After passing legislation to amend a forgivable loan program for coronavirus-stricken small businesses on Wednesday, the Senate was working on a related bill Thursday that would give borrowers another tax break on their loans.
Sen. John Cornyn, R-Texas, who introduced the bill in early May, told reporters that leadership was trying to pass the bipartisan measure, but said it still faced obstacles. The bill would give borrowers a second tax benefit, a practice sometimes described as double-dipping. The borrowers already don't have to treat forgiven loans as income and the bill would allow them to get a business expense deduction.
“If I’m not mistaken, we did hotline it — got a couple of holds and we’re working through those one at a time,” he said Thursday afternoon. But Senate Majority Leader Mitch McConnell, R-Ky., wrapped up later in the afternoon, deferring any action until at least next week.
Senate hotlining involves leadership quickly polling members to see if any have issues with passing it by unanimous consent. It’s a way to pass uncontroversial measures without hours of floor debate.
Senate backers of the bill may also be facing resistance from the administration. Treasury Secretary Steven Mnuchin has resisted calls to allow the deduction by changing the rules of the PPP program, calling it a "double dip." The Treasury did not respond to a request for comment.
Sen. Marco Rubio, R-Fla., the chairman of the Senate Small Business and Entrepreneurship Committee and one of the PPP program’s architects, said the bill would implement Congress’s original intent. “When we passed the PPP, it was under the assumption that you will be able to write off these expenses,” said Rubio. “It isn't double-dipping.”
Cornyn hedged on when the bill might come up on the Senate floor. “I'm not sure exactly what the timing is,” he said, adding that there were only “one or two” holdouts.
The Small Business Administration program offers small businesses forgivable loans that act like grants as long as the money is used mostly to pay employees. In a bill cleared Wednesday, Congress changed the program to give businesses more time and flexibility to use the money.
Borrowers who follow the program's rules won't have to pay the loans back. For tax purposes, such debt is usually treated as income, but Congress made an exception for the PPP. Because the PPP funds came with one tax break, the IRS decided to take away another: deductions for business expenses paid using forgiven loans.
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Cornyn's bill has attracted 23 co-sponsors, including Senate Finance Chairman Charles E. Grassley, R-Iowa, and ranking member Ron Wyden, D-Ore., who were original co-sponsors along with Rubio and Sen. Thomas R. Carper, D-Del.
The rapidly assembled PPP program, established in one of the COVID-19 relief laws, has been a lifeline for millions of small businesses facing ruin from the economic carnage wrought by the crisis, but critics have worried it isn’t enough to save many of the hardest hit.
As of Wednesday night, the program had issued 4.5 million loans totaling $510.6 billion, leaving just under $150 billion left for new loans. An initial rush of applications required Congress to appropriate another $310 billion. A recent survey by the National Federation of Independent Business found that 77 percent of small-business owners had applied for the loans, two-thirds of which said they were “very helpful.”
If the Senate passes Cornyn's bill, the House may be ready to take it up quickly. The chamber had been scheduled to remain in recess until the end of the month, but Democratic leaders have said the House could return sooner to consider policing legislation. The Congressional Black Caucus will unveil a bill aimed at ending racial profiling, excessive use of force and qualified immunity on Monday.
Rachel Oswald contributed to this report.