Waiver of Information Reporting Requirements with Respect to Certain Amounts Excluded from Gross Income

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Waiver of Information Reporting Requirements with Respect to Certain Amounts

Excluded from Gross Income

Notice 2021-06

I.

PURPOSE

This notice waives the requirement to file certain information returns or furnish

certain payee statements otherwise required by the Internal Revenue Code (Code)

pursuant to section 279 of the COVID-related Tax Relief Act of 2020 (COVID Relief

Act), enacted as Subtitle B of Title II of Division N of the Consolidated Appropriations

Act, 2021, Pub. L. 116-260, 134 Stat.1182 (December 27, 2020) (CAA 2021).

Specifically, this notice waives the requirement to file certain information returns or

furnish certain payee statements otherwise required by chapter 61 of the Code with

respect to amounts excluded from gross income by reason of section 7A(i) of the Small

Business Act (15 U.S.C. § 631 et seq.) or sections 276(b), 277, or 278 of the COVID

Relief Act. This notice also obsoletes Announcement 2020-12, 2020-41 I.R.B. 893.

II.

BACKGROUND

Section 1102 of the Coronavirus Aid, Relief, and Economic Security Act, Pub. L.

No. 116-136, 134 Stat. 281 (March 27, 2020), as amended by the Paycheck Protection

Program Flexibility Act of 2020, Pub. L. No. 116-142, 134 Stat. 641 (June 5, 2020)

(collectively, CARES Act), established the Paycheck Protection Program (PPP),

allowing qualifying businesses (eligible recipients) to obtain loans guaranteed by the

Administrator of the Small Business Administration (Administrator) under section

7(a)(36) of the Small Business Act (15 U.S.C. § 636(a)(36)) (PPP covered loans).

Section 1106 of the CARES Act (originally codified at 15 U.S.C. § 9005) provides that

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an eligible recipient of a PPP covered loan is eligible for forgiveness of indebtedness for

all or a portion of the stated principal amount of the PPP covered loan if certain

conditions are satisfied

strator) under section

7(a)(36) of the Small Business Act (15 U.S.C. § 636(a)(36)) (PPP covered loans).

Section 1106 of the CARES Act (originally codified at 15 U.S.C. § 9005) provides that

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an eligible recipient of a PPP covered loan is eligible for forgiveness of indebtedness for

all or a portion of the stated principal amount of the PPP covered loan if certain

conditions are satisfied. Section 304 of the Economic Aid to Hard-Hit Small

Businesses, Nonprofits, and Venues Act (Economic Aid Act), enacted as Title III of

Division N of the CAA 2021, redesignated, transferred, and amended section 1106 of

the CARES Act (15 U.S.C. § 9005) as section 7A of the Small Business Act, to be

inserted after section 7 of the Small Business Act (15 U.S.C. § 636). Section 276(a)(1)

of the COVID Relief Act amended section 7A(i) of the Small Business Act, as

redesignated, transferred, and amended by the Economic Aid Act, to provide that, for

taxable years ending after March 27, 2020 (the date of the enactment of the CARES

Act), no amount is included in the gross income of an eligible recipient by reason of

forgiveness of a PPP covered loan.

Section 311 of the Economic Aid Act authorizes Paycheck Protection Program

Second Draw (PPP II) covered loans for qualifying businesses (eligible entities)

guaranteed by the Administrator under section 7(a)(37) of the Small Business Act

(15 U.S.C. § 636(a)(37)), and provides that an eligible entity is eligible for forgiveness of

a PPP II covered loan in the same manner as an eligible recipient with respect to a

PPP covered loan made under section 7(a)(36) of the Small Business Act (15 U.S.C.

§ 636(a)(36)). Section 276(b)(1) of the COVID Relief Act provides that no amount of a

forgiven PPP II loan is included in the gross income of an eligible entity

and provides that an eligible entity is eligible for forgiveness of

a PPP II covered loan in the same manner as an eligible recipient with respect to a

PPP covered loan made under section 7(a)(36) of the Small Business Act (15 U.S.C.

§ 636(a)(36)). Section 276(b)(1) of the COVID Relief Act provides that no amount of a

forgiven PPP II loan is included in the gross income of an eligible entity.

