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:

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

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This Legal Briefing is intended for general informational and educational purposes only and should not be considered legal advice or counsel. The substance of this Legal Briefing is not intended to cover all legal issues or developments regarding the matter. Please consult with an attorney to ascertain how these new developments may relate to you or your business. © 2020 Law Offices of Pullano & Farrow PLLC.

Paycheck Protection Program - Deductibil
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