Businesses can expect surprise tax after November
As if things weren’t hard enough for Iowa’s small businesses, news comes that the Trump administration plans to claw back a chunk of the Paycheck Protection Program (PPP) funds legitimate businesses have used as a lifeline to keep their employees on the payroll.
When Congress passed PPP, the legislation made it clear that these loans would ultimately be forgiven if businesses used them for approved purposes, mostly payroll. And, the law ensured – in writing – that any forgiven amounts would not be taxable, meaning that businesses could use all those funds to keep folks employed.
More than 58,000 Iowa businesses, including this one, signed up in good faith, secure in the knowledge that if they used those funds as Congress intended, they would be forgiven and not taxed. This program helped support approximately 51 million jobs in our state.
Well, Congress may have said one thing, but President Donald Trump’s Treasury Secretary, Steve Mnuchin, has other ideas.
According to the Treasury Department, forgiven funds may not be taxable, but the payroll businesses paid with those funds can no longer be considered a business expense. Now, we don’t know Mr. Mnuchin personally, but our guess is that, as Treasury Secretary, he probably knows something about math – disallowing businesses from claiming that payroll as an expense is the same thing as taxing the forgiven loan.
Which means that Marshalltown’s small businesses are going to get hit with a huge surprise tax bill, but most won’t know it until – wait for it – after the November election! Surprise!
Now some members of the U.S. Senate weren’t amused by this little “Lucy with the football” tomfoolery. U.S. Sens. Chuck Grassley (R-Iowa) and John Cornyn (R-Texas) have led a fight in the Senate to tell the Treasury Department that they meant what they said – the forgiven loans should not be taxable, including through the back door. Other senators are worried about the “optics” of standing up for small businesses, if you can imagine.
Our own Grassley was an early supporter of a bill Cornyn introduced (S-3612) to fix the problem. Treasury cannot be allowed to override Congress’ promise to our small business community.
Some Marshalltown businesses that have received PPP funds, and the number of reported retained jobs through those funds include:
• Loans of $2 million to $5 million — Clinic Investments, 383 jobs; MARSHALLTOWN Company, 352;
• Loans of $1 million to $2 million –Central Iowa Residential Services, 179; R.S. Stover Company, 78; RACOM Corporation, 121
• Loans of $350,000 to $1 million — Bruin Manufacturing, 43; Center Associates, 0; Clapsaddle-Garber Associates, 55; Concrete, Inc., 26; Grandview Heights, 103; Iowa River Hospice, 55; Moore, McKibben, Goodman and Lorenz, 29; Raymon Enterprises, 83; Wolfe Clinic Eye Centers, 31; Wolfe Eye Clinic, 40
• Loans of $150,000 to $350,000 — Anderson Process and Instrumentation Solutions, 8; B&G HVAC, 16; Central Iowa Farm Store, 21; Ciro Diiorio Masonry & Landscaping, 16; Clemons, Inc., 0; Dave Wright BGH, 32; Dave Wright CDRJ, 16; Determan & Merrill, 12; Electric Supply of Marshalltown, 0; French Grove Enterprises, 11; Ft. Dodge Distributing, 20; Jensen, Inc., 21; Kapaun & Brown, 14; Koehler Insurance, 22; M. Gervich & Sons, 0; Marshalltown Vision, 21; Marshalltown Young Men’s Christian Association – YWCA, 60; Mid-Iowa Workshops, 91; Mitchell Family Funeral Services, 28; Ramms Construction, 40; Strand’s, Inc., 11; Structural Engineers, 9; Substance Abuse Treatment Unit of Centra, 0; The McGregor Company, 39; The Willows of Marshalltown, 53; and Trending Media, 19.