DC Tax Flash: IRS Reverses Stance on Deducting Expenses Under PPP
Tax Alert
The Internal Revenue Service (IRS) today rescinded its previously issued Notice 2020-02 and Revenue Ruling 2020-27 by issuing Revenue Ruling 2021-02, which permits deductions for eligible expenses for recipients of loans under the Paycheck Protection Program (PPP).
Today's guidance specifies that "no amount is included in the gross income of a Paycheck Protection Program (PPP) participant by reason of forgiveness of a PPP loan, and no deduction is denied, no tax attribute is reduced, and no basis increase is denied, by reason of the exclusion from gross income," the IRS explains.
The move reflects changes made by the enactment of the Consolidated Appropriations Act, 2021 that retroactively modified the CARES Act to clarify that expenses paid with the proceeds of a forgiven PPP loan are deductible. Additional legislative background on this issue is posted here.
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