Nov 22 IRS ISSUES GUIDANCE SURROUNDING TAX TREATMENT OF PPP LOAN FORGIVENESS
In a series of three Revenue Procedures issued on November 18, 2021, the Internal Revenue Service provided guidance for taxpayers related to the timing and treatment of the tax-exempt income associated with Paycheck Protection Program (PPP) loan forgiveness.
This revenue procedure stipulates that taxpayers may treat the tax-exempt income associated with forgiven PPP loans as received or accrued:
- As eligible expenses are paid or incurred,
- When the PPP loan forgiveness application is filed, or
- When PPP loan forgiveness is granted.
Further guidance surrounding amended return filing requirements in situations where partial PPP loan forgiveness is achieved, as well as timing requirements in situations where tax-exempt income resulting from the partial or full forgiveness of a PPP loan is treated as gross receipts under certain federal tax provisions, is also included.
Issued to provide guidance for partnerships and consolidated groups, this revenue procedure provides support for the treatment of tax-exempt income from forgiven PPP loans, grant proceeds or subsidized payment of certain principal, interest and fees for:
- Partner and partnership allocations under Internal Revenue Code (IRC) Sec. 704(b), as well as the corresponding tax basis adjustments under IRC Sec. 705; and
- Consolidated group basis adjustments for the stock of subsidiary members under IRC Sec. 1502 and the corresponding treasury regulations.
Rev. Proc. 2021-50 allows partnerships that are subject to the centralized partnership audit regime that wish to take advantage of the provisions of Rev. Proc. 2021-48 and Rev. Proc. 2021-49 to file amended returns for taxable years ending after March 27, 2020. Taxpayers should note that the amended returns must be filed, and the corresponding Schedules K-1 must be furnished, on or before December 31, 2021.
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