Sections 3504, 18004, and 18008 of the CARES Act authorize institutions of

higher learning to award emergency financial aid grants to assist students with

unexpected expenses and unmet financial needs that result from a qualifying

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emergency and with expenses related to the disruption of campus operations due to the

COVID-19 pandemic. Section 277(a) of the COVID Relief Act provides that these

grants, as well as other emergency financial aid grants made to students in response to

a qualifying emergency (as defined in section 3502(a)(4) of the CARES Act), are not

included in the gross income of a student receiving such a grant.

Section 1109 of the CARES Act authorizes the Department of the Treasury

(Treasury Department), in consultation with the Administrator, and the Chairman of the

Farm Credit Administration to establish criteria for various lenders that do not already

participate in lending under Small Business Administration programs, to participate in

the PPP to provide loans. Section 1109(d)(2)(D) requires that lenders use terms and

conditions that, to the maximum extent practicable, are consistent with the terms and

conditions for PPP covered loan forgiveness under section 1106 of the CARES Act.

Section 278(a)(1) of the COVID Relief Act provides that no amount of such a forgiven

loan is included in the gross income of a borrower.

Section 1110 of the CARES Act (15 U.S.C. § 9009) and section 331 of the

Economic Aid Act provide for Economic Injury Disaster Loan grants (EIDL grants) to

certain eligible entities under section 7(b)(2) of the Small Business Act (15 U.S.C.

§ 636(b)(2))

ct.

Section 278(a)(1) of the COVID Relief Act provides that no amount of such a forgiven

loan is included in the gross income of a borrower.

Section 1110 of the CARES Act (15 U.S.C. § 9009) and section 331 of the

Economic Aid Act provide for Economic Injury Disaster Loan grants (EIDL grants) to

certain eligible entities under section 7(b)(2) of the Small Business Act (15 U.S.C.

§ 636(b)(2)). Section 278(b)(1) of the COVID Relief Act provides that an advance under

section 1110(e) of the CARES Act or any funding under section 331 of the Economic

Aid Act is not included in the gross income of the person that receives such advance or

funding.

Section 1112(c) of the CARES Act (15 U.S.C. § 9011(c)) authorizes the

Administrator to subsidize certain loan payments by paying principal, interest, and any

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associated fees owed on certain loans. Section 278(c)(1) of the COVID Relief Act

provides that such a payment is not included in the gross income of the person on

whose behalf the payment is being made. Section 278(c)(2) provides that no deduction

shall be denied by reason of the exclusion of the loan payments from gross income.

Section 324(b) of the Economic Aid Act authorizes the Administrator to provide

grants to shuttered venue operators. Section 278(d)(1) of the COVID Relief Act

provides that such a grant is not included in the gross income of the person that

receives the grant.

Section 279 of the COVID Relief Act authorizes the Secretary of the Treasury or

the Secretary’s delegate to provide an exception from any requirement to file an

information return otherwise required under chapter 61 of the Code with respect to any

amount excluded from gross income by reason of section 7A(i) of the Small Business

Act or sections 276(b), 277, or 278 of the COVID Relief Act

ant.

Section 279 of the COVID Relief Act authorizes the Secretary of the Treasury or

the Secretary’s delegate to provide an exception from any requirement to file an

information return otherwise required under chapter 61 of the Code with respect to any

amount excluded from gross income by reason of section 7A(i) of the Small Business

Act or sections 276(b), 277, or 278 of the COVID Relief Act.

Announcement 2020-12, published prior to the enactment of the COVID Relief

Act, stated that when all or a portion of the stated principal amount of a covered loan is

forgiven because the eligible recipient satisfies the forgiveness requirements under

section 1106 of the CARES Act, an applicable entity is not required to, for federal

income tax purposes only, and should not, file a Form 1099-C, Cancellation of Debt,

information return with the Internal Revenue Service (IRS) or provide a payee statement

to the eligible recipient under section 6050P of the Code as a result of the qualifying

forgiveness.

III.

GRANT OF RELIEF

Under the authority provided by section 279 of the COVID Relief Act, the

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Treasury Department and the IRS waive the requirement to file information returns or

furnish payee statements as described in the following list:

1. Original PPP covered loan forgiveness. A lender is not required to file with the

IRS, or furnish to a borrower, a Form 1099-C reporting forgiveness of PPP

covered loans under section 7A(i) of the Small Business Act as redesignated,

transferred, and amended by the Economic Aid Act.

2. PPP II covered loan forgiveness. A lender is not required to file with the IRS, or

furnish to a borrower, a Form 1099-C reporting forgiveness of PPP II covered

loans under section 311 of the Economic Aid Act.

