Legal Alert

Expenses Paid With Proceeds of Forgiven PPP Loans Are Not Deductible

by the Tax Group
May 1, 2020

The IRS issued Notice 2020-32 (text available here) explaining that otherwise deductible business expenses paid for with the proceeds of a forgiven PPP loan are not deductible for federal income tax purposes. This means that when a taxpayer pays eligible costs with a PPP loan (payroll, rent, mortgage interest, utilities, or certain other interest), if the PPP loan is forgiven, none of those expenses will be deductible.

Both Senator Grassley, the Senate Finance Committee Chair, and Representative Neal, the Chair of the House Ways and Means Committee expressed their dissatisfaction with this Notice. Representative Neal stated an intention to reverse this result in future legislation.

For questions about this guidance or other tax issues, contact a member of the Ballard Spahr Tax Group.

Copyright © 2020 by Ballard Spahr LLP.
(No claim to original U.S. government material.)

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, including electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of the author and publisher.

This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.

Subscribe to Ballard Spahr Mailing Lists

Get the latest significant legal alerts, news, webinars, and insights that affect your industry.