PPP LOAN EXPENSES NOW DEDUCTIBLE

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As part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), passed March 27, 2020, certain businesses were eligible for loans which were forgivable under the Paycheck Protection Program (PPP). The loan forgiveness would not be taxable income.

The IRS, in Notice 2020-32, denied the deductibility of expenses attributed to the loan if the loan was, or was expected to be, forgiven, despite Congressional intent to the contrary. The rationale was that there would be a double dip.

The COVID-related Tax Relief Act of 2020, signed into law Dec. 27, 2020, amended the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to provided that no deduction is denied, no tax attribute is reduced, and no basis increase is denied by reason of the exclusion from gross income of the forgiveness. This change applies for taxable years ending after March 27, 2020.

The IRS released Rev. Rul. 2021-2, which overrides the prior Notice.

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