COVID-19 UPDATE 25
THE INTERNAL REVENUE SERVICE ISSUES RULING
ON PAYCHECK PROTECTION PROGRAM LOAN EXPENSES
In response to the federal government’s Paycheck Protection Program (PPP) loan forgiveness procedures, the Internal Revenue Service (IRS) on April 30, 2020 released Notice 2020-32 concerning the loan/grants established by the new program.
If you have received loan proceeds under the PPP program and the loan or portions of the loan are forgiven, the expenses associated with the loan forgiveness are not deductible. With these payroll deductions disallowed, there is the potential that business entities' taxable income for 2020 will be higher. If not planned for properly, businesses that participated in the program could be liable for additional taxes.
The notice highlights a long history and clear pattern for treatment of similar items. The language in the CARES Act was interpreted differently, and the IRS is ensuring that treatment of funds is consistent with long-standing taxation policy.
Use the link below to access Notice 2020-32.
Contractors contemplating funding under the federal PPP loan program should consult with their accountants or other financial advisors. The consideration of using PPP funds has impacts on the application of other tax incentives in the CARES Act, and with this new ruling, some of the initial upside of the PPP program is diminished.
UTCA recommends that you review this urgent matter with your legal and financial experts.
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If anyone has questions concerning this notice, please contact us at the UTCA office 732-292-4300.
