On Thursday, April 30th, the Internal Revenue Service (IRS) issued Notice 2020-32 which clarified “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).” It is ABC’s view that this ruling is at odds with the legislative text of the CARES Act, which included Section 1106(i), which says that, with regard to the “taxability” of the loan forgiveness available to PPP recipients, any amounts forgiven by a PPP loan “shall be excluded from gross income.”
ABC recently signed on to a letter that will be sent to Congressional leadership urging opposition to IRS Notice 2020-23 regarding deductible expenses related to Paycheck Protection Program loans. If your chapter or business would like to add their signature, please click on this link to add your signature and provide contact info so you will receive a copy of the final letter.
Additionally, Senate Finance Chairman Chuck Grassley (R-Iowa), Ranking Member Ron Wyden (D-Ore.) and House Ways and Means Chairman Richard Neal (D-Mass.) sent a letter to Treasury urging the Department to allow small businesses to deduct PPP expenses and you may view the letter here. Further, Senators John Cornyn (R-Texas), Finance Committee Chairman Chuck Grassley (R-Iowa), Finance Committee Ranking Member Ron Wyden (D-Ore.), Small Business Committee Chairman Marco Rubio (R-Fla.), and Tom Carper (D-Del.) today introduced the Small Business Expense Protection Act, which would clarify that small businesses can deduct expenses paid with a forgiven PPP loan from their taxes.