Treasury and IRS Issue Guidance on PPP and Deductibility of Expenses

The U.S. Treasury Department and Internal Revenue Service (IRS) released guidance yesterday clarifying the tax treatment of expenses where a Paycheck Protection Program (PPP) loan has not been forgiven by the end of the year the loan was received.

Since businesses are not taxed on the proceeds of a forgiven PPP loan, the expenses are not deductible. If a business reasonably believes that a PPP loan will be forgiven in the future, expenses related to the loan are not deductible, whether the business has filed for forgiveness or not. In a case where a PPP loan was expected to be forgiven, and it is not, businesses will be able to deduct those expenses. Treasury and the IRS are encouraging business to file for forgiveness as soon as possible.

Read the revenue ruling here.

Read the revenue procedure here.