The IRS announced a safe harbor for certain businesses that received first-round Paycheck Protection Program (PPP) loans but did not deduct any of the original eligible expenses because they relied on guidance issued before the enactment of the Consolidated Appropriations Act, 2021 (CAA), P.L. 116-260, in December 2020.
In Notice 2020-32 and Rev. Rul. 2020-27 (which were obsoleted by Rev. Rul. 2021-2) the IRS provided that a taxpayer that received a loan through the PPP was not permitted to deduct expenses that are normally deductible under the Code to the extent the payment of those expenses resulted in PPP loan