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DC Tax Flash: IRS Advises on Deductible Expenses Under Paycheck Protection Program

Tax Alert

The Internal Revenue Service (IRS) today issued Notice 2020-32, which provides guidance on the deductible expenses of taxpayers that access loans under the Paycheck Protection Program.

Enacted as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act (P.L. 116-36), the Paycheck Protection Program provides certain small businesses (500 or fewer employees) with forgivable loans to pay up to eight weeks of payroll costs and certain other expenses.  

Today's guidance clarifies that no deduction is allowed "for an expense that is otherwise deductible if the payment of the expense results in forgiveness of a covered loan...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," the IRS explains.

The seven-page text of Notice 2020-32 is posted here.


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