NON-DEDUCTIBILITY OF EXPENSES PAID WITH FORGIVEN PAYROLL PROTECTION PROGRAM LOAN PROCEEDS

The IRS has released Notice 2020-32. In this Notice the IRS has determined that any otherwise deductible expenses incurred in a taxpayer's trade or business that are funded by Paycheck Protection Program ("PPP") loan proceeds are not deductible to the extent the loan proceeds are subsequently forgiven and excluded from gross income.

The loan can be forgiven if the employer retains its workforce and meets certain other requirements. Please see the COVID 19 resource section of our website www.mslcpa.com/COVID-19 Resources for further discussion.

This position is not surprising as otherwise businesses would receive a double tax benefit from the PPP loan forgiveness program. 

If you need additional assistance or for more information, contact your MSL representative who will be happy to assist your organization.