4/22/2021
Revenue Procedure 2021-20: Safe Harbor for certain taxpayers that received a loan pursuant to the Paycheck Protection Program
Provides a safe harbor for certain taxpayers that received a loan pursuant to the Paycheck Protection Program (PPP) and, based on guidance issued by the Treasury Department and the IRS prior to the enactment of the COVID-related Tax Relief Act of 2020, did not deduct certain otherwise deductible expenses paid or incurred during the taxpayer’s taxable year(s) ending after March 26, 2020, and on or before December 31, 2020. Under the safe harbor, these taxpayers may deduct the expenses in the immediately subsequent taxable year. This revenue procedure also obsoletes Revenue Procedure 2020-51.
Revenue Procedure 2021-20 will appear in IRB 2021-19, issued on May 10, 2021.
The Treasury Department and the Internal Revenue Service issued Revenue Procedure 2021-20 for certain businesses that received first-round Paycheck Protection Program (PPP) loans but did not deduct any of the original eligible expenses because they relied on guidance issued before the enactment of tax relief legislation in December of 2020.
Under prior guidance, businesses that received PPP loans to cover payroll costs, interest on covered mortgage obligations, covered rent obligation payments, and covered utility payments could not deduct corresponding expenses.
With the Dec. 27, 2020, enactment of the Consolidated Appropriations Act, 2021, businesses now may claim these deductions even though they received PPP loans to cover original eligible expenses.
These businesses can use the safe harbor provided by this guidance to deduct those expenses on the return for the immediately subsequent year.