The U.S. Senate and House of Representatives passed a $900 billion COVID-19 relief bill (the Consolidated Appropriations Act 2021) on Monday, December 21, 2020, and signed by the president on December 27, 2020. One component of this act “ensures tax deductibility for business expenses paid with forgiven Paycheck Protection Program (PPP) loans, provides fresh PPP funding, makes Sect. 501(C)(6) not-for-profit organizations eligible for loans for the first time, and offers businesses facing severe revenue reductions the opportunity to apply for a second loan.”
The provisions specifically related to tax deductibility will supersede the guidance previously provided by the IRS this summer and fall, which stated a taxpayer may not deduct those expenses.
The Consolidated Appropriations Act 2021 also provides for additional PPP loans (PPP2) for both first-time businesses and previous recipients—provided that they have used or will use the full amount of their first PPP loan.
More guidance will likely come after the act has been signed into law.