Congress Urged to Offer Canceled-Debt Tax Relief in Virus Bill

There’s a push for lawmakers to help companies avoid taxes on canceled debts as they restructure—something congressional staff say they’re considering—as the pandemic has thrown oil and gas, retail, restaurant, and other sectors into a tailspin.

When loans are canceled or significantly amended, the forgiven debts or modifications can trigger taxes for the borrower, with exceptions for those that are insolvent or bankrupt, among others. The forgiven portions of the $660 billion in small-business loans provided by the third coronavirus response law (Public Law 116-136) won’t be subject to tax, but many companies that restructure after the crisis ...