{"id":158,"date":"2021-01-25T07:19:57","date_gmt":"2021-01-25T07:19:57","guid":{"rendered":"https:\/\/www.thinkastute.com\/blog\/?p=158"},"modified":"2023-11-26T07:23:01","modified_gmt":"2023-11-26T07:23:01","slug":"the-impact-of-ppp-loan-forgiveness-on-rd-tax-credit","status":"publish","type":"post","link":"https:\/\/www.thinkastute.com\/blog\/the-impact-of-ppp-loan-forgiveness-on-rd-tax-credit\/","title":{"rendered":"The Impact Of PPP Loan Forgiveness On R&D Tax Credit"},"content":{"rendered":"

The Paycheck Protection Program (PPP) was established under the CARES Act (Coronavirus Aid, Relief, and Economic Security Act) to provide financial resources to small and mid-sized businesses. These funds were distributed to help companies cover certain expenses and maintain their payroll during the pandemic.<\/p>\n

You may have seen some reports circulating on the topic of loan forgiveness, which may be confusing. Please allow us to provide some clarity.<\/div>\n
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The CARES Act explicitly states that PPP loan forgiveness doesn\u2019t trigger taxable income. It further states that income arising from the forgiveness of debt \u201cshall be excluded from gross income.\u201d<\/div>\n
The IRS issued Notice 2020-32 on April 30, 2020, stating that forgiven PPP loan proceeds used for otherwise allowable business expenses are not deductible.<\/div>\n
How does PPP Loan Forgiveness Relate to the R&D Tax Credit?<\/strong><\/div>\n
Under this Notice, taxpayers are unable to claim tax deductions for expenditures that were paid with their PPP funds. Thus, taxpayers cannot claim these expenses for purposes of calculating their R&D tax credit.<\/div>\n
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What does all this mean to you? <\/strong><\/div>\n
A company that received a PPP loan may experience a reduction in their ability to claim both federal and state R&D tax credits. This could translate into a significant decrease in R&D expenditures, reducing your R&D tax credits for 2020.<\/div>\n
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You can try and mitigate the impacts by applying the PPP forgivable loan funds to <\/strong><\/div>\n