Under the Paycheck Protection Program ("PPP") established by the CARES Act, a borrower is eligible for forgiveness of all or a portion of the principal amount of a loan made in accordance with the PPP if certain conditions are satisfied ("qualifying forgiveness"). While the Internal Revenue Code generally requires a borrower to include the amount of any loan forgiveness in gross income, the amount of any such "qualifying forgiveness" is excluded from gross income pursuant to the provisions of the PPP.
Typically, a lender that discharges at least $600 of indebtedness of a borrower is required to file a Form 1099-C (Cancellation of Debt) with the IRS as well as furnish a payee statement to a borrower whose loan has been discharged.
However, the IRS recently announced that lenders should not file a Form 1099-C (Cancellation of Debt) nor furnish a payee statement to the borrower to report the amount of any "qualifying forgiveness" with respect to a loan made under the PPP (see Announcement 2020-12, 2020-41 IRB). The IRS was concerned that the filing of such information returns could result in the inadvertent issuance of IRS notices for underreporting to borrowers for amounts of "qualifying forgiveness", and that the furnishing of such payee statements to a borrower "could cause confusion" (presumably in connection with whether such amounts should be included in the borrower's gross income).
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