IRS guidance on deductibility of PPP costs

ALERT: Important IRS news on PPP expenses

May 1, 2020

IRS Notice indicates that expenses paid to qualify for loan forgiveness under PPP will not be deductible.

The IRS published Notice 2020-32 indicating that expenses paid to qualify for loan forgiveness under the Paycheck Protection Program (PPP) will not be deductible. This includes items such as payroll costs, rent, utilities and interest on mortgage obligations. At this time, businesses should prepare for these amounts to be non-deductible.

The intent when Congress passed the original legislation was for there to be no tax impact from the loan forgiveness. Therefore, we believe future COVID-19 legislation could clarify that such expenses are, in fact, deductible. We will update you if this changes.

Additional information

For additional information and applicability to your tax situation, we recommend consulting with your AGH tax advisor or Shawn Sullivan using the information below.

Shawn Sullivan

Executive Vice President
Tax Services

Shawn serves as one of two primary leaders in the firm’s large tax group. He has extensive public and private experience in the fields of tax and accounting and works frequently with clients in the manufacturing, wholesale/retail distribution, real estate development and management, construction, and contractor industries. In addition to enhancing business performance to minimize tax consequences, he has experience in mergers and acquisitions and international tax and business structuring.

A certified public accountant, Shawn is a member of the American Institute of Certified Public Accountants, the Kansas Society of Certified Public Accountants (KSCPA) and chairs the KSCPA Committee on Taxation.

NOTE: Any advice contained in this material is not intended or written to be tax advice, and cannot be relied upon as such, nor can it be used for the purpose of avoiding tax penalties that may be imposed by the IRS or states, or promoting, marketing or recommending to another party any transaction or matter addressed herein.

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