SECTION 3. TIMING OF TAX-

EXEMPT INCOME

.01 Overview . Subject to section 3.03 of this revenue procedure, a taxpayer that received a PPP Loan may treat tax-exempt income resulting from the partial or complete forgiveness of such PPP Loan as received or accrued:

(1) As, and to the extent that, the taxpayer pays or incurs eligible expenses as described in section 2.01(2). Under this section 3.01(1), a taxpayer that has elected to use the safe harbor provided under Revenue Procedure 2021-20 will be treated as paying or incurring the eligible expenses during the taxpayer’s immediately subsequent taxable year following the taxpayer’s 2020 taxable year in which the expenses were actually paid or incurred,

as described in Revenue Procedure 202120; (2) When the taxpayer files an application for forgiveness of the PPP Loan; or

(3) When the PPP Loan forgiveness is granted.

.02 Amended returns . Taxpayers may report tax-exempt income pursuant to section 3.01 on a timely filed original or amended Federal income tax return, information return or administrative adjustment request (AAR) under § 6227 of the Code. See also Revenue Procedure 2021-50, 2021-49 I.R.B. 844 (Dec. 6, 2021), released November 18, 2021, allowing an eligible partnership to file an amended Form 1065, U.S. Return of Partnership Income, as an alternative to filing an AAR, and furnish a corresponding amended Schedule K-1 (Form 1065), Partner’s Share of Income, Deductions, Credits, etc., to each of its partners. Partners and shareholders that receive amended Forms K-1 as provided in this section 3.02 must file amended Federal income tax returns, information returns or AARs, as applicable, consistent with the Forms K-1 received.

.03 When PPP Loan is not fully for- given . Unless otherwise provided in the 2021 filing year form instructions, if the taxpayer receives forgiveness for an amount of the PPP Loan that is less than the amount that the taxpayer previously treated as tax-exempt income, the taxpayer must make appropriate adjustments on an amended Federal income tax return, information return or AAR, as applicable, for the taxable year(s) in which the taxpayer treated tax-exempt income from the forgiveness of such PPP Loan as received or accrued. Partners and shareholders that receive amended Forms K-1 as provided in this section 3.03 must file amended Federal income tax returns, information returns or AARs, as applicable, consistent with the Forms K-1 received.

.04 Reporting consistent with this reve- nue procedure . The IRS will publish form instructions for the 2021 filing season that will detail how taxpayers can report consistently with sections 3.01 through 3.03 of this revenue procedure. However, taxpayers do not need to wait until the instructions are published to apply this revenue procedure.

Bulletin No. 2021–49 837 December 6, 2021

.05 Gross receipts application. To the extent tax-exempt income resulting from the partial or complete forgiveness of a PPP Loan is treated as gross receipts under a particular Federal tax provision, including but not limited to §§ 448(c) and 6033 of the Code, section 3 of this revenue procedure applies for purposes of determining the timing and, to the extent relevant, reporting of such gross receipts.