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On April 30, 2020 the IRS recently issued IRS Notice 2020-32. This Notice discusses the tax deductibility status of expenses that are forgiven under the Paycheck Protection Program (“PPP”) provided for by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).
The Notice explains that if an employer received a PPP loan and some or all of it was forgiven, the forgiven amount is not allowable as a deduction. An employer cannot get the forgiveness benefit of covered expenses and then turn around and treat those covered expenses as tax deductible.
Apparently some in Congress did not like the IRS Notice because on May 5, 2020, Senator Cornyn (R-TX) introduced Senate Bill 3612 that will explicitly allow a PPP loan receipt to get a tax deduction on business expenses that were paid by the employer with funds received under the PPP without impacting the employer’s ability to apply for forgiveness for that same loan.
The bill is still in the Senate Finance Committee, but it would provide much appreciated additional relief to those employers lucky enough to receive a PPP and qualify for forgiveness if it is able to make its way through Congress and to Trump’s desk for signature.
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