The US Treasury Department along with the Internal Revenue Service (IRS) released guidance today, Revenue Ruling 2021-02, permitting the deductibility of eligible expenses related to forgiven Paycheck Protection Program (PPP) loans.
Notice 2020-32 and Revenue Ruling 2020-27 had not allowed deductions for expenses leading to forgiveness of Paycheck Protection Program (PPP) loans related to the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).
Revenue Ruling 2021-02 will relieve the anxiety faced by businesses concerned about their tax liability exposure related to the Paycheck Protection Program (PPP). COVID-19 has created a tremendous amount of changes to tax laws and businesses and their tax advisors have been scrambling to keep up. This ruling, however, was a win for the business community including small businesses that have had problems related to Economic Injury Disaster Loans (EIDL) as well as Paycheck Protection Program (PPP) loans.
With a new US presidential administration entering office shortly, there will without a doubt be more important tax legislation to follow.