of the COVID-19 pandemic,” said Congresswoman Lizzie Fletcher.  “Congress' intent when creating the PPP was to bolster our small businesses, not create new burdens by prohibiting them from deducting forgiven expenses. I am glad to work with my colleagues to make this much-needed legislative clarification and protect our small businesses from a surprise tax bill.”

In their letter, the members note: “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.”

“The Paycheck Protection Program provided vital financial assistance to over 417,000 Texas small businesses. Unfortunately, IRS guidance limits the benefit of the PPP by prohibiting the deductibility of forgiven expenses. Unless Congress clarifies that forgiven PPP expenses are deductible, businesses struggling to survive will face a surprise tax increase. Representative Fletcher has demonstrated leadership in protecting already-strained small businesses from this surprise tax increase. NFIB Texas appreciates her efforts and looks forward to helping deliver for small businesses in this time of need,” said NFIB Texas State Director, Annie Spilman.  

Earlier this year, the Internal Revenue Service (IRS) issued guidance that would prevent business owners who have their PPP loans forgiven from claiming tax deductions on otherwise deductible expenses if they were paid through government aid.  In response, Fletcher introduced the Protecting the Paycheck Protection Program Act of 2020 to supersede this guidance and clarify that expenses paid with forgiven PPP loans remain tax-deductible, providing small businesses with additional relief as they face the economic impacts of COVID-19.  Fletcher’s legislation passed as a part of The Heroes Act.  

Today’s letter calls on Congressional leadership to ensure that this critical protection for small businesses remains in any end-of-year COVID-19 relief legislation.  Fletcher also led a group of 55 freshman Members of Congress in a similar effort earlier this week. 

Read the full text of the letter here.