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Nonprofits: Impact of PPP Loan Forgiveness on Public Charity Status

12/8/20 – Bryan Pautsch

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Nonprofit organizations nationwide have been anxiously awaiting clarity amidst fears that forgiven loans may NOT be reported as government grants and negatively affect the organization’s public charity status. During last week’s AICPA Fall Tax Meeting, officials were pressed regarding the effect of loan forgiveness on charitable public support tests.

Officials confirmed that the amounts in question can be reported on Schedule A of the Form 990 and 990-EZ as contributions from a government unit in the same tax year in which they are forgiven, dismissing the widespread concern. IRS Deputy Associate Chief Counsel, Janine Cook, reiterated that loan forgiveness would not affect public charity status. “We anticipate that this is not going to be a problem…I think I can allay those concerns,” said Cook.

Guidance will be issued in the upcoming Form 990 instructions. In the meantime, organizations can rest easy knowing their public charity status is not at risk.  As always, VonLehman will be prompt in providing future updates for our clients.

Contact VonLehman’s Nonprofit Tax Leader, Bryan Pautsch, at bpautsch@vlcpa.com or 800.887.0437 for questions and additional information related to PPP Loan Forgiveness, or other nonprofit tax consulting.