Consolidated Appropriations Act 2021: PPP & EIDL funded expenses

  • The bill clarifies that Gross income does not include any amount that would otherwise arise from the forgiveness of a PPP loan, emergency EIDL grants and certain loans & repayment assistance, as provided by the Cares Act.
  • Deductions are allowed for otherwise deductible expenses paid with the proceeds of a PPP loan that is forgiven, as well as for business expenses paid with emergency EIDL grants and advances.
  • Tax basis and other attributes of the borrower’s assets will not be reduced as a result of those amounts being excluded from Gross income. Partner’s tax basis would be adjusted by the distributable share of the deductions attributed to forgiveness.
  • A similar treatment is also applicable to the Second Draws of PPP loans, effective for tax years ending after the date of enactment of the provision.
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