The Internal Revenue Service (IRS) recently released guidance on the deductibility of expenses reimbursed by a Payment Protection Program (PPP) loan that is then forgiven. In Notice 2020-32, the IRS states that no deduction is permitted for expenses normally deductible to the extent the expenses were reimbursed by a PPP loan that was forgiven. The disallowance is to prevent a double benefit by preventing a deduction for excluded income.
Some lawmakers disagree with the IRS’ guidance. They believe the intent of the program was to provide small businesses with liquidity to retain their employees. The notice is contrary to that intent.
A spokesperson for House Ways and Means Committee Chairman Richard Neal stated, “We are planning to fix this in the next piece of response legislation.”
Our office is monitoring this situation closely and will provide you with updates as needed. Please call our office if you have any questions.
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