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Are Provider Relief Payments Taxable

When the CARES Act was passed, Congress did not address the tax treatment of payments of aid funds to providers. Many providers and practitioners hoped that the IRS and hhS could determine that relief payments to providers represented eligible disaster relief payments that could be excluded from income under Section 139 of the Internal Revenue Code (the “Code”). Without much hassle, however, the IRS (July 6) and HHS (July 10) made it clear in existing FAQ updates that this would not be the case. Both stated that “[a] payment to a business, even if the business is a sole proprietorship, is not considered an eligible disaster relief payment under section 139.” Instead, relief fund payments to claimants are included in gross income in accordance with § 61 of the Code. A: No. A payment to a business, even if the business is a sole proprietorship, will not be considered an eligible disaster relief payment under section 139. Payment from the Provider`s Relief Fund is included in gross income in accordance with § 61 of the Code. Hart Health Strategies has provided the following information on the Relief Fund FAQ. The nature of these new issues underscores that PIB funds can be factored into taxable income. Can suppliers use the Supplier Relief Fund payment to pay taxes? (Added on 12/11/2020) Yes. HHS considers taxes levied on Provider Relief Fund payments to be “coronavirus-related health-related expenses” that are refundable with money from the Provider Relief Fund. “Instead, HHS expects suppliers to use supplier relief fund payments only for authorized purposes and if suppliers have residual funds from the Supplier Relief Fund at the end of the pandemic that they cannot spend on eligible expenses or losses.

then they will return that money to HHS. HHS will provide instructions on how to return unused funds in the future. Some of the most common supplier questions are: Are intergovernmental transfers (IGIs) related to government supplier taxes eligible for G&A expenditures? (Added on 10/28/2020) A portion of the taxes of the state-owned providers of the recipient of a supplier assistance fund may be eligible expenses, but only to the extent that the recipient of the supplier assistance fund must gradually increase the taxes of government suppliers if the gradual increase is due to the coronavirus. The Department of Health and Human Services (HHS) publishes updates on frequently asked questions (FAQs) almost daily. The CARES Act has provided $175 billion in grants to help health care providers financially manage the COVID-19 crisis. These funds are designed to help suppliers cover the cost of coronavirus-related expenses and recover lost revenue. There have been many cash allocations, starting with the general distribution of $50 billion and subsequent more targeted allocations. In general, these allowances are based on a percentage of income, most often 2%.

The U.S. Department of Health and Human Services (HHS) has updated its Supplier Relief Fund FAQ to clarify that Provider Relief Fund payments are taxable. According to the FAQ, these payments are considered disaster relief payments under Section 139 of the Internal Revenue Code. www.hhs.gov/sites/default/files/provider-post-payment-notice-of-reporting-requirements.pdf?language=en healthcare providers need to carefully document their COVID-19 expenses and lost income to ensure you are making full use of the funds they have received. Don`t wait until it`s too late. These reporting instructions include instructions on reporting requirements for each supplier who has received payment from the following CARES Act/PRF distributions: Can suppliers use the Supplier Relief Fund payment to pay taxes? (Added on 12/11/2020) If you have any questions about Provider Assistance Fund payments or other tax issues that affect healthcare organizations, please contact Kendall A. Schnurpel, Brian M. Heaton, or your regular War DeVault attorney. Many questions were asked about how and when Supplier Assistance Funds (FRPs) should be recorded as revenue in the financial statements. There were not many guides on this topic. We believe that FRP income should first be reported as a liability or income carried forward to the balance sheet.

In a recent technical bulletin, the Governmental Accounting Standards Board (GASB) stated that revenues should be accounted for if the eligibility requirements are met. We believe this happens when you can document eligible expenses and lost revenue. This portion of the funds could then be moved from the balance sheet to the profit and loss account. It would also address income tax issues. The funds would be taxable during the period in which they are transferred from the balance sheet to the profit and loss account. For companies in subchapter “S”, this is passed on to shareholders through income. Therefore, taxable companies should carry out careful tax planning for 2020. The provisions of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) have created a $100 billion fund to compensate eligible health care providers for health care expenses or loss of income due to the COVID-19 pandemic.

An additional $75 billion has been allocated to the Provider Assistance Fund under the Paycheque Protection Program and the Health Care Improvement Act. In early April, HHS began making payments to the Provider Relief Fund to certain health care providers. Is a tax-exempt health care provider subject to tax on a payment they receive from the Provider Relief Fund? (Added on 07/10/2020) A: In general, no. A health care provider described in paragraph 501(c) of the Code is generally exempt from federal income tax under paragraph 501(a). Nevertheless, a payment that a tax-exempt health care provider receives from the Provider Assistance Fund may be subject to tax under section 511 if the payment reimburses the provider for expenses or loss of income attributable to a business or independent business within the meaning of section 513. Can a health care provider who receives a payment from the Providers` Relief Fund exclude that gross income payment as an eligible disaster relief payment under section 139 of the Internal Revenue Code? (Added on 07/10/2020) No. A payment to a business, even if the business is a sole proprietorship, will not be considered an eligible disaster relief payment under section 139. Payment from the Provider`s Relief Fund is included in gross income in accordance with § 61 of the Code. For more information, visit the Internal Revenue Services website at www.irs.gov/newsroom/frequently-asked-questions-about-taxation-of-provider-relief-payments. Providers have struggled with vague HHS guidelines to determine the amounts of eligible expenses and revenue losses.

See the previous article vlcpa.com/articles/hhs-provides-guidance-on-cares-act-provider-relief-fund-financial-reporting-202063/541. Yes. HHS considers taxes levied on FRP payments to be “coronavirus-related health-related expenses” that are refundable with PRF money, with the exception of nursing home infection control distribution payments. However, the IRS and HHS have distinguished between payments to tax-exempt health care providers described in Section 501(c) of the Code. Payments made by the Supplier Relief Fund to these exempt suppliers are not subject to federal income tax unless the payments reimburse the supplier for expenses or loss of revenue attributable to a business or independent business within the meaning of section 513 of the Code. Yes. All suppliers are subject to these requirements, even those who received less than $10,000. The FAQ also clarified that while tax-exempt health care providers are generally not subject to tax payments from the Provider Relief Fund, they may be subject to tax under section 511 of the Internal Revenue Code if the payment reimburses the supplier for expenses or loss of income attributable to an independent business or business as defined in section 513.

Recipients (both non-federal corporations and commercial organizations) of the FRP`s general and targeted distributions are subject to paragraphs A (Acronyms and definitions) and B (General provisions) of CFR 75 CFR, § 75.303 (Internal Controls) and 75.351-.353 (Sub-Recipient Oversight and Management) and Subsection F (Audit Requirements). In addition, the terms and conditions of the RRF by reference payments include the requirement for recipients to meet the requirements for maintaining adequate financial systems at 75,302 (financial management and standards for financial management systems) and the requirements for retention and access to records at 75,361 to 75,365 (retention and access to records). .