Deductibility of PPP Loans from IRS Notice 2020-32 – May 4th Update from PKF Texas

by | May 4, 2020 | COVID-19, Tax and Accounting Desk

On Thursday, April 30, 2020, the IRS released Notice 2020-32. Specifically, “this notice clarifies 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).”

The IRS takes the position that any expenses paid from the proceeds from a loan from the Paycheck Protection Program will be disallowed to the extent the loan is forgiven and excluded from taxable income. The result is denying a double benefit of receiving excludible loan forgiveness income while simultaneously deducting the expenses used with the loan proceeds.

Please know that legislative dialogue in Washington, D.C. continues as to the possible final tax treatment of this matter. We will continue to monitor future forthcoming Stimulus Acts for possible updates and/or amendments to IRS Notice 2020-32, promptly advising you should the current contents of the Notice be revised or amended.

If you have questions about how this IRS announcement applies to your tax situation, please connect with your PKF Texas tax team members.

J. Del Walker, CPA
Director, Tax Practice Leader
(713) 860-1420
Martin Euson, JD
Director, Tax
(713) 860-5436
Frank Landreneau, CPA
Director, International Tax
(713) 860-1429
Rafael Carsalade, CPA
Director, International Tax
(713) 860-5412
Nikki Homratsamy, CPA
Director, Tax
(713) 860-5425
Jim Streets, CPA
Director, Tax
(713) 860-5440
Gary Voth, CPA, JD
Director, Tax
(713) 860-1410

Additionally, we are keeping PKFTexas.com/COVID-19 up-to-date with information and resources to assist you as we all navigate these quickly-changing times.

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