Loan Forgiveness Deductions Left in Hands of Congress

The IRS, backed into an interpretive corner, eliminated some potential extra benefits of a massive loan program that is part of the government’s virus response—and it’s on lawmakers to fix it if they disagree, tax professionals said.

In the Thursday guidance (Notice 2020-32) the agency said expenses that qualify businesses for forgiveness of loans under the Paycheck Protection Program won’t generate federal tax deductions. This decision “prevents a double tax benefit” since the forgiven loans aren’t included in taxable income, the guidance said, following a standard under tax code Section 265.

There ...