Skip to Main Content


Holland & Hart News Update

Tax Consequences of PPP Loan Forgiveness

The CARES Act expressly provides that the amount of any PPP loan forgiveness is excluded from the PPP recipient’s gross income. However, the CARES Act had been silent on the issue of tax deductions for the expenses associated with the loan forgiveness. In Notice 2020-32, issued April 30, 2020, the IRS addressed the tax deductibility of certain expenses. Specifically, small businesses whose PPP loans are forgiven may not deduct the payroll costs, rents, and other expenses that resulted in the loan forgiveness.

This tax treatment is designed to prevent a double tax benefit because the amount of the loan forgiveness is not taxable to the PPP recipient. As a result, the PPP program is a wash for tax purposes. However, it also diminishes the potential value of the PPP program. Given that the program is designed to maximize liquidity for small businesses, it is likely that Congress will step in to expressly permit the tax deductions. Senator Grassley, the Chair of the Senate Finance Committee, has stated that the Notice is contrary to legislative intent and Representative Neal, the House Ways and Means Committee Chairman, has indicated that the next round of relief legislation will address the issue.

This publication is designed to provide general information on pertinent legal topics. The statements made are provided for educational purposes only. They do not constitute legal or financial advice nor do they necessarily reflect the views of Holland & Hart LLP or any of its attorneys other than the author. This publication is not intended to create an attorney-client relationship between you and Holland & Hart LLP. Substantive changes in the law subsequent to the date of this publication might affect the analysis or commentary. Similarly, the analysis may differ depending on the jurisdiction or circumstances. If you have specific questions as to the application of the law to your activities, you should seek the advice of your legal counsel.


Unless you are a current client of Holland & Hart LLP, please do not send any confidential information by email. If you are not a current client and send an email to an individual at Holland & Hart LLP, you acknowledge that we have no obligation to maintain the confidentiality of any information you submit to us, unless we have already agreed to represent you or we later agree to do so. Thus, we may represent a party adverse to you, even if the information you submit to us could be used against you in a matter, and even if you submitted it in a good faith effort to retain us.