Paycheck Protection Program Forgiveness and Taxability

It’s been a crazy few weeks. We were able to help many of you to secure Paycheck Protection Program (PPP) loans. That’s good news. The bad news is that many of you are still in pending status waiting on Congress to approve more funding. We are all crossing our fingers that more money for this program is approved soon and, hopefully, there is a more sensible approval process that puts small businesses first before large, capital strong businesses.

For those that did get their PPP funds, please review this excellent article that discusses the “Ten Things We Need To Know About Paycheck Protection Program Loan Forgiveness”. While there are still many rules to be clarified, the 8-week clock to spend the money wisely (to ensure maximum forgiveness) is ticking for any business that has received PPP funds. We also recommend this PPP resource compiled the US Chamber of Commerce. Dig in and learn as much as you can to ensure you get the maximum forgiveness possible.

Another question that we have been asked a lot lately — “Does the PPP loan forgiveness create taxable income?”. At this point in time, and according to the author of the article above, it appears that the answer is no. “While a cancellation of a borrower’s debt typically creates taxable income under Section 61(a)(11) of the Internal Revenue Code, the CARES Act provides that forgiveness of a PPP loan is completely tax-free.” Another piece of good news if you were fortunate enough to secure a PPP loan before the well ran dry.

Congress will be back in session today to, hopefully, hammer out round 2 funding for the PPP. We will post another update here if and when Congress approves additional funding. Stay tuned.