More Questions Answered on the Paycheck Protection Program
May 12, 2020
The Internal Revenue Service (IRS) released Notice 2020-32 earlier this month which answers question about business deductions for expenses with PPP funds. The Notice provides that businesses will not be able to claim a deduction for expenses paid with PPP loan proceeds to qualify for loan forgiveness. The CARES Act was silent on the deductibility of the expenses paid with PPP loan proceeds such as utilities, rents, and other PPP approved expenses. In normal circumstance these expenses can be deducted, but the Notice prohibits these deductions if a business uses PPP funds to pay for them.
The US Treasury answered additional questions on PPP loan forgiveness in their latest FAQ. Of interested to many employers is question #40. It states that a borrower’s loan forgiveness will not be reduced if the employer laid off an employee, offered to rehire the same employee, but the employee declined the offer as long as the offer to rehire was made in good faith, written offer and the employee’s rejection of that offer must be documented.
The FAQ also extends the deadline to return PPP loans until May 14 (question #31). This is the date companies can return PPP loans without penalty.