Rev. Proc. 2020-51: Safe harbor for claiming deductions by taxpayers that received PPP loans
Rev. Proc. 2020-51: Safe harbor for claiming deductions
The IRS last evening released an advance version of Rev. Proc. 2020-51 that provides a safe harbor allowing a taxpayer to claim a deduction in the taxpayer’s tax year beginning or ending in 2020 (the 2020 tax year) for certain otherwise deductible eligible expenses if:
- The eligible expenses are paid or incurred during the taxpayer’s 2020 tax year;
- The taxpayer received a loan guaranteed under the Paycheck Protection Program (PPP)* that, at the end of the taxpayer’s 2020 tax year, the taxpayer expects to be forgiven in a tax year after the 2020 tax year; and
- In a subsequent tax year, the taxpayer’s request for forgiveness of the PPP loan is denied (either in whole or in part), or the taxpayer decides never to request forgiveness of the PPP loan.
Rev. Proc. 2020-51 [PDF 115 KB] provides that such a taxpayer may be able to deduct some or all of the eligible expenses on: (1) the taxpayer’s timely filed (including extensions) original income tax return or information return for the 2020 tax year; (2) an amended return or an administrative adjustment request (AAR) under section 6227 for the 2020 tax year; or (3) the taxpayer’s timely filed (including extensions) original income tax return or information return for the subsequent tax year.
*The PPP is a program intended to provide nearly $660 billion to support lending to both small and medium-sized businesses enacted by the “Coronavirus Aid, Relief, and Economic Security Act” (CARES Act) (Pub. L. No. 116-136).
Rev. Proc. 2020-51 defines taxpayers that are eligible for the safe harbor and sets forth the safe harbor procedures, including that the taxpayer may not apply the safe harbor procedures to deduct any amount of non-deducted eligible expenses unless the taxpayer attaches a statement to the return on which the taxpayer deducts non-deducted eligible expenses. The statement must be titled “Revenue Procedure 2020-51 Statement,” and Rev. Proc. 2020-51 lists the information that must be included on the statement.
The purpose of this report is to provide text of the revenue procedure.
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.
