The new provision, found at revised CARES Act Section 1106(d)(7), provides: (7) EXEMPTION BASED ON EMPLOYEE AVAILABILITY.—During the period beginning on February 15, 2020, and ending on December 31, 2020, the amount of loan forgiveness under this section shall be determined without regard to a proportional reduction in the number of full-time equivalent employees … 6. On April 2, 2020, the SBA issued an Interim Final Rule to provide guidance for the implementation of the PPP, which applies to small business loan applications submitted through June 30, 2020, or until funds made available for this purpose are exhausted. The CARES Act stipulates explicitly that if the portion forgiven by the PPP loan shall not be considered gross income and the IRS confirms that in their notice, “…any amount that (but for that subsection) would be includible in gross income of the recipient by reason of forgiveness described in section 1106(b) shall be excluded from gross income.” Q: Section 1106(b) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), provides that a recipient of a covered loan (as defined in Section 1106(a)(1)) is eligible for forgiveness of indebtedness on the In May 2020, the IRS released Notice 2020-32 , which provided that no deduction is allowed for an eligible expense that is otherwise deductible if the payment of the expense results in forgiveness of a PPP loan. Section 1106 of the CARES Act provides that PPP loans may be forgiven without causing the borrower to incur cancellation of debt income. 40. The ruling asks the question, “may a taxpayer that received a loan guaranteed under the Paycheck Protection Program (PPP), and paid or incurred certain otherwise deductible expenses listed in section 1106(b) of the Coronavirus […] See CARES Act Section 1106(a)(d); see also Paycheck Protection Program Loans FAQs, at Question 20 (April 24, 2020). . would be includible in gross income of the eligible recipient by reason of forgiveness Section 1102 of the Act temporarily adds a new product, titled the “Paycheck … Everybody paying attention to paycheck protection program loans knows about one of those statutes, Section 1106 of the CARES act. In May, the IRS issued Notice 2020-32, providing that a taxpayer that receives a loan through the PPP is not permitted to deduct expenses that are normally deductible under the Code to the extent the payment of those expenses results in loan forgiveness under the CARES Act. Section 1106(i) of the CARES Act provides that a PPP loan recipient will not recognize taxable income if the loan is forgiven, in effect making the loan a tax-free grant. CARES Act Section 1106(i) provides that any amount of a PPP loan that would be includible in gross income of a taxpayer due to forgiveness of the loan shall be excluded from gross income. This 1102 and 1106 of the CARES Act amend section 7(a) of the Small Business Act to create the PPP, through which up to $349 billion in funding was provided to businesses through federally guaranteed loans. Situation 1: During the period beginning on Feb. 15, 2020, and ending on Dec. 31, 2020 (covered period), a taxpayer paid expenses that are described in section 161 of the Internal Revenue Code and section 1106(a) of the CARES Under section 1106 of the CARES Act, an eligible recipient is eligible for forgiveness of indebtedness for all or … A taxpayer that received a covered loan guaranteed under the PPP and paid or incurred certain otherwise deductible expenses listed in section 1106(b) of the CARES Act may not deduct those expenses in the taxable year in For example, the statute does not specify what portion of the loan proceeds must be applied toward the payment of payroll costs – the SBA, however, has indicated that at least 75 percent of the proceeds must be so used. Section 1106, LOAN FORGIVENESS, of the Coronavirus Aid, Relief, and Economic Security (CARES Act) P.L. The law would amend section 1106(i) to leave undisturbed the tax deductions for business expenses paid with forgiven PPP loan proceeds. IRS ANNOUNCES THAT EXPENSES GIVING RISE TO PPP LOAN FORGIVENESS CANNOT BE DEDUCTED To prevent taxpayers from claiming what the Internal Revenue Service (the IRS) believes to be an unintended double tax benefit under the Paycheck Protection Program (PPP), the IRS issued Notice 2020-32, 2020-21 I.R.B. Background on federal legislation relating to the PPP On March 27, 2020, the federal government enacted the CARES Act in response to the COVID-19 pandemic. The IRS yesterday released Revenue Ruling 2020-27 to clarify the timing on the deductibility of expenses paid with PPP loan funds. 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