Updates on the PPP Loan Program

President Trump signed a bill into law on July 4 which created an extension to the Paycheck Protection Program (PPP) deadline for small businesses to apply for the program. This deadline which expired at the end of June 2020 under current law was extended to August 8, 2020. The PPP still had approximately $134 billion to give even as the deadline neared. 

Congress is set to resume session on July 20 after it returns from its Fourth of July recess, a two-week vacation. Upon their return, members of Congress will have approximately 2 weeks to decide several key economic issues before again taking a summer recess until September. At the top of the list are key fixes to the Paycheck Protection Program which has undoubtedly been plagued with flaws. 

Probably the most important flaw that needs attention directly affects small business owners utilizing itemized deductions. There is a strong uncertainty that you will have the ability to take deductions for expenses funded with PPP loans (or portions thereof) that were forgiven.

The IRS has ruled in its Notice 2020-32 the following:

Specifically, this notice clarifies that no deduction is allowed under the Internal Revenue Code (Code) for an expense that is otherwise deductible if the payment of the expense results in forgiveness of a covered loan pursuant to section 1106(b) of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), Public Law 116-136, 134 Stat. 281, 286-93 (March 27, 2020) and the income associated with the forgiveness is excluded from gross income for purposes of the Code pursuant to section 1106(i) of the CARES Act. 

Congressional action would be needed to have the IRS change its ruling. If Congress doesn’t act and the IRS ruling stands, then by all indicators, this matter will end up in the courts. 

The good news is that most tax experts agree that expenses paid with a forgiven PPP Loan are deductible and that the IRS is wrong. These experts also feel that Congress will eventually need to act to clarify this issue, otherwise it defeats the economic alleviation purpose of the loan. 

But a giant caution remains and this issue needs to be watched closely and verified with your accountant or tax advisor when filing your future income tax returns. 

Another topic concerning the PPP Loan that is being discussed thoroughly at the present time is exactly how the U.S. government-subsidized loans will be forgiven. 

On Thursday, June 16, the SBA released detailed instructions showing how borrowers should petition their PPP lenders for loan forgiveness. 

Banks have been asking the government for clearer rules on how loan forgiveness will be handled. The Treasury Department and Small Business Administration (SBA) are struggling with the process of how to handle millions of applications for loan forgiveness, a process that includes verifying that the 60% minimum percentage of PPP funds were used by borrowers on “payroll costs”. Lenders have complained there is still a lack of clarity regarding the process they should follow and apparently, the SBA still had not provided a process or portal for accepting loan forgiveness applications from lenders as of July 17, 2020.

On Friday, July 17, Treasury Secretary Steven Mnuchin made a suggestion that all taxpayer-backed small loans under the PPP should be forgiven outright without verifying how the funds were used exactly. A decision of this magnitude is a game changer that could make the process very easy for millions of small businesses to wipe away the forgiven portions of the PPP Loan.

Mnuchin went on the suggest waiving the case-by-case approval process for loan forgiveness for loans below a certain threshold. It’s unclear what that threshold would be, but it has been speculated that amounts under $150,000 or under $50,000 (which make up nearly 70 percent of all loans under the program) are possible benchmarks for the waiver process.

***The NYSCA is doing its best to provide its members with the most up-to-date and pertinent information regarding Covid-19 related financial concerns and the CARES Act. However, with the current crisis in mind this information is changing on a daily basis. We strongly advise you seek clarification with your own Accountant, Financial Advisor, or Attorney who specializes in Finance before making any final decisions or submitting any paperwork. We cannot be held responsible for any personal actions or decisions and any information that becomes outdated, is misapplied, or is incorrect because it has changed, been updated, or has been misinterpreted.

The NYSCA remains strong because of our members and we want to thank you for your continued support.


  1. https://www.forbes.com/sites/peterjreilly/2020/04/30/irs-rains-on-the-paycheck-protection-parade/#640f47715312

  1. https://www.forbes.com/sites/peterjreilly/2020/07/05/preparers-may-fight-irs-on-ppp-deduction-denial-hundreds-of-billions-at-stake/#7aa47eb5704e

  1. https://www.blueandco.com/an-update-on-the-paycheck-protection-program-ppp-p3/

  1. https://www.washingtonpost.com/business/2020/07/17/congress-ppp-hearing-mnuchin/

  1. https://www.barrons.com/articles/news-updates-51594990909

Additional resources related to COVID-19 for your practice and patients are cataloged here: www.NYSCA.com/covid19.

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