“Like sands through the hourglass, so is the news surrounding the PPP loans.”

As you may recall business owners have applied to borrow up to 2.5 times their average monthly payroll through the Payroll Protection Program. The CARES Act specifically states that the money must be used within 8 weeks of receipt for payroll and certain other expenses such as rent and utilities. If the loan proceeds are used correctly the loan can be forgiven. Generally when debt is canceled it results in gross income and becomes taxable. The CARES Act clearly states that forgiven debt under the PPP shall be excluded from gross income making it highly appealing. The IRS issued Notice 2020-32 on April 30th which, “clarifies that no deduction is allowed under the Internal Revenue Code (Code) for an expense that is otherwise deductible if the payment of the expense results in forgiveness of a covered loan pursuant to section 1106(b) of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act)”.

We have not heard the last on this critical subject. The IRS is the authority on tax matters. Killingsworth Spencer will pay close attention to their guidance on this controversy and others that are sure to come from the CARES Act.