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PPP Loan Forgiveness and the R&D Tax Credit

Officially signed into law on December 27th, the recent omnibus Covid-19 relief bill H.R. 133 reversed the Service’s previous stance regarding the deductibility of PPP-related expenditures.

Among the bill’s voluminous provisions, section 276 (beginning on page 2004) makes clear that no deduction shall be denied as a result of a PPP loan’s forgiveness. Consequently, a taxpayer’s potential federal research credit will be unaffected as a result of the taxpayer’s utilization of a PPP loan and subsequent loan forgiveness. This protection is extended both to loans under the original Paycheck Protection Program as well as future loans to be granted under the bill’s expanded program.

While the enactment of these provisions provide urgently needed relief to companies utilizing the program federally, it remains to be seen whether state relief programs will follow suit. For example, as of this writing California remains committed under Assembly Bill 1557 to disallowing deductions and credits based on PPP-related expenditures. CTI will continue to closely monitor the progress of potential future state or federal Covid-19 relief packages and provide updates on each’s impact to PPP loan expense deductibility and the R&D credit as they evolve.

For additional information, read our full blog: PPP Loan Forgiveness and the R&D Tax Credit.

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