July 13, 2020
The U.S. Department of Health and Human Services (HHS) has updated its Provider Relief Fund FAQ to clarify that payments from the Provider Relief Fund are taxable. According to the FAQ, such payments do qualify as disaster relief payments under section 139 of the Internal Revenue Code.
The FAQ also clarified that while tax-exempt health care providers would not generally be subject to tax payments received from the Provider Relief Fund, they may be subject to tax under section 511 of the Internal Revenue Code 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, see the HHS Provider Relief Fund FAQ.
The California Medical Association and the American Medical Association are both asking Congress to exempt physicians from being taxed on the payments received from the Provider Relief Fund. We are hoping to include this provision in the next COVID-19 relief package expected at the end of July.