Paycheck Protection Program: Deductibility of Expenses

On November 18, 2020, the United States Treasury Department and Internal Revenue Service released guidance related to the tax treatment of expenses in a situation where a Paycheck Protection Program (“PPP”) loan has not been forgiven by the end of the year in which the loan was received.


The guidance has clarified that if at the end of 2020 a business “reasonably expects” that a PPP loan will be forgiven, costs/expenses related to the loan are not deductible in 2020 – regardless of whether or not the business has filed for forgiveness in 2020. In a situation where a PPP loan was expected to be forgiven, and ends up not being forgiven, businesses will be able to deduct those expenses. Here are links to the two guidance documents –Rev. Rul. 2020-27 and Rev. Proc 2020-51: https://home.treasury.gov/news/press-releases/sm1187


New legislation would need to be passed in order for this guidance to be modified.

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