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Paycheck Protection Program (PPP) loans for corporations

Proceeds

Forgiven PPP loan proceeds are excluded from taxable income and are treated as tax-exempt income. For S-Corporations, the forgiven PPP loan proceeds increase the shareholder's basis in the S-Corporation stock and increase the Other Adjustments Account (OAA).

Expenses

Eligible expenses paid with forgiven PPP loan proceeds are fully deductible. For S-Corporations, expenses paid with forgiven PPP loan proceeds shouldn't reduce the Accumulated Adjustments Account (AAA). These expenses instead reduce the OAA.

Additional reporting statement

The 2021 Form 1120 and Form 1120-S instructions require additional reporting for corporations that have tax-exempt income resulting from the forgiveness of a PPP loan. The following information must be included in a statement with the tax return:
  1. The corporation’s name, address, and EIN.
  2. A statement that the corporation is applying or applied section 3.01(1), (2), or (3) of Rev. Proc. 2021-48 as applicable.
  3. The amount of tax-exempt income from forgiveness of the PPP loan the corporation is treating as received or accrued.
  4. Whether forgiveness of the PPP loan has been granted as of the date the return is filed.

Electronic file

UltraTax CS automatically includes the additional reporting statement in the electronic file when you enter data in the statement window attached to the PPP loan forgiveness field in the
Mc
 screen or
Ms
 screen.
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