APTA recently discussed the position of the IRS related to the CARES Act Provider Relief Funds. APTA stated that these funds are considered taxable income. The following is from the HHS provider relief FAQs that were just posted on July 13, 2020.
May a health care provider that receives a payment from the Provider Relief Fund exclude this payment from gross income as a qualified disaster relief payment under section 139 of the Internal Revenue Code (Code)? (Added 7/10/2020)
No. A payment to a business, even if the business is a sole proprietorship, does not qualify as a qualified disaster relief payment under section 139. The payment from the Provider Relief Fund is includible in gross income under section 61 of the Code. For more information, visit the Internal Revenue Services’ website at https://www.irs.gov/newsroom/frequently-asked-questions-about-taxation-of-provider-relief-payments
Is a tax-exempt health care provider subject to tax on a payment it receives from the Provider Relief Fund? (Added 7/10/2020)
Generally, no. A health care provider that is described in section 501(c) of the Code generally is exempt from federal income taxation under section 501(a). Nonetheless, a payment received by a tax-exempt health care provider from the Provider Relief Fund may be subject to tax under section 511 if the payment reimburses the provider for expenses or lost revenue attributable to an unrelated trade or business as defined in section 513. For more information, visit the Internal Revenue Services’ website at https://www.irs.gov/newsroom/frequently-asked-questions-about-taxation-of-provider-relief-payments
Provider relief fund FAQs: https://www.hhs.gov/sites/default/files/provider-relief-fund-general-distribution-faqs.pdf
Please note: HHS continues to update the Provider Relief Fund FAQs. Please review them on a regular basis.
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