On April 30, the IRS issued Notice 2020-32 addressing an important issue that was not covered explicitly in the CARES Act – whether covered costs that are paid with a PPP loan can be deducted for income tax purposes to the extent that the PPP loan associated with such costs is forgiven. Under the CARES Act, the PPP loan forgiveness is not taxable income. The IRS Notice provides that there is no deduction allowed for covered costs to the extent of the resulting loan forgiveness because the payments are allocable to tax-exempt income.
Thank you to Isdaner & Company Certified Public Accounts for this information. The full text of the IRS Notice can be accessed online.
