August 4, 2020

Consult Tax Advisor Prior to Applying for PPP Loan Forgiveness

The CARES Act provides for the forgiveness of Paycheck Protection Program (PPP) loans that are used for certain payroll-related costs, or covered expenses, and makes clear that forgiven loans are to be excluded from gross income.

However, the CARES Act does not address the deductibility of covered expenses, which has prompted the IRS to issue a notice (2020-32) stating that any forgiven PPP loans used for covered expenses will not be deductible, which appears to undercut Congressional intent in designing the relief program.

Efforts are under way to secure a Congressional fix. Until such legislative clarification is realized, Western Growers members are encouraged to speak with their tax advisor prior to applying for PPP loan forgiveness, as doing so may preclude the applicant from any potential retroactive correction.

Western Growers has joined a national coalition of business and agricultural groups in calling on Congress to include a technical correction ensuring tax-free PPP loan forgiveness in the next round of COVID-19 relief.

“Denying the correct tax treatment of these loans will result in hardship for many struggling businesses,” the coalition states in a letter to Congressional leadership.

The letter concludes: “As part of the next round of COVID-19 relief, we request that Congress reaffirm its intent and restore the tax benefits it intended to give distressed Main Street businesses as part of the CARES Act.”

Click here to read the full text of the coalition letter.

We will keep our members updated on further developments on the topic of PPP loan forgiveness.