Small businesses that manage to get their Paycheck Protection Program loans forgiven may find themselves losing valuable tax breaks, according to new guidance from the Internal Revenue Service.
Companies that qualify for loan forgiveness under legislation Congress approved won’t be able to deduct the wages or other businesses expenses they paid for using the loan, according to an IRS notice published Thursday.
“This treatment prevents a double tax benefit,” the agency said in the notice. “This conclusion is consistent with prior guidance of the IRS.”
The guidance clarifies a point of confusion in the $670 billion small business loan program to help businesses struggling as the coronavirus has brought the economy to a standstill. The law states that the forgiven loan won’t be taxed, but didn’t specify whether companies could still write off the expenses they covered with that money.
Wayne Rushton served more than four decades at the Office of the Comptroller of the Currency, culminating in his role as senior deputy comptroller and chief national bank examiner. In that capacity, he chaired the agency's Committee on Bank Supervision and represented the OCC on the Federal Financial Institutions Examination Council's Task Force on Supervision.
Earlier in his career, Wayne led the OCC's Multinational Banking Division and held several senior examination and supervisory positions. He gained extensive experience managing troubled institutions during the late 1980s and early 1990s, including service as the comptroller's deputy at the Resolution Trust Corporation and as director of the OCC's Special Resolutions Unit. He also completed a special assignment with the U.S. Department of Justice as a legislative fellow in the 97th Congress.
Following his government service, Wayne was a senior advisor at Promontory Financial Group, where he helped clients navigate complex regulatory examinations and enforcement issues and strengthen relationships with supervisory agencies.
Jimmy Nesbitt is a reporter at Employee Benefit News, where he covers the evolving landscape of workplace benefits, healthcare, retirement, financial wellness and related policy issues. His career has spanned more than two decades and taken him all over the world. He started out as a public safety reporter at a regional newspaper in western Kentucky in 2002, and has since held writing and editing positions at publications in Indiana, Beijing, South Dakota, Massachusetts and South Carolina. Nesbitt most recently served as editor of The Post and Courier Columbia in South Carolina before joining Employee Benefit News in October 2025.
Nesbitt has been recognized for excellence in journalism with multiple awards, including honors in headline writing from the South Dakota Newspaper Association and the Associated Press Great Plains Newspaper Contest, and accolades for community affairs and public service reporting, feature writing, and news coverage from the Indiana Associated Press Managing Editors, Hoosier State Press Association, Kentucky State Press Association, and The E.W. Scripps Company. Most recently, he was awarded the Most Impactful Reporting Award for 2025 from Employee Benefit News.
Alex D. Pappas is an associate in Hunton's Insurance Coverage group in the firm's Washington, DC office. He counsels clients on all aspects of insurance coverage, guiding them in obtaining appropriate coverage and resolving disputes over coverage, including in litigation and arbitration.
The tax code permits companies to write off businesses expenses, such as wages, rent and transportation expenses, but generally doesn’t allow write-offs for tax-exempt income.
The ruling adds to the list of stumbling blocks facing businesses as they try to qualify for the Paycheck Protection Program loans.
Small businesses have reported technical issues in trying to apply for the funds, which restarted Monday after the first round of funding ran out after just 13 days.
The program, run by the Small Business Administration, provides funds to cover eight weeks of payroll costs and the loans are forgiven if the employers keep workers on the job or quickly rehire laid-off workers.