Healthcare Orgs Fight CARES Act Tax Penalty

AAHomecare has banded together with other healthcare industry organizations to fix a flaw in the CARES Act that could cost providers more than a fifth of their CARES Act funding.

• By David Kopf
• Jun 25, 2020

A coalition of 18 healthcare provider organizations, including the American Association for Homecare, is calling on Congress to address a tax penalty in the CARES Act that will undercut providers’ funding.

The issue is the result of what appears to be an oversight in the legislation:

While government payments to corporations are usually considered taxable, the Paycheck Protection Program (PPP) included a provision specifically exempting PPP funds from being taxed.

However, after Congress passed the CARES Act, it was discovered that the legislation’s language unintentionally failed to protect the ability for entities receiving PPP funds from maintaining their tax deductions for expenditures attributable to PPP funds.

The result is that many providers will lose more than a fifth of the grant funds Congress passed to help them respond to the COVID-19 public health emergency. 

“It is critical that the actions taken to support front-line caregivers and hospitals are not diluted by technical issues around the taxability of support funds,” a letter from the coalition to lawmakers reads. “The current grant structure creates an inefficient process that provides grants, and then takes back 21 percent or more of the same grants for many of the organizations that need the assistance the most.”

The full letter is available for download as a PDF.

The coalition is calling on Congress to do two things:

• Ensure Provider Relief Funds and similar COVID-19 funding are not taxable.
• Ensure that the entities that receive these funds maintain the tax deductions attributable to these relief funds.

“Congress has provided welcome relief to help offset revenue losses and higher costs that the entire healthcare continuum is currently experiencing; even so, many providers are still facing severe financial impacts as a result of this crisis,” noted AAHomecare President and CEO Tom Ryan. “Clawing back one-fifth of the CARES Act relief will only magnify these pressures for the HME community and other healthcare providers.”