A huge advocacy win for the HUBZone Contractors National Council, GovEvolve, and Montgomery County Chamber of Commerce (MCCC) - as well as entire small business community - with today's announcement of IRS Paycheck Protection Program (PPP) guidance reversal.
On April 22, the IRS issued guidance (Revenue Procedure 2021-20) regarding retroactive tax deductions for businesses or individuals that received forgiveness on a PPP loan but did not deduct any of the original eligible business expenses because they adhered to former guidance, issued before the enactment of tax relief legislation in December of 2020.
This new guidance allows business with forgiven loans to retroactively deduct those expenses, no longer considering it a “doubt credit.” Taxpayers have the option to deduct these expenses in the subsequent tax year if they do not wish to amend a return or make an administrative adjustment request.
Small businesses who relied on economic support from the CARES Act to weather the economic downturn caused by the COVID-19 pandemic will benefit from this change. Our clients advocated for this change as lawmakers worked to reverse the IRS decision in Congress. They provided input on various measures to support this reversal.
We would like to thank Senators Grassley, Wyden and Rubio for their efforts in repealing this provision. Their legislation, the Small Business Expense Protection Act of 2020, introduced in May of 2020, sought to resolve this tax injustice so that recipients of coronavirus assistance were not stripped of their right to claim regular business expenses. Although it did not pass, this bill reflected the sentiments of our clients and the small business communities that they support.