3. Student emergency financial aid grants

eness of PPP

covered loans under section 7A(i) of the Small Business Act as redesignated,

transferred, and amended by the Economic Aid Act.

2. PPP II covered loan forgiveness. A lender is not required to file with the IRS, or

furnish to a borrower, a Form 1099-C reporting forgiveness of PPP II covered

loans under section 311 of the Economic Aid Act.

3. Student emergency financial aid grants. A grantor is not required to file with the

IRS, or furnish to a student, a Form 1099-MISC, Miscellaneous Information,

reporting the payment of an emergency grant to the student under section 3504,

18004, or 18008 of the CARES Act or another emergency financial aid grant

described in section 277(b)(3) of the COVID Relief Act made to students in

response to qualifying emergencies.

4. Treasury Program loan forgiveness. A lender is not required to file with the IRS,

or furnish to a borrower, a Form 1099-C reporting forgiveness of loans under

section 1109 of the CARES Act.

5. EIDL grants. The Administrator is not required to file with the IRS, or furnish to a

recipient, a Form 1099-MISC reporting the payment of an advance under section

1110(e) of the CARES Act or a grant under section 331 of the Economic Aid Act.

6. Loan subsidies. Neither the Administrator nor a lender is required to file with the

IRS, or furnish to a borrower, a Form 1099-MISC reporting the payment of

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principal, interest, and any associated fees through a loan subsidy authorized

under section 1112(c) of the CARES Act.

7. Shuttered venue operator grants. The Administrator is not required to file with

the IRS, or furnish to a recipient, a Form 1099-MISC reporting the payment of a

grant to a shuttered venue operator under section 324(b) of the Economic Aid

Act.

IV

ting the payment of

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principal, interest, and any associated fees through a loan subsidy authorized

under section 1112(c) of the CARES Act.

7. Shuttered venue operator grants. The Administrator is not required to file with

the IRS, or furnish to a recipient, a Form 1099-MISC reporting the payment of a

grant to a shuttered venue operator under section 324(b) of the Economic Aid

Act.

IV.

OTHER INFORMATION REPORTING

The waivers of information reporting requirements described in section III of this

notice apply only to requirements to file and furnish Form 1099 series information

returns and payee statements for the described grants, payments, subsidies, or loan

forgiveness, which are excluded from gross income. The waivers do not affect any

requirements to file and furnish other forms, such as forms in the 1098 series. For

example, the waiver does not apply to the requirement to file and furnish Form 1098-T,

Tuition Statement, with respect to any payments received for qualified tuition and

related expenses, including qualified tuition and related expenses paid with grants

described in this notice.

Because borrowers may deduct mortgage interest that the Small Business

Administration (SBA) paid to lenders under section 1112 of the CARES Act, lenders

may include those mortgage interest payments in Box 1 of Form 1098, Mortgage

Interest Statement, notwithstanding § 1.6050H-1(e)(3)(ii) of the Income Tax

Regulations. The payments should be included on both the Form 1098 that is filed with

the IRS and the copy that is furnished to borrowers. Including this interest on Form

1098 will inform borrowers of the total amount of mortgage interest they may deduct. In

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addition, this reporting will avoid discrepancies between interest reported to the IRS and

interest claimed as a deduction by borrowers on their income tax returns

be included on both the Form 1098 that is filed with

the IRS and the copy that is furnished to borrowers. Including this interest on Form

1098 will inform borrowers of the total amount of mortgage interest they may deduct. In

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addition, this reporting will avoid discrepancies between interest reported to the IRS and

interest claimed as a deduction by borrowers on their income tax returns. The filing of

information returns with the IRS omitting mortgage interest that the SBA paid to lenders

under section 1112 of the CARES Act could result in the issuance of underreporter

notices (IRS Letter CP2000) to eligible recipients who correctly deduct that interest.

Lenders who are unable to furnish by February 1, 2021, a Form 1098 to a borrower that

includes mortgage interest that the SBA paid to lenders under section 1112 of the

CARES Act may furnish a corrected Form 1098 including this interest in box 1. Lenders

are encouraged to do so as promptly as possible.

V.

EFFECT ON OTHER DOCUMENTS

Announcement 2020-12 is obsoleted.

VI.

DRAFTING INFORMATION

The principal author of this notice is Isaac Brooks Fishman of the Office of the

Associate Chief Counsel (Procedure and Administration). For further information

regarding this notice, contact Isaac Brooks Fishman at (202) 317-5436 (not a toll-free

call).