Finally Some Good News! -- Congress Locks In Full PPP Deductibility
By: Randall P. Andreozzi
Congress last night passed COVID-relief legislation that included a much-anticipated provision that allows businesses to deduct qualifying expenses paid with forgiven Paycheck Protection Program (PPP) loans.
IRS caused a stir earlier this year when it issued IRS Notice 2020-32 which told taxpayers that such otherwise-deductible expenses lose their character if they’re paid with forgiven PPP loans. The position, which would have effectively reversed the tax-free character of PPP loan forgiveness, created a not-so-hidden landmine for taxpayers come tax time in 2021.
Yesterday, a bi-partisan Congress came to the rescue, characterizing the IRS position – in the words of Senator Chuck Grassley — as “poppycock,” and putting the issue to bed through legislation. Once the legislation is signed into law by the president, accountants and businesses around the country can know that there’s at least one less thing to worry about come the new year.
The new legislation provides a few other goodies for businesses. It allows PPP loan recipients to also use the employee retention credit — something they weren’t allowed to do under previous coronavirus relief bills. The bill would increase the credit rate from 50 percent to 70 percent and the limit of creditable wages per employee from $10,000 per year to $10,000 per quarter. It also allows a 100 percent deduction for business meal expenses for 2021 and 2022.
Andreozzi Bluestein has extensive experience representing tax payers in a wide range of tax matters before the IRS and State Tax authorities. If you or a client are uncertain on how to proceed with a tax controversy matter, please call us at any time for a no-obligation consultation.
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