On Nov. 18, the IRS released Revenue Ruling 2020-27, which provides additional guidance related to the deductibility of Paycheck Protection Program loan forgiveness.
The guidance states that if a borrower reasonably expected to have the loan forgiven because it met the various criteria, the expenses still couldn’t be deducted if the loan was on the books at the end of the year. Specifically, “A taxpayer that received a covered loan guaranteed under the PPP and paid or incurred certain otherwise deductible expenses listed in section 1106(b) of the CARES Act may not deduct those expenses in the taxable year in which the expenses were paid or incurred if, at the end of such taxable year, the taxpayer reasonably expects to receive forgiveness of the covered loan on the basis of the expenses it paid or accrued during the covered period, even if the taxpayer has not submitted an application for forgiveness of the covered loan by the end of such taxable year.” NRCA continues to advocate for legislation that will restore tax deductibility for forgiven PPP expenses as was originally intended under the CARES Act.
The IRS also released Rev. Proc. 2020-51, which provides a safe harbor for borrowers whose loan forgiveness has been denied and who want to claim deductions for otherwise eligible payments on a return, amended return or administrative adjustment request.
