By Donna Wesling, CPA-Austin
The question of whether expenses paid with Paycheck Protection Program (PPP) loan proceeds can be tax deductible remains unsettled at this time. It seems clear that the intent of Congress was for these loans, if forgiven, to have no tax consequence. The language of the Coronavirus Aid, Relief and Economic Security (CARES) Act of 2020 specifically says that the loan forgiveness will not be income from cancellation of debt. However, in Notice 2020-32, the IRS has taken the position that expenses paid with the PPP loan proceeds are not deductible and Treasury Secretary Mnuchin is standing by that notice.
Senator John Cornyn (R-TX) introduced S. 3612 in the Senate to specifically make the PPP expenses deductible, but the bill has not been enacted. At TXCPA’s Annual Meeting of Members, Senator Cornyn indicated that he is hopeful this will be wrapped into additional coronavirus relief legislation in July.
Senator Cornyn also indicated that he is hopeful that the legislation would include a simplified forgiveness application for smaller loans (under $250,000). The U.S. Small Business Administration (SBA) has issued a form for the forgiveness application with a revision date of June 16, 2020.
The PPP loan guidance has been changing at a rapid pace so stay tuned for further developments.