IRS Eliminates Tax Value of PPP Forgiveness
The IRS released yesterday Notice 2020-32 dealing with the taxation of Paycheck Protection Program (PPP) loan forgiveness. We had previously mentioned in a post that several commentators had mentioned that loan forgiveness could give rise to the related expenses being ruled non-deductible and that is exactly what the notice determined.
Although not surprising, they may not have been the intent of Congress since they explicitly stated that loan forgiveness would be non-taxable, the assumption by Congress was that this would be an additional benefit to the borrowers. However, they forgot to put anything in the law stating that expenses, would in fact, be deductible.
It will be up to Congress to determine if a new law is needed to allow full deduction or if they will let the IRS ruling stand. There is plenty of case law on the side of the IRS in this situation since there is a specific Code Section dealing with this issue.
Senator Grassley (R-IA) came out and indicated that was not the will of Congress, but that means nothing without an actual new law to implement that will.
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
How will this IRS exclusion of deductions work for Sole proprietors and for Partnerships with active general partners. What expense is not deductible for net earnings from self-employment?