Tax Implications of Paycheck Protection Program and Related Expenses: Deductibility, PPP Loan Forgiveness and Exclusion from Taxable Income

This CLE/CPE webinar will provide guidance to tax counsel and advisers on critical tax issues associated with Paycheck Protection Program (PPP) loans and related expenses. Chamberlain Hrdlicka shareholders Juan Vaquez, Jr. and Jaime Vasquez and Chamberlain associate Victor Viser will discuss the latest developments and IRS guidance, challenges of loan forgiveness and exclusion from taxable income, and recently issued Notice 2020-32 and the deductibility of covered expenses.

Description

Congress passed the PPP to help small businesses stay afloat and their employees paid while they weather the COVID-19 pandemic. Instead, these businesses have encountered multiple rule changes and conflicting information resulting in significant tax challenges. Tax counsel and advisers must grasp a complete understanding of PPP loans and related tax issues.

Small businesses receiving PPP loans from the SBA agonize through myriad initial challenges. These businesses must now consider the tax issues that come with the loan forgiveness process as provided under the CARES Act.

Section 1106 of the CARES Act provides that loans taken out under the PPP are forgivable without incurring cancellation of debt income if such loans are used for payroll and other qualifying expenses. However, IRS Notice 2020-32 provides that payroll costs and other expenses are not deductible for federal income tax purposes if they are paid with forgiven PPP loan proceeds that are excluded from taxable income under the CARES Act. Taxpayers must weigh the costs and benefits of the PPP loan program compared to other relief under the CARES Act, such as the employee retention tax credits.

Listen as our panel discusses the latest developments and IRS guidance regarding PPP loans, employee retention tax credits, challenges of loan forgiveness, and other related tax issues of PPP loans and expenses.

Outline

1. CARES Act relief provisions
2. PPP loan overview and application process
3. Forgiveness and exclusion from taxable income
4. Notice 2020-32 and covered expenses
5. Issues for certain taxpayers
   1. PPP loan vs. employee retention tax credit
   2. Interplay with aggregation rules
   3. Deferral of certain taxes under the CARES Act
6. Key tax planning options for businesses and best practices for tax counsel

Benefits

The panel will review these and other key issues:

• What relief does the CARES Act provide businesses impacted by the pandemic?
• What are the requirements and critical challenges of PPP loans?
• How can you ensure PPP loan forgiveness and exclusion from taxable income?
• What are the key issues stemming from IRS Notice 2020-32 regarding covered expenses?
• What are the essential considerations for businesses in determining whether to apply for PPP loans versus employee retention tax credits?
• How do the aggregation rules apply?