By Jeb Bladine • President / Publisher • 

Jeb Bladine: Future may depend on May-June events

Imagine staring at your smoldering house while firefighters pack up their equipment and prepare to leave. You feel grateful for their quick response that saved much of the structure. But then the chief hands you this note:

“We’re glad we could be of service. We calculate that our costs related to this fire will be $37,500, which will be added to your taxable income for this year.”

Whatchamacolumn

Jeb Bladine is president and publisher of the News-Register.

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That, in the words of U.S. Sen. Ron Wyden of Oregon, would be a real “gut punch.”

Actually, Wyden was referring to the IRS ruling that expenses paid with forgivable SBA loans will not be deductible for tax purposes. Essentially, that makes the SBA grants taxable.

Wyden is one of five senators who have introduced the Small Business Expense Protection Act to overturn that IRS decision. Led by Republican Sen. Charles Grassley of Iowa, the sponsors include Democrat Wyden, Democrat Thomas Carper of Delaware, Republican John Cornyn of Texas and Republican Marco Rubio of Florida.

The Payroll Protection Act, sponsors said, was not intended to increase taxes.

“Our intent was clearly to make sure small businesses had the liquidity and the help they needed to get through these difficult times,” said Grassley. Loss of tax deductibility is “the opposite of what we intended and should be fixed.”

Does that sound obvious? Actually, it’s complicated and likely contentious.

PPP forgivable loans are a lifeline to many businesses that otherwise might fail altogether. For them, adding taxability to the grants could turn financial salvation into future tailspin.

Other businesses, however, may realize renewed profitability with PPP funds after already receiving favored competitive status compared to other companies. Some will argue that full deductibility in those situations creates an unfair double advantage for PPP recipients.

This latest debate arises while PPP funds already are subject to mass confusion about exactly how they can be used to avoid loss of loan forgiveness. Interim rules are less than fully enlightening — more rules will be coming — but businesses must complete all forgivable spending in eight weeks.

Meanwhile, all these financial intrigues may become irrelevant if the “opening of America” produces massive new outbreaks of COVID-19 cases. It’s ironic that the outcome of that high-risk social experiment coincides almost exactly with the rapid spending period for PPP loan funds.

When it comes to high drama, Americans — and the world — appear to be all-in with the highly anticipated events of May-June 2020.

Jeb Bladine can be reached at jbladine@newsregister.com or 503-687-1223.

Comments

Don

The loan is forgivable and not taxable. The loan eliminates a like amount of those expenses. So why do you think the expenses that the government paid should be deductible?