IRS Guidance Says No Deduction is Allowed for Business Expenses Paid with Forgiven PPP Loans [Updated December 31, 2020] [open pdf - 694KB]
From the Document: "The Coronavirus Aid, Relief, and Economic Security Act (CARES Act; P.L. 116-136) created Small Business Administration (SBA) Paycheck Protection Program (PPP) loans for payroll expenses and certain operating costs, which are forgiven if the borrower meets certain criteria. On April 30, 2020, the Internal Revenue Service (IRS) issued Notice 2020-32, stating that PPP recipients cannot claim a deduction for expenses funded from forgiven PPP loans. On December 27, 2020, President Trump signed H.R. 133, the COVID-[coronavirus disease 2019] related Tax Relief Act of 2020 (Subtitle B of Title II of Division N of the Consolidated Appropriations Act of 2021), which nullifies the IRS's [Internal Revenue Service] guidance and allows borrowers to deduct expenses paid out of forgiven PPP loans."
CRS Insight, IN11378
Congressional Research Service: https://crsreports.congress.gov/