Concerning the non-deductibility of expenses related to the Paycheck Protection Program (PPP), the IRS released updated guidance this month (November 2020). Under the new IRS guidance, a calendar year borrower who received a PPP loan in 2020, which loan has not been forgiven by the end of 2020, may not deduct expenses incurred with PPP loan proceeds if (i) the expenses are qualifying expenses under the PPP rules (i.e., qualifying payroll costs, mortgage interest, utility payments and rent) and (ii) the borrower reasonably expects that its loan will be forgiven. This rule applies even if the borrower has not yet submitted an application for forgiveness in 2020, so long as the borrower intends to submit an application in 2021 and reasonably expects forgiveness. In contrast, if a borrower forgoes forgiveness, or was denied forgiveness, the borrower may elect to deduct the previously non-deductible expenses on its federal income tax return for either its 2020 or 2021 tax year.