CLIENT ALERT: PPP Loan Forgiveness - Deductibility of the 8-week Covered Costs
- POSTED: May 05, 2020
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CLIENT ALERT: PPP Loan Forgiveness - Deductibility of the 8-week Covered Costs
- The CARES Act clearly stated that the income associated with PPP Loan Forgiveness shall be excluded from gross income.
- However, IRS Notice 2020-32, that was issued on April 30th, clarifies that “…no deduction is allowed under the Internal Revenue Code (Code) for an expense that is otherwise deductible if the payment of the expense results in forgiveness of a covered loan pursuant to section 1106(b) of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), Public Law 116-136, 134 Stat. 281, 286-93 (March 27, 2020) and the income associated with the forgiveness is excluded from gross income for purposes of the Code pursuant to section 1106(i) of the CARES Act.”
- There will likely be clarification forthcoming since the position of the IRS appears to be contrary to the legislative intent of the CARES Act on this issue.
IRS Notice 2020-32 can be located here: https://www.irs.gov/pub/irs-drop/n-20-32.pdf
PPP Loan FAQs can be located here (updated as of May 3, 2020): https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Frequently-Asked-Questions.pdf
*The Attorneys at Levene Gouldin & Thompson, LLP are available to provide advice and counsel concerning these new statutory obligations and other matters related to COVID-19.