On November 18, the U.S. Treasury Department and Internal Revenue Service (IRS) clarified the tax treatment of expenses where a Paycheck Protection Program (PPP) loan has not been forgiven by the end of the year the loan was received. According to the IRS revenue ruling, businesses are not taxed on the proceeds of a forgiven PPP loan, thus the business expenses paid from those proceeds are not deductible. The revenue ruling illustrates multiple taxpayer scenarios, which conclude that if the PPP loan has not yet been forgiven by the end of 2020, but the business reasonably believes the loan will be forgiven in the future, the expenses are not deductible. This applies whether the business has filed for forgiveness yet or not. However, if a PPP loan was expected to be forgiven, and was not, the expenses are deductible.