May 4, 2020

The Ink Was Almost Dry On That One; Update on the Deductibility of Expenses Funded With Paycheck Protection Program Loans

Written By

Thomas E. Rutledge
Member, Stoll Keenon Ogden PLLC

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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