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Did You Know that Certain Expenses May Not Be Deductible if You Received a PPP Loan?

Client Alert
May 1, 2020

On April 30, 2020, the IRS issued a Notice stating that for Federal income tax purposes, certain expenses that would otherwise be deductible in a taxpayer’s trade or business may not be deductible if the taxpayer received a loan under the Paycheck Protection Program (“PPP”).

Specifically, the IRS states that no deduction is allowed for an otherwise deductible expense if the expense’s payment resulted in forgiveness of the PPP loan pursuant to Section 1106(b) of the CARES Act. The income associated with the PPP loan forgiveness is also excluded from gross income pursuant to Section 1106(i) of the CARES Act.

For example, if a business received $400,000 in PPP loan proceeds and used the proceeds to pay $350,000 in payroll expense, $50,000 in qualifying rent and utility payments, and met all other applicable terms and conditions within the 8-week applicable period, the entire $400,000 would be forgiven. Therefore, the $400,000 PPP loan proceeds are not included in gross income. However, the $400,000 in payroll, rent, and utility expenses would also not be deductible for Federal income tax purposes.

For additional questions related to the taxability of specific income and expenses in relation to the PPP loan forgiveness, please contact BMD Tax Law Attorney Tracy Albanese at tlalbanese@bmdllc.com or (330) 253-9195.

PPP Loanpaycheck protection programsmall businessFederal Income TaxdeductionsIRSTracy L. Albaneseexpenses
Client Alert

New Ohio Reporting Requirements for Non-Residential Contractors

March 18, 2026Ohio’s E-Verify Workforce Integrity Act, effective March 19, 2026, requires all nonresidential construction companies, subcontractors, and labor brokers to use E-Verify to confirm employee work eligibility on projects across the state. The law applies regardless of company size and carries financial penalties and potential restrictions on future state contracts for noncompliance. Some uncertainty remains around requirements for existing employees, making early compliance planning important.Client Alert

DOT Non-Domiciled CDL Rule

March 11, 2026A new rule from the Federal Motor Carrier Safety Administration (FMCSA) will significantly narrow eligibility for non-domiciled Commercial Driver’s Licenses (CDLs) beginning March 16, 2026. The rule limits eligibility to holders of H-2A, H-2B, and E-2 visas and eliminates Employment Authorization Documents (EADs) as qualifying proof of work authorization. As a result, many lawfully present and work-authorized immigrants, including refugees, asylees, DACA recipients, and Temporary Protected Status holders, will no longer be able to obtain or renew a non-domiciled CDL. The change is expected to affect roughly 194,000 drivers nationwide and has prompted multiple legal challenges, including a pending emergency stay request before the United States Court of Appeals for the District of Columbia Circuit.Client Alert

FinCEN Residential Real Estate Reporting Rule Now in Effect

March 6, 2026FinCEN’s new Residential Real Estate Reporting Rule, effective March 1, 2026, requires certain real estate transfers to be reported to combat financial crimes. Transfers of residential property to entities or trusts without financing may require a Real Estate Report.Client Alert

Department of Education Proposes Redefinition of “Professional Degree,” Excluding Nursing and Limiting Graduate Loan Borrowing

February 20, 2026The U.S. Department of Education has issued a Notice of Proposed Rulemaking that would redefine “professional degree” programs under the One Big Beautiful Bill Act. The proposal excludes nursing from the recognized list and would impose new borrowing limits for graduate students while eliminating the Grad PLUS program. Public comments are due by March 2, 2026.Client Alert

First-of-Its-Kind Federal Ruling Finds Use of Consumer AI Tool May Destroy Attorney-Client Privilege

February 17, 2026On February 10, 2026, Judge Jed Rakoff of the U.S. District Court for the Southern District of New York issued a first-of-its-kind ruling finding that documents generated by a criminal defendant using a consumer AI platform were not protected by attorney-client privilege after being shared with counsel. The court treated the AI tool as a third party, concluding that entering sensitive information into a publicly available platform may waive confidentiality. The ruling also suggests that the work product doctrine may not apply where AI-generated materials are created independently by a client rather than at counsel’s direction. The decision signals that parties should exercise caution when using consumer AI tools in connection with legal matters.
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