On May 6, 2020, members of the Senate Finance Committee introduced the Small Business Expenses Protection Act of 2020 (“the Act”), legislation that would allow some small businesses to deduct from their taxes expenses paid with their forgiven Paycheck Protection Program (“PPP”) loan. Should this bill become law, it would greatly modify current regulations surrounding tax-deductible expenses for small businesses.

On April 30, 2020, the Internal Revenue Service (“IRS”) issued a notice stating that no tax deduction is allowed for an expense that results in PPP loan forgiveness. On May 4, 2020, Senate Finance Committee members Chuck Grassley and Ron Wyden co-wrote a letter to the IRS saying that such guidance runs counter to their congressional intent and makes it harder to provide necessary health care coverage.

The Act would effectively void the IRS notice. Coronavirus assistance through the PPP would not affect the tax-deductibility of regular business expenses. The senators who introduced the bill hope that it will encourage small businesses to continue using PPP funds to retain employees and keep their businesses afloat.

PilieroMazza is monitoring the rapidly changing COVID-19 crisis and will provide updates when more guidance is released by the government. We also invite you to visit the Firm’s COVID-19 Client Resource Center to access further resources that will help businesses navigate the effects of the COVID-19 pandemic. If you need immediate assistance, please contact us at [email protected]