Congress passed the Appropriations bill, which included the latest Covid relief and economic stimulus provisions. The bill fulfilled a long-awaited promise by Congress to clarify the treatment of the Payroll Protection Plan’s forgiveness. Since the passage of the PPP, one of the main draws was the chance for companies to have the loan forgiven by the SBA. Many companies anticipated applying for and receiving forgiveness. However, shortly after the original loan application opened, the Department of Treasury issued guidance stating that if a company’s loan was forgiven, that company could not take a deduction resulting from any expenses paid with the loan proceeds. Congressional members and leadership have been vocal about allowing the deductions. Still, they have been unable to pass a law requiring it until now.

This bill clarifies Congress’s intent. The bill prevents the proceeds from being included in gross income, and therefore taxable. It also prevents the Treasury from denying deductions because the forgiven proceeds were used. This is true for the current PPP loans and future programs of a similar nature.