Warren Buffett hearts small businesses. The Berkshire Hathaway chairman and “Oracle of Omaha” spoke with CNBC’s Becky Quick on “Squawk Box” Tuesday and made a strong pitch to extend the Paycheck Protection Program (PPP) amidst the global COVID-19 pandemic.
“It’s an economic war,” Buffett told Quick in a telephone interview, speaking alongside Goldman Sachs CEO David Solomon about helping small businesses.
Specifically, Buffett encouraged Congress to pass another round of funds.
“I think the country owes it to the millions of small-business people … just renew the PPP and get us to the end of the tunnel,” Buffett said. “When we went into World War II, a lot of industries were shut down; everything went to the defense production. Well, we’ve shut down a lot of people in this particular induced recession and others are prospering, and I think the country owes it to the really millions of small business people.”
Vice President-elect Kamala Harris also urged lawmakers to pass so-called PPP2, telling Good Morning America, “I don’t understand the hesitation, the people are suffering.”
The New York Times said the legislation could cost roughly $900 billion and include additional funding for small businesses and unemployed Americans.
Non-deductible outrage
The IRS drew heavy criticism last month when it clarified the tax treatment of expenses for a PPP loan. Whether lawmakers will ensure forgiven PPP loans in a second round are tax-deductible is still unclear.
Since businesses are not taxed on the proceeds of a forgiven PPP loan, the IRS said, the expenses are not deductible. It results in neither a tax benefit nor tax harm since the taxpayer has not paid anything out of pocket.
Members of Congress immediately responded to the clarification. Senate Finance Committee Chairman Chuck Grassley, R-Iowa, and Ranking Member Ron Wyden, D-Ore., released a joint statement criticizing the guidance.
“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,” it said. “As we’ve stated previously, Treasury’s approach in Notice 2020-32 effectively renders that provision meaningless.
“Regrettably, Treasury has now doubled down on its position in new guidance that increases the tax burden on small businesses by accelerating their tax liability, all at a time when many businesses continue to struggle and some are again beginning to close. Small businesses need help maintaining their cash flow, not more strains on it.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.