IRS Green Lights PPP Deductibility after Congress Forces Reversal
Businesses can now deduct expenses paid for with the proceeds of a forgiven pandemic relief loan.
The IRS, Wednesday, January 6, 2021, reversed its original position that prohibited businesses with Paycheck Protection Program loans from “double-dipping” by paying expenses with a forgivable loan and then writing off those expenses. Congress, in the latest virus relief bill, explicitly stated that such expenses were deductible, forcing the IRS to flip.
In November 2020, Treasury Secretary Steven Mnuchin took a hard line on the issue, arguing that the decision was consistent with precedent. The IRS was criticized by lawmakers and trade groups for restricting access to a long-used tax perk.
The Paycheck Protection Program (PPP) facilitated hundreds of billions in government-backed, forgivable loans to help struggling businesses keep their workers employed during the pandemic. The recent pandemic aid bill revived the program with more funding and paved the way for some businesses to receive a second loan.