In an April 30 article reviewing the mechanism by which a Paycheck Protection Program loan may be forgiven, a pair of open tax questions with respect to PPP loans were reviewed. One of them dealt with the question of whether expenses funded with a forgiven PPP loan may be deducted from a borrower’s taxes.
Well, the ink was barely dry on that before the IRS addressed the question. In a notice published April 30, the IRS announced (IRS announcement was 2020–32) that expenses that are funded with a forgiven PPP loan may not be deducted from the borrower’s income. In effect, while for example compensation payments may be paid for with a PPP loan, and the borrower does not recognize income in the amount of those loan proceeds, the borrower may not also take a deduction in that same amount.
Such is the rate of change with PPP loans.
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