Contact Congress on IRS PPP Tax Deductibility Ruling

Paycheck Protection Program Tax Deductibility

Ths IRS has issued additional guidance on the deductibility of business expenses claimed, or to be claimed, as amounts supporting loan forgiveness on a Paycheck Protection Program (PPP) loan forgiveness application. Unfortunately, the additional IRS guidance doubled down on its previous guidance by confirming that business recipients of PPP loans that have been forgiven cannot deduct wages and related expenses as a business expense.  This guidance significantly lessens the benefit of this important small business relief program. 

The guidance was released in two parts, as a Revenue Ruling (Rev Rul 2020-27) and as a Revenue Procedure (Rev Proc 2020-51). The Revenue Ruling provides guidance on when PPP related expenses become non-deductible for tax purposes, while the Revenue Procedure provides a safe harbor for deducting those expenses, if in a subsequent year they are ultimately not forgiven.

While this is the second IRS guidance confirming the non-deductibility of PPP business expenses, there is broad bipartisan congressional support, even among the leadership, that the IRS guidance is incorrect and against the intent of congressional leaders.  RVDA and other business groups support a legislative effort to get this ruling changed.  If you are concerned about this IRS decision, please reach out to your federal elected officials urging them to act

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Subject: Paycheck Protection Program taxation concerns

Dear [[Recipient's Title and Name]]:

As a small business owner in your jurisdiction, I was extremely disappointed to learn that the IRS ruled on April 30 (Notice 2020-32) and again on November 18th (Rev. Rul. 2020-27) that it will not allow struggling small businesses across our country to deduct employee wages as a business expense if their Paycheck Protection Program (PPP) loan is forgiven, essentially making the PPP loan taxable.   This ruling is contrary to the intent that the loans not be taxed, significantly reduces the value of the PPP loan itself, and is a damaging blow to small business owners.  Please take every action necessary to reverse this punitive position.

We are living in extraordinarily challenging times, and business owners are at risk of losing everything because they have been forced to significantly limit their business operations or temporarily close their doors through no fault of their own.  The economic relief provided through the PPP is an important lifeline that was intended by Congress and President Trump to help businesses maintain liquidity, keep employees working, and get through this pandemic with their doors still open.   This IRS ruling fly in the face of that intent and will take critical financial resources from businesses that are fighting to survive.

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I urge you to support efforts to overturn these harmful IRS rulings and help employers keep employees on their payroll as was intended by the Paycheck Protection Program in the first place.   Please let me know your position on this critical issue.




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