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COVID-19: IRS Issues Guidance on Forgiven PPP Loans; Congress Reacts

In new guidance, the IRS clarified that a taxpayer that received a Paycheck Protection Program (PPP) loan may not deduct expenses if, at the end of the tax year, the taxpayer reasonably expects the PPP loan to be forgiven, whether or not the taxpayer has actually requested that the loan be forgiven. 

This new guidance reaffirms the position that the IRS took in April 2020. That guidance sparked a quick backlash from many tax professionals and businesses that were surprised given the CAREs Act express provision that a forgiven PPP loan would not be considered taxable income. Congressional leaders also urged the IRS to reverse its position, which they viewed as contrary to Congress’s intent. 

Congressional leaders have again expressed their displeasure with the IRS on this issue, and say they are working to include language in year-end spending legislation clarifying that taxpayers qualify for expense deductions even if their loans are forgiven.

If Congress does not act, many taxpayers will be put in a difficult position given the lack of guidance on PPP loan forgiveness, including potential adverse determinations by the Small Business Administration (SBA) as to whether the borrower had the requisite level of “need” for the loan to be forgiven. 

©2020 Pierce Atwood LLP. All rights reserved.National Law Review, Volume X, Number 325
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Robert Ravenelle, Pierce Atwood Law Firm, Portland, Tax Law Attorney
Partner

As head of Pierce Atwood's Federal Income Tax practice, Rob Ravenelle has extensive experience in the planning, negotiation and tax structuring for mergers and acquisitions. He works closely with members of our Business Practice Group to ensure that clients obtain the most economic and tax efficient transaction results possible. Rob's prior experience practicing as a Certified Public Accountant brings unique skills that enhance the value of our services in deal transactions, from mergers to renewable energy tax equity financing to succession planning of closely held...

207-791-1294
Kris J. Eimicke, tax lawyer, Pierce Atwood
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Kris Eimicke concentrates his practice on tax issues and economic development programs, with a special emphasis on state and federal new markets tax credit (NMTC) programs, renewable energy tax credits, historic rehabilitation tax credits, and the newly created opportunity zone program. Kris also regularly advises businesses, tax-exempt organizations, and individuals on tax issues related to a variety of business transactions, as well as representation before the Internal Revenue Service, state revenue agencies, and the courts on tax matters. 

(207) 791-1248
Christopher E. Howard Corporate Finance Attorney Pierce Atwood Law Firm Portland Maine
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Chris Howard has a unique combination of technical legal skills and hands-on business and finance experience, enabling him to integrate these disciplines into strategies that match client objectives and provide clients with a competitive advantage. His forte is in managing complex commercial transactions and development projects in time-sensitive environments, and in accessing all sectors of the capital markets.

Chris' practice has four areas of focus:

  • Corporate finance and transactional representation...

(207) 791-1335
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