Coronavirus Relief Package allows PPP expense deduction

Congress has agreed to a deal to provide more aid to businesses and individuals as a result of the ongoing coronavirus pandemic.

As of this writing, the package has not been formally approved, but one of the most significant provisions for business owners is that eligible expenses used with forgiven Paycheck Protection Program funds would be deductible.

While the portion of PPP loan funds receiving forgiveness was never taxable, the Treasury Department had maintained that the expenses paid with those funds would not be deductible so as not to create what it considers “double dipping.” Business groups and others successfully lobbied Congress and in this $900 billion relief package agreed to Sunday, those expenses would in fact be deductible.

Section 276(a)(1) of the bill, which relates to the tax treatment of PPP loans, states the following: “No deduction shall be denied, no tax attribute shall be reduced, and no basis increase shall be denied, by reason of the exclusion from gross income.”

This is good news for PPP loan recipients and could significantly change your tax liability.

We will continue to monitor this legislation and provide more information as it becomes available.