Our last blog post announced that the IRS issued Notice 2020-32 indicating that expenses funded with forgiven PPP loan proceeds are not deductible. We believe this is contrary to the intent of the CARES Act.
Yesterday, Senators Grassley and Wyden introduced legislation to permit businesses to deduct the above-referenced expenses. The Small Business Protection Act (S. 3612) would ensure PPP loan recipients can deduct their business expenses, even if their loans are forgiven, to reflect the lawmakers’ original intent.
“Unfortunately, Treasury and the IRS interpreted the law in a way that’s prevented businesses from deducting expenses associated with PPP loans,” Grassley said. “That’s just the opposite of what we intended and should be fixed. This bill will do just that.”
Grassley, Wyden and House Ways and Means Committee Chairman Richard Neal, D-Mass., sent a joint letter to Treasury Secretary Steven Mnuchin on Tuesday, arguing that the IRS notice was contrary to lawmakers’ intent in exempting loan forgiveness from income.
The Mettise Group will continue to post updates to bring you the most current information.