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Small businesses that benefit from the Paycheck Protection Program could end up having to pay a share of their loan to Uncle Sam in taxes.  On April 30, the IRS issued Notice 2020-32, which states that expenses paid with the forgivable PPP loan proceeds – which would normally be deductible for tax purposes – are considered to be nondeductible. By reasoning that forgivable PPP loans give rise to tax-exempt income, and expenses from tax-exempt income are nondeductible, the IRS concluded that considering PPP expenses as nondeductible will prevent a “double tax benefit.”

In an insightful article, CGS3 partner Phil Jelsma  explains the potential consequences of this Notice for small businesses – and why the IRS’s guidance could still be reversed if Congress decides to act.

Read the full article from the Daily Journal here  or from the Daily Transcript here  (subscription required).