Nondeductibility of PPP-Related Expenses

05 May Nondeductibility of PPP-Related Expenses

The  Treasury Department has issued guidance that clarifies that no deduction is allowed under the Internal Revenue Code for an expense that is otherwise deductible if the payment of such expense results in forgiveness of a covered loan pursuant to the CARES Act and the income associated with the forgiveness is excluded from gross income.  https://www.irs.gov/pub/irs-drop/n-20-32.pdf

This issue has been brought to challenge by associations such as the AICPA, who believe that the intent of the CARES Act was to allow businesses to deduct all of their ordinary and necessary expenses.  https://www.journalofaccountancy.com/news/2020/may/expenses-reimbursed-by-ppp-not-tax-deductible-paycheck-protection-program.html