The passing of the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) established the Paycheck Protection Program for small businesses. These loans are to be used principally for payroll costs of employees, rent, and utilities. These loans were being used to help avoid companies from furloughing their employees during the COVID-19 pandemic. The loan amounts are 2.5 times the average monthly payroll from 2019. Recipients of these loans are hoping that the loans will be forgiven through this program and that they would be able to deduct the payroll costs and allowable rent expense during the 8 week period after receiving the loans (the measurement period). The IRS just published Notice 2020 -32, which effectively bursts the bubble of the companies hoping to take advantage of the double benefit of tax-free income, while being able to deduct the expenses the loans were designed to pay. The notice clearly states “…no deduction is allowed under the Internal Revenue Code (Code) for an expense that is otherwise deductible if the payment of the expense results in forgiveness of a covered loan pursuant to section 1106(b) of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), Public Law 116-136, 134 Stat. 281, 286-93 (March 27, 2020) and the income associated with the forgiveness is excluded from gross income for purposes of the Code pursuant to section 1106(i) of the CARES Act”. Some taxpayers feel this forgiveness was implied, the IRS does not agree. Unless Congress steps into to clarify the issue further, it looks like expenses related to loan forgiveness are not deductible.