January 4, 2021—With the passage of the “Consolidated Appropriations Act, 2021,” the National Conference of CPA Practitioners (NCCPAP), a national organization of small and mid-sized CPA practices, working with other organizations, can claim a major victory for business owners/taxpayers. After the CARES Act was passed in March, the Internal Revenue Service (IRS) came out with a notice stating that their position with regard to the Paycheck Protection Program (PPP) was that if a business received funding through PPP and it was forgiven by the Small Business Administration (SBA), then the deductions that such funding was used for would be disallowed for income tax purposes. This was directly opposite to the position that was intended by Congress when they passed the CARES Act, which was demonstrated by several attempts at legislation in both chambers of Congress to reverse the IRS position prior to this most recent bill’s passing.
While NCCPAP leadership sent letters to the U.S. Department of the Treasury, IRS, SBA and Congressional leadership on the House Ways and Means Committee and Senate Committee on Finance requesting that they take action on this, NCCPAP members wrote personal pleas to their state representatives in Congress, both in the House and Senate. This truly was “NCCPAP in Action”, especially since the organization whose members go to Capitol Hill every spring, was unable to do so this year because of COVID. In working with other organizations, including the American Institute of Certified Public Accountants (AICPA), this letter writing campaign was made by thousands of tax specialists. And this unified voice was heard.
Included in this legislation is the provision that all expenses paid for by PPP funds are now fully deductible. We want to thank the members of Congress for taking the concerns of the practitioner community into consideration and including this provision in the legislation.
However, this is not the end of the battle. Some states and localities have taken the position that PPP funding is taxable income to the business and must be reported as such. Despite the fact that the CARES Act considered these funds as non-taxable, many states are considering them otherwise. Practitioners should now consider contacting their State Representatives on this matter, reminding them that the spirit of the CARES Act was to help the owners of small businesses. By taxing these funds, it puts a further burden on the business owners, many of whom have been barely able to survive the pandemic, by now requiring them to have the funds necessary for a large state tax liability.
It’s time to take action, once again, on behalf of small business and taxpayers. We urge members of the CPA profession to contact representatives in their states where the potential increase in the tax burden may be a hardship.
The National Conference of CPA Practitioners (NCCPAP) is a professional organization comprised of Certified Public Accountants practicing in the United States. In addition to serving as a forum for education, networking, and community impact, NCCPAP also advocates for its clients. NCCPAP influences tax administration and tax policy by regularly meeting with Internal Revenue Service representatives, state taxing authorities, and elected officials. NCCPAP members represent over one million businesses and individual clients. The organization is headquartered in Woodbury, NY. For more information visit, www.NCCPAP.org.