On December 27, 2020, President Donald Trump signed into law the Consolidated Appropriations Act, 2021

Congress passes Consolidated Appropriations Act, 2021. The bill now heads to the White House, where President Donald Trump is expected to sign the bill in the coming days. Within this massive piece of legislation lies Division N-Additional Coronavirus Response and Relief, Subtitle B-COVID-related Tax Relief Act of 2020, Section 276-Clarification of Tax Treatment of Forgiveness of Covered Loans.

Ever since the IRS published Notice 2020-32, borrowers and tax professionals alike have put their faith in Congress to overrule the IRS and provide a double benefit: tax-free forgiveness of loan proceeds and income tax deductible expenses paid with PPP funds. Congress is now providing much-needed economic relief to struggling businesses by ensuring expense deductibility under the PPP is honored, as was intended by the CARES Act.

Specifically, within Section 276 it reads, “No deduction shall be denied or reduced, no tax attribute shall be reduced, and no basis increase shall be denied, by reason of exclusion from gross income…..”. It is the intent of this legislation that this applies to all PPP loan recipients regardless of whether or not you have already applied for and received forgiveness. Accordingly, all expenses paid with PPP loan proceeds that are forgiven will now be fully tax deductible to the extent of your income tax cost basis.

More details to come

This is just a brief overview of one section within the massive 5,500 page, $900 billion COVID-19 aid bill. We will share additional details regarding all of the provisions that are most likely relevant to you or your business in the coming days. In the meantime, please don’t hesitate to reach out to us with any questions or concerns. We are always available to assist you during these challenging times.

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