SECTION 1. PURPOSE

.01 This revenue procedure provides guidance for partnerships and consolidated groups regarding amounts excluded from gross income (tax exempt income) and deductions relating to the Paycheck Protection Program (PPP) and certain other COVID-19 relief programs. More specifically:

(1) This revenue procedure provides guidance for partners and their partnerships regarding:

(a) allocations under § 704(b) of the Internal Revenue Code (Code) of tax exempt income arising from the forgiveness of PPP Loans, the receipt of certain grant proceeds, or the subsidized payment of certain principal, interest and fees;

(b) allocations under § 704(b) of the Code of deductions resulting from expenditures attributable to the use of forgiven PPP Loans or certain grant proceeds, or subsidized payments of certain interest and fees; and

(c) the corresponding adjustments to be made with respect to the partners’ bases in their partnership interests under § 705 of the Code.

(2) This revenue procedure also provides guidance under § 1502 of the Code and § 1.1502-32 of the Income Tax Regulations regarding the corresponding basis adjustments for stock of subsidiary members of consolidated groups as a result of tax exempt income arising from certain

forgiven PPP Loans, grant proceeds, or subsidized payment of certain principal, interest and fees.

.02 For guidance on the timing of tax exempt income arising from forgiven PPP Loans, see Rev. Proc. 2021-48, 2021-49 I.R.B. ___, released on November 18, 2021.