PPP: Tax Responsibilities and Disbursement Rules

The IRS and SBA issued additional clarification and guidance regarding PPP. Whether you have a loan already or preparing to apply, you should be aware of a few details.
Tax Responsibilities
The IRS clarified no deduction is allowed under the Internal Revenue Code (IRC) for an expense otherwise deductible if the payment of the expense results in forgiveness of a covered loan pursuant to the CARES Act. Also, the income associated with the loan forgiveness is excluded from gross income for purposes of the IRC. See IRS Notice 2020-32 for details.
Disbursement Rules
The SBA issued guidance that answers questions about PPP loans. A key question for businesses is whether a borrower can take multiple draws from a PPP loan and delay the start of the eight-week covered period. The SBA’s answer is no. The lender must make a one-time full disbursement of the PPP loan within 10 calendar days of loan approval. For the purposes of this rule, a loan is considered approved when the loan is assigned a loan number by the SBA. Details are available in Docket Number SBA-2020-0022.
Corporate Group Loans
The SBA responded to another question: Can a single corporate group receive unlimited PPP loans? The answer is no. The SBA stated: “To preserve the limited resources available to the PPP program, and in light of the previous lapse of PPP appropriations and the high demand for PPP loans, businesses that are part of a single corporate group shall in no event receive more than $20 million of PPP loans in the aggregate. For purposes of this limit, businesses are part of a single corporate group if they are majority owned, directly or indirectly, by a common parent.” See Docket Number SBA-2020-0023.
Guidance is subject to change. Contact us for the latest information.


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