On April 30th, the IRS issued Notice-2020-32, stating the position that expenses funded by forgiven loan proceeds under the Paycheck Protection Program (PPP) are not tax deductible. The CARES Act did not specifically address whether generally allowable deductions would still be permitted if the loan was later forgiven, but the act and public officials’ comments did imply that the forgiveness would be “tax-free”. This IRS position effectively decreases the previously implied net value of the PPP Loan program to businesses after taxes.
We are still anxiously awaiting more clarification from the SBA on details of the PPP loan forgiveness and any potential legislative actions that could over-rule this IRS position.
See https://mwbpc.com/the-cares-act-tax-highlights/ for the tax highlights and https://mwbpc.com/the-cares-act-business-highlights/ for the business highlights of the CARES Act.
Reach out to the team at MWB for any questions you may have on anything above or ANY impact you are seeing to your business during this time.