April 30 stating that borrowers may not deduct expenses paid using forgiven PPP loan funds.
The Paycheck Protection Program (PPP) established by the CARES Act provides forgivable loans to help small businesses affected by the COVID-19 outbreak cover payroll and other costs. The Act specifically excludes loans forgiven under the PPP from the borrower’s taxable income. According to Senator Chuck Grassley, chairman of the Senate Finance Committee, the IRS’s notice is contrary to the intent of the CARES Act because it effectively negates the beneficial tax treatment of PPP loan forgiveness written in the Act.
Congress may overrule the notice, but due to its recent publication, no legislation to nullify the notice has been proposed at this time. Many of the PPP rules have been fluid, and the IRS’s guidance is likely not an exception. We will continue to monitor guidance on the PPP and provide information as it becomes available. If you have questions or if we can help, please don’t hesitate to contact us.