The AICPA is challenging recent IRS guidance provided under Notice 2020-32, which states that employers who have their Paycheck Protection Program (PPP) loans forgiven are ineligible for tax deductions on expenses paid for through the loan.
Under the new guidance, the PPP debt forgiveness is not taxable, but the expenses incurred in the payroll, rent, interest and utilities are not deductible.
The AICPA believes strongly that the IRS’s interpretation denying deductions of expenses forgiven under the PPP program is contrary to Congress’s intent of the Coronavirus Aid, Relief and Economic Security (CARES) Act.
Because it believes the intent of the CARES Act was to allow businesses to deduct all of their ordinary and necessary expenses — including any expenses used in determining PPP covered costs — the AICPA plans to seek legislative clarification.