Congress Clarifies the Deductibility of Expenses Paid with Forgiven PPP Loan Proceeds

Subject to the President’s signature, Congress passed on December 21, 2020 the Consolidated Appropriations Act of 2021. The President is expected to sign it.
 
Once the legislation is signed, the law will be clear that expenses paid with Paycheck Protection Program (PPP) loan proceeds will, in fact, be tax deductible. This issue has been a matter of considerable concern for borrowers under the PPP loan program because while the forgiven loan proceeds are tax exempt income, the IRS has stated that the related expenses paid with the loan proceeds are not deductible. The practical effect of that position is that what was given with one hand was taken away with the other.
 
When enacted, this bill will provide PPP loan borrowers the certain benefit of not only tax-exempt income with respect to forgiven proceeds, but also allow them to deduct the expenses paid with the proceeds. It appears that with this legislation, borrowers are doubly benefitted by the giving hand while the taking hand has been tied.
 
Members of the Frantz Ward Business Law Group are available to answer your questions relating to this and the other provisions of the Consolidated Appropriations Act of 2021.