The Internal Revenue Service and the Treasury Department released guidance Wednesday on claiming deductions for expenses associated with Paycheck Protection Program loans that have been forgiven. The guidance in Revenue Ruling 2021-02 also reverses previous guidance issued last year by the IRS and the Treasury when Treasury Secretary Steven Mnuchin fiercely opposed the ability to deduct expenses related to forgiveness of PPP loans. Industry groups, including the American Institute of CPAs, lobbied for the ability to write off such expenses, arguing it would help struggling businesses and was in line with congressional intent when the CARES Act was passed last year setting up the PPP loans as a way to get money quickly into the hands of desperate business owners.
Source: Accounting Today

Editor’s Note: The full deductibility of PPP loan expenses for all PPP recipients by the end of 2020 was a top legislative priority for NADA. NADA supported the new coronavirus relief package, H.R. 133, passed on Dec. 21, which brought a favorable resolution to this issue. The legislation clarified that forgiven PPP loans are not taxable income, meaning a PPP recipient can claim full deductibility of expenses paid using proceeds from a forgiven PPP loan. The legislative clarification supersedes previous IRS guidance on the issue, and this IRS guidance is consistent with the new law.