Skip to main content

News & Updates

Pending COVID Relief Bill Would Allow Deduction for Expenses Associated with Forgiven PPP Loans


December 23, 2020

Read Time

1 minute


Author: Michael Tuchman

In one of our posts earlier this year, we noted that the Cares Act provided that PPP loan forgiveness would not be considered income. This was a departure from the general rule that taxpayers have taxable income when a loan is forgiven.

Treasury, however, issued a notice stating that taxpayers would not be able to deduct eligible PPP expenses (such as payroll) that give rise to the debt forgiveness. Treasury’s view was that if the government is in essence paying the expense (through a loan that does not have to be repaid), the taxpayer does not bear the economic burden of the expense and should not be able to deduct it. From a tax policy perspective, that seems reasonable enough. On the other hand, critics noted that denying the deduction was functionally the same as being taxed on the debt forgiveness and that Treasury was unilaterally nullifying Congressional intent. An equally reasonable point.

In welcome news, the pending COVID relief bill would resolve this issue in favor of taxpayers by allowing a tax deduction for eligible PPP expenses that give rise to PPP loan forgiveness. As of this writing, the COVID relief bill still needs to be signed by the President. We will continue to monitor for developments and update you as they become available.

Filed under: Corporate, Tax Planning

August 31, 2022

Does your Goodwill Go Home at Night? The Sale of Personal Goodwill Offers Considerable Tax Planning Opportunities for Closely-Held Corporations

Read More

August 16, 2022

Inflation Reduction Act – Channeling The Terminator: I’LL BE BACK

Read More