Buried in the 5,300-page law approved in the Senate yesterday is a significant holiday gift for businesses who received PPP loans:  tax deductibility for PPP expenses!

Until Congress passed this latest Covid-relief package, IRS guidance stated businesses could not deduct expenses paid with PPP funds. The American Institute of Certified Public Accountants, the Journal of Accountancy and a host of other business and legal commentators disagreed.  The new law headed for President Trump’s desk for signature provides:

“[N]o 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 provided” by Section 1106 of the CARES Act (which has been redesignated as Section 7A of the Small Business Act). This provision applies to loans under both the original PPP and subsequent PPP loans.”

Businesses and business owners should discuss the impact of this significant change in expense deductibility with their tax advisors.

Happy holidays!  Here’s looking forward to a happier, healthier and prosperous 2021.