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Provider Relief Funds: HHS
Post-Payment
Notice of Reporting Requirements

06.15.21

Read this if your facility or organization has received Provider Relief Funds.

The rules over the use of the HHS Provider Relief Funds (PRF) have been in a constant state of flux and interpretation since the funds started to show up in your bank accounts back in April. Here is a summary of where we are as of June 14, 2021 on HHS’ reporting requirements. Key highlights:

These requirements apply to:

  • PRF General and Targeted Distributions
  • the Skilled Nursing Facilities (SNF) and Nursing Home Infection Control Distribution
  • and exclude:
    • the Rural Health Clinic COVID-19 Testing Program
    • claims reimbursements from HRSA COVID-19 Uninsured Program and the HRSA COVID-19 Coverage Assistance Fund (CAF)

This notice supersedes the January 15, 2021 reporting requirements.
Deadline for Use of Funds:

Payment Received Period

Deadline to Use Funds

Reporting Time Period

Period 1

4/10/20-6/30/20

6/30/21

7/1/21-9/30/21

Period 2

7/1/20-12/31/20

12/31/21

1/1/22-3/31/22

Period 3

1/1/21-6/30/21

6/30/22

7/1/22-9/30/22

Period 4

7/1/21-12/31/21

12/31/22

1/1/21-3/31/23

Recipients who received one or more payments exceeding $10,000 in the aggregate during each Payment Received Period above (rather than the previous $10,000 cumulative across all PRF payments) are subject to the above reporting requirements 

Responsibility for reporting:

  • The Reporting Entity is the entity that registers its Tax Identification Number (TIN) and reports payments received by that TIN and its subsidiary TINs.
  • For Targeted Distributions, the Reporting Entity is always the original recipient; a parent entity cannot report on the subsidiary’s behalf and regardless of transfer of payment.

Steps for reporting use of funds:

  1. Interest earned on PRF payments
  2. Other assistance received
  3. Use of SNF and Nursing Home Control Distribution Payments if applicable (any interest earned reported here instead), with expenses by CY quarter
  4. Use of General and Other Targeted Distribution Payments, with expenses by CY quarter
  5. Net unreimbursed expenses attributable to Coronavirus, net after other assistance and PRF payments by quarter
  6. Lost revenues reimbursement (not applicable to PRF recipients that received only SNF and Nursing Home Infection Control Distribution payments)

PORTAL WILL OPEN ON JULY 1, 2021!

Access the full update from HHS: Provider Post-Payment Notice of Reporting Requirements.

Related Professionals

Principals

BerryDunn experts and consultants

Read this is if you are at a healthcare organization and considering telehealth options. 

Given the COVID-19 emergency declaration, telehealth service regulations have been greatly modified to provide flexibility and payment. The guidance on telehealth is very dispersed and can be difficult to navigate. Here are some FAQs based on the many questions we have received. If you have questions related to your specific situation, please contact us. We're here to help.

UPDATED: Are RHCs and FQHCs now eligible as distant site providers for telehealth services? If so, how will they be paid by Medicare?
Yes, the CARES Act includes RHCs and FQHCs as distant sites during the COVID-19 Public Health Emergency (PHE). Distant site telehealth services can be provided by any health care practitioner of the RHC or FQHC within their scope of practice. The practitioners can provide any distant site telehealth service that is approved as a distant site telehealth service under the Physician Fee Schedule (PFS) and from any location, including from the practitioner’s home. CMS has approved an interim payment rate of $92 for RHCs and FQHCs for these services. The rate is based on the average payment for all PFS telehealth services, weighted by the volume of those services paid under the PFS. This rate will apply for services furnished between January 27, 2020 and June 30, 2020. Modifier “95” must be included on the claim. In July 2020, these claims will be automatically reprocessed and be paid at the RHC all-inclusive rate (AIR) and the FQHC prospective payment system (PPS) rate. Reprocessing will begin when the Medicare claims processing system is updated for the new payment rate.

For telehealth distant site services furnished between July 1, 2020 and the end of the COVID-19 PHE, RHCs and FQHCs will need to use RHC/FQHC specific G code, G2025, for services provided via telehealth. These claims will be paid at the $92 rate, not the AIR or PPS rates. If the COVID-19 PHE continues beyond December 31, 2020, the $92 will be updated based on the 2021 PFS average payment rate for these services, again weighted by the volume of those services.

For services in which the coinsurance is waived, RHCs and FQHCs must put the “CS” modifier on the service line. RHC and FQHC claims with the “CS” modifier will be paid with the coinsurance applied, and the Medicare Administrative Contractor (MAC) will automatically reprocess these claims beginning on July 1. Coinsurance should not be collected from beneficiaries if the coinsurance is waived.

UPDATED: Will telehealth visits of any kind affect my FQHC or RHC encounter rate?
Costs associated with telehealth will not affect the prospective payment system rate for FQHCs or the all-inclusive rate calculation for RHCs, but the costs will need to be reported on the cost report. Costs of originating and distant site telehealth services will be reported as follows:

  • Form CMS-222-17 on line 79 (Cost Other Than RHC Services) of Worksheet A for RHCs
  • Form CMS-224-14 on line 66 (Other FQHC Services) of Worksheet A for FQHCs.

