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11/18/2020

Treasury and IRS Issue Guidance Clarifying the Deductibility of Expenses Where a Business Received a PPP Loan | U.S. Department o…

U.S. DEPARTMENT OF THE TREASURY
Treasury and IRS Issue Guidance Clarifying the Deductibility of
Expenses Where a Business Received a PPP Loan
November 18, 2020

WASHINGTON – The U.S. Treasury Department and Internal Revenue Service (IRS) released
guidance today clarifying the tax treatment of expenses where a Paycheck Protection Program
(PPP) loan has not been forgiven by the end of the year the loan was received.
Since businesses are not taxed on the proceeds of a forgiven PPP loan, the expenses are not
deductible. This results in neither a tax benefit nor tax harm since the taxpayer has not paid
anything out of pocket.
If a business reasonably believes that a PPP loan will be forgiven in the future, expenses related
to the loan are not deductible, whether the business has filed for forgiveness or not. Therefore,
we encourage businesses to file for forgiveness as soon as possible.
In the case where a PPP loan was expected to be forgiven, and it is not, businesses will be able
to deduct those expenses.
“Today’s guidance provides taxpayers with greater clarity and flexibility,” said Secretary Steven
T. Mnuchin. “These provisions ensure that all small businesses receiving PPP loans are treated
fairly, and we continue to encourage borrowers to file for loan forgiveness as quickly as
possible.”
Click here to view the revenue ruling.
Click here to view the revenue procedure.
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https://home.treasury.gov/news/press-releases/sm1187

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