Pennsylvania PPP Loan Forgiveness and Deductibility of Expenses

Pennsylvania businesses that obtained Payroll Protection Program (PPP) loans under the federal CARES Act received some good news as the Pennsylvania governor signed Senate Bill 109 into law on Friday, February 5, 2021.

Among the bill’s provisions are two items that make it clear that PPP loan forgiveness is not taxable under any of the classes of income subject to tax under the Pennsylvania income tax code.  Further, expenses paid from the proceeds of the loan are fully deductible. This legislative clarification favorably impacts sole proprietors, partnerships, and “S” corporations and aligns the Pennsylvania tax treatment with the federal tax treatment.  

The bill also clarifies that federal individual economic stimulus rebates paid to individuals as part of the COVID-19 economic relief and stimulus packages will not be included in taxable income for Pennsylvania purposes either.

The provisions above were part of an overall bill approving over $900 million in spending geared towards providing relief to help restaurants, schools, and individuals impacted by the COVID-19 pandemic.  The funding source for most of the spending is provided through federal government COVID-19 relief programs.  

Our team of Business and Tax Advisors at Schneider Downs has extensive experience with the issues surrounding PPP loan forgiveness, so please do not hesitate to contact us with any questions.  

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Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

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