IRS Clarifies Delayed PPP Forgiveness Filing Will Not Enhance Deduction Availability Position

While under the CARES Act, forgiveness of any portion of a Paycheck Protection Program ("PPP") loan is expressly excluded from federal income inclusion, in Notice 2020-32, released on April 30, 2020, the U.S. Treasury and the IRS made it clear that their view was that expenses paid with such forgiven loan proceeds would not be deductible. Newly issued guidance clarifies that delaying PPP forgiveness certification into 2021 will not enhance a 2020 deduction availability position.

Since such time, some commentators and practitioners seized upon the nuance in Notice 2020-32 that suggested it may only apply to PPP loans actually forgiven rather than merely potentially forgivable in the future. The same commentators and practitioners then suggested that if the forgiveness application process is delayed until 2021, and thereby assuring no clear forgiveness in 2020, the taxpayer may argue that a tax deduction is available in 2020. Plenty of others questioned the solid