Posted May 6, 2020

Many companies who received a loan under the Paycheck Protection Program (PPP) are now working to determine and document the expenses that qualify for loan forgiveness. The SBA has provided some interim rules, but final rules and clarity are not yet available. Per the SBA, the amount eventually forgiven will be non-taxable income to the business.

The IRS issued an unexpected ruling on April 30, 2020, stating that expenses funded with forgiven PPP loans are NOT deductible. This will greatly impact the taxable income of companies who received a forgivable loan.

However, this may not be the final decision. The IRS’s ruling seems contrary to the intent of the CARES Act.  Congress can act to amend the Internal Revenue Code and provide legislative clarification on this matter.

There is likely more to come on this topic.