PPP LOAN FORGIVENESS/EXPENSE DEDUCTIBILITY

NCACPA joined with AICPA and other state CPA societies to successfully lobby Congress to ensure tax deductibility for business expenses associated with forgiven Paycheck Protection Program (“PPP”) loans. The IRS had previously declared such deductions would be disallowed.

H.R. 133 (Public Law 116-120) clarifies that deductions are allowed for otherwise deductible expenses paid with the proceeds of a PPP loan that is forgiven, and that the tax basis and other attributes of the borrower’s assets will not be reduced as a result of the loan forgiveness.

The legislation contained numerous other provisions important to the profession, including $284 million to fund Second Draw PPP loans and a streamlined process for loan forgiveness.

Deductibility will also apply to eligible expenses associated with Second Draw PPP loans. The list of eligible expenses was broadened to include personal protective equipment; certain supplier costs; costs related to property damage not covered by insurance and caused by public disturbances that occurred in 2020; and expenditures for software, cloud computing, and other human resources and accounting needs.

More than 640 NCACPA members combined with 409 of their clients to send emails to Congress in support of PPP expense deductibility.

December 2020