On 18 November 2020, the Internal Revenue Service (IRS) has published 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 provides a safe harbor allowing a taxpayer to claim a deduction in the taxpayer’s taxable year beginning or ending in 2020 (2020 taxable year) for certain otherwise deductible eligible expenses, as defined in the revenue procedure subject to meet following conditions:
- The eligible expenses are paid or incurred during the taxpayer’s 2020 taxable year,
- The taxpayer receives a loan (covered loan) guaranteed under the Paycheck Protection Program (PPP) authorized under section 7(a)(36) of the Small Business Act (15 U.S.C. 636(a)(36)), which at the end of the taxpayer’s 2020 taxable year the taxpayer expects to be forgiven in a taxable year after the 2020 taxable year (subsequent taxable year), and
- In a subsequent taxable year, the taxpayer’s request for forgiveness of the covered loan is denied, in whole or in part, or the taxpayer decides never to request forgiveness of the covered loan, as described in section 3 of this revenue procedure.
The PPP is a program to assist small businesses negatively impacted by the Covid-19 pandemic. A taxpayer described in section 3.01 or 3.02 of this revenue procedure 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, as applicable, for the 2020 taxable year; (2) an amended return or an administrative adjustment request (AAR) under section 6227 of the Internal Revenue Code (Code) for the 2020 taxable year, as applicable; or (3) the taxpayer’s timely filed, including extensions, original income tax return or information return, as applicable, for the subsequent taxable year.
