IRS issues FAQs on provider relief payments made under the CARES Act

On July 6, 2020, the IRS released FAQs providing guidance to health care providers with respect to the taxability of payments received from the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) Provider Relief Fund.

Background

The recently enacted CARES Act appropriated funds to establish the Public Health and Social Services Emergency Fund (Provider Relief Fund) to reimburse eligible health care providers for health care-related expenses or lost revenues attributable to the COVID-19 pandemic. With no guidance governing the taxability of such payments, numerous providers questioned whether the payments were subject to tax.

Guidance

The FAQs specifically address the tax treatment of payments made from the Provider Relief Fund to health care providers:

• Health care providers receiving payments from the Provider Relief Fund may not exclude the payments from their taxable income as qualified disaster relief payments under section 139. The payments are therefore includible in gross income under section 61.
• Tax-exempt health care providers generally are not subject to tax on payments received from the Provider Relief Fund, unless the payment reimburses the provider for expenses or lost revenue attributable to an unrelated trade or business as defined in section 513.