Update On PPP Deductibility

*We will be updating this article as we receive more information.

December 21, 2020

The House Rules Committee discussed the Senate Amendment to HR 133 (Consolidated Appropriations Act of 2021) today. This Act is well over 5,000 pages and includes the Coronavirus Economic Aid. During their conversations, expense deductibility for businesses with approved PPP loans was brought up. Expense deductibility is covered in the draft of this new bill and allows for businesses to take advantage of the PPP loan as intended by Congress in the CARES Act.

‘‘(i) TAX TREATMENT.—For purposes of the Internal Revenue Code of 1986—

1. No amount shall be included in the gross income of the eligible recipient by reason of forgiveness of indebtedness described in subsection (b),

2. no deduction shall be denied, no tax attribute shall be reduced, and no basis increase shall be denied, by reason of the exclusion from gross income provided by paragraph (1), and

3. in the case of an eligible recipient that is a partnership or S corporation—

(A) any amount excluded from income by reason of paragraph (1) shall be treated as tax exempt income for purposes of sections 705 and 1366 of the Internal Revenue Code of 1986, and

(B) except as provided by the Secretary of the Treasury (or the Secretary’s delegate), any increase in the adjusted basis of a partner’s interest in a partnership under section 705 of the Internal Revenue Code of 1986 with respect to any amount described in subparagraph (A) shall equal the partner’s distributive share of deductions resulting from costs giving rise to forgiveness described in subsection (b).

(2) EFFECTIVE DATE.—The amendment made by this subsection shall apply to taxable years ending after the date of the enactment of the CARES Act.”

Link to the full bill.

Link to the two pages where deductibility is located.