Issue

Tax Deductibility

Improving Tax Policy

IFA supports policies that expand eligibility for franchise businesses to deduct expenses from their tax obligations.

As part of the December 2020 COVID-19 relief legislation, Congress expressly provided that taxpayers may treat expenses paid with PPP loan proceeds as ordinary and necessary business expenses reducing their overall gross income.

In January 2021, the IRS issued guidance correcting its previous Notice 2020-32 and Revenue Ruling 2020-27, which provided that taxpayers could not deduct otherwise deductible business expenses that were paid with forgiven or forgivable PPP loans.

In January 2019, the Internal Revenue Service (IRS) issued final rules addressing one of the biggest uncertainties facing franchise businesses following passage of the 2017 tax law: eligibility under Section 199A for a new 20% deduction on qualified business income for "specified service trades or businesses" (SSTBs). 

IFA's advocacy led to more than 500 franchise brands and thousands of franchise business owners benefitting from this regulation, including those in health care, fitness, personal services, and professional services. The IRS rules largely follow IFA's recommendations and ensure that more franchise businesses than ever before are paying a new, lower tax rate.