Safe harbor provided for PPP loans

Written on Apr 26, 2021

The Treasury Department and the IRS have issued Revenue Procedure 2021-20 for certain businesses that received first-round Paycheck Protection Program loans but did not deduct any of the original eligible expenses because they relied on guidance issued before the enactment of tax relief legislation in December.

Under prior guidance, businesses that received PPP loans to cover payroll costs, interest on covered mortgage obligations, covered rent obligation payments and covered utility payments could not deduct corresponding expenses.

With the Dec. 27 enactment of the Consolidated Appropriations Act, 2021, businesses may claim these deductions even though they received PPP loans to cover original eligible expenses. These businesses can use the safe harbor provided by this guidance to deduct those expenses on the return for the immediately subsequent year.