VSCPA Asks Senators to Clarify PPP-Funded Expense Deductions

With the Virginia General Assembly out of session, the VSCPA is focusing on federal government efforts. We have been monitoring the fast-moving rollout of the Paycheck Protection Program (PPP) to ensure you not only know how the law impacts your clients, but also how it might affect your own bottom line.  

The VSCPA joined with other state societies to urge U.S. senators to support the withdraw of IRS Notice 2020-32, which states that no tax deduction will be allowed for listed business expenses paid using funds from forgiven PPP loans. The CPA profession believes 2020-32 is inconsistent with apparent legislative intent. Along with the American Institute of CPAs (AICPA), we pushed for senators to support S. 3612, “The Small Business Expenses Protection Act of 2020,” which clarifies the deductibility of PPP-funded expenses. This bill clarifies that the receipt and forgiveness of coronavirus assistance through the Paycheck Protection Program (PPP) does not affect the deductibility of ordinary business expenses. S. 3612 will remedy the IRS guidance and allow taxpayers to deduct covered expenses paid or incurred by an eligible recipient of a small business loan that is forgiven pursuant to section 1106(b)4 of the Coronavirus Aid, Relief and Economic Security (CARES) Act. 

CPAs are being called upon to advise PPP borrowers on how available guidance applies to them — and how critical, forthcoming guidance may be written. The lack of available guidance on the loan forgiveness calculations makes critical decisions, like staff retention, unnecessarily worrisome and difficult for current and prospective PPP borrowers. We have been told repeatedly that this guidance is forthcoming, but the guidance release date remains uncertain.