Senate Finance Committee Chairman Chuck Grassley, R-Iowa, and Ranking Member Ron Wyden, D-Ore., have criticized Treasury’s latest PPP guidance on deductibility as missing “the mark.”

“Since the CARES Act, we’ve stressed that our intent was for small businesses receiving [PPP] loans to receive the benefit of their deductions for ordinary and necessary business expenses,” Grassley and Wyden said in a November 19 joint statement. “We explicitly included language in the CARES Act to ensure that PPP loan recipients whose loans are forgiven are not required to treat the loan proceeds as taxable income. As we’ve stated previously, Treasury’s approach in Notice 2020-32 effectively renders that provision meaningless.”

Grassley and Wyden went on to criticize Treasury’s choice to “double down” on its position, which ultimately increases the tax burden on small businesses. “Small businesses need help maintaining their cash flow, not more strains on it,” they said.

Additionally, the Senate’s top tax writers alluded to the possibility of addressing this issue in year-end legislation, but encouraged Treasury in the meantime to reconsider its position. Notably, Grassley and Wyden are both cosponsors of Sen. John Cornyn’s, R-Tex., bipartisan Small Business Expense Protection Act, (S. 3612), which would clarify congressional intent that ordinary business expenses paid with forgiven PPP loans are deductible.