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The Internal Revenue Service (IRS) has issued new guidance two items related to Paycheck Protection Program (PPP) loans. The first guidance clarifies that businesses that secured PPP loan forgiveness to not have the ability to deduct business expenses paid for by the loan. The second guidance provides a safe harbor for certain Paycheck Protection Program loan participants, whose loan forgiveness has been partially or fully denied, or who decide to forego requesting loan forgiveness. Deduction of Business Expenses: Specifically, the guidance on not having the ability to deduct business expenses related to your PPP loan makes clear that companies that have received PPP loan forgiveness, or have a reasonable expectation that the government will not require the company to pay back the money, cannot deduct the business expenses paid for by the loan. This guidance affirms a position the IRS took in April. Businesses that do not receive loan forgiveness, however, can still deduct the business expenses used with the loan. According to the guidance, if the request for loan forgiveness is "denied, in whole or in part, or the taxpayer decides never to request forgiveness" companies can still write off the payroll, mortgage, and utility costs paid for with PPP money. Click here to read the business expense guidance. Safe Harbor: The guidance provides a safe harbor for certain Paycheck Protection Program loan participants, whose loan forgiveness has been partially or fully denied, or who decide to forego requesting loan forgiveness, to claim a deduction for certain otherwise deductible eligible payments on (1) the taxpayer's timely filed, including extensions, original income tax return or information return, as applicable, for the 2020 taxable year, or (2) an amended return or an administrative adjustment request (AAR) under section 6227 of the Internal Revenue Code (Code) for the 2020 taxable year, as applicable. For taxpayers that decide to forego requesting loan forgiveness, the safe harbor also allows these taxpayer to claim a deduction for the otherwise deductible eligible payments on an original income tax return or information return, as applicable, for the taxable year in which the taxpayer decides to forego requesting forgiveness. Click here to read the safe harbor guidance. --SWACCA