Late last week, the Internal Revenue Service (IRS) issued Notice 2020-32 taking the position that business expenses incurred and forgiven under the Paycheck Protection Program (PPP) are not tax-deductible.
According to the Notice, the debt forgiveness will not be considered debt cancellation income excluded from taxable income subject to the rules surrounding debt cancellations. Rather, the cancellation will be treated as a kind of exempt income under the Code which means that the related expenses will not be deductible.
We will monitor this latest information closely and see what happens as the impact of this Notice is realized. There is a possibility Congress could intervene and reposition this stance taken by the IRS.
If you have questions about the PPP and the result of this Notice, Selden Fox can help. For additional information please call us at 630.954.1400 or click here to contact us.