Guidance issued on deductibility of expenses with a PPP loan

On Nov. 18, the IRS and Treasury issued Revenue Ruling 2020-27 which provides long-awaited guidance on the tax treatment of expenses related to Paycheck Protection Program (PPP) loans. The guidance states that the expenses listed in section 1106(b) of the CARES Act that would otherwise be deductible will not be allowed in the taxable year that the expenses were paid or incurred and covered under a PPP loan that is forgiven or expected to be forgiven.

Businesses whose loans are not forgiven, or those who expected forgiveness and later did not receive it, will be able to deduct the expenses.

This ruling applies to all PPP borrowers regardless of if you’ve filed for forgiveness; therefore, the Treasury is recommending borrowers apply for forgiveness as soon as possible.

This ruling stands unless further legislation is passed (such as another stimulus bill) that reverses this ruling.

Reach out to us for assistance with your PPP loan forgiveness application and for assistance with tax planning in light of this ruling.

For more information from the Treasury, click here.

Click here to view the revenue ruling.

Click here to view the revenue procedure.