On April 30, 2020, the Internal Revenue Service (IRS) issued Notice 2020-32, which provides that no deduction is allowed for expenses paid with loan money forgiven under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).

Notice 2020-32 explains that, because forgiven loans are not treated as income under the CARES Act, the denial of a tax deduction for expenses paid with forgiven loan proceeds prevents a double tax benefit, as consistent with Section 265 of the Internal Revenue Code.