What is telehealth versus telemedicine?
Telemedicine refers to a remote clinical service while telehealth is a broader term that embodies a consumer-based approach to medical care, incorporating both delivery of care and education of patients.

UPDATED: What types of service levels are available?
There are three main types of Medicare virtual services with different payment levels. Here are the key things to know for each type:

Telehealth visits

  1. These are considered the same as in-person visits and paid at the same PFS rates as regular, in-person visits.
  2. Pre-existing patient relationship requirements have been waived.
  3. The patient originating site can be any healthcare facility or the patient’s home.

Virtual check-ins

  1. These are brief communications in a variety of technology-based manners.
  2. They do require the patient to initiate and consent to the check-in.
  3. It cannot be preceded by a medical visit within the previous 7 days and cannot lead to a medical visit within the next 24 hours. 
  4. A pre-existing relationship with the patient is required.
  5. Common billing codes include HCPCS code G2012 (telephone) and G2010 (captured video or images).

E-visits:

  1. These also need to be initiated by the patient in order to be billable and would be conducted using online patient portals (no face-to-face), for example.
  2. A pre-existing relationship with the patient is required.
  3. Common billing codes include CPT codes 99421-99423 and HCPCS codes G2061-G2063. 

The payment rate for these services will be $24.76 beginning March 1, 2020, through the end of the PHE, instead of the CY 2020 rate of $13.53, and should be billed using code G0071. MACs will automatically reprocess any claims with G00771 furnished on or after March 1, 2020, that were not paid at the new rate.

What codes can be billed as telehealth services?
Here is the listing effective as of March 1, 2020. 

Since this time, 85 additional codes have been added. Click here for the list. 

Do we need to request an 1135 waiver or are these changes covered by a blanket waiver from CMS?
A blanket waiver is in effect, retroactive to March 1, 2020 though the end of the emergency declaration. 

Is patient consent required?
Yes, patients must verbally consent to services. This includes brief telecommunications (which currently have a cost share for Medicare). We recommend it for all payers as a best practice.

Is there additional information expected from Medicare?
Yes, Medicare, Medicaid, and other payers are continually updating their guidance. 

What can we bill for telehealth services for Medicaid and insurance carriers?
This is the most problematic to track as it is continually evolving and every state and carrier is different. Providers must understand each payor’s requirements around audio and video, allowable CPT/HCPCS codes, modifiers, and place of service codes. As you have questions, please reach out to us so we can be sure to provide the most current answer.

Resources
Given how quickly information related to telehealth is changing, please feel free to contact us for the latest resources. 

Article
Telehealth FAQs

Read this if you are a small retailer in Massachusetts.

If you are a small retailer in Massachusetts, it’s likely you are already making efforts to prepare for the upcoming sales tax holiday that’s set to occur on August 14 and 15. Perhaps you have been advertising the savings to your customers, in an effort to generate more foot traffic, or putting additional signage on your door, next to your register, or on the cash wrap.  

All good steps to take, and another essential step is to educate your staff on the additional measures that need to be taken to ensure all generated sales are recorded properly.  

Larger retailers have the ability to program these types of events into their point-of-sale systems, including assigning dates and times of the promotion, types of products effected, and many more. This is nothing new for your local box store, for example. However, for the small retailer, this type of event requires much more manual intervention.  

Small retailer approaches, tips, and tricks

Turning sales tax on and off for your complete inventory is easy for most POS systems. But what if only some of the products you offer are eligible for the sales tax exemption? What is the best approach to take?

For the platform that offers inventory file uploads, a wise approach would be to export your current inventory list, adjust the sales tax as needed in Excel, and then import the new file back into the system. This will ensure the appropriate sales tax is captured for the holiday weekend. Don’t forget to do this once more, after the sales tax reprieve has ended.  

Overriding your products individually as a sale occurs may also be necessary for some POS systems. This option will require your sales associates to intervene on each individual transaction. There is great potential for increased human error, particularly in a fast-paced retail environment.  

Making a list and checking it twice

Another good idea to reduce your chance of errors is to meet with your employees at the start of each applicable shift and remind them of the sales tax holiday. Simple but effective, as is adding a simple note to your register. This can offer an additional layer of accountability.

Any sales tax collected in error during this holiday weekend will require payment to the Mass DOR, which will need to be reported on your sales tax return. If a customer discovers they paid unnecessary sales tax during the tax holiday weekend the retailer will be required to refund the customer for the tax collected. In turn, an amended sales tax return will need to be filed, for the month in question. 

When it comes time to reconcile your sales tax for the month of August, you can expect to see a bump in the exempt sales tax you will be required to report. Setting a reminder about the infrequent holiday event on your calendar can speed up your reconciliation process. Again, by writing a quick little note to remind you that you will see unusual activity could alleviate the need for any undue research.

If you have any questions about the upcoming tax holiday, please don’t hesitate to contact our Outsourced Accounting team. We’re here to help.
 

Article
Massachusetts annual sales tax holiday: Small retailer considerations

Read this if you are a timber harvester, hauler, or timberland owner.

The USDA recently announced its Pandemic Assistance for Timber Harvesters and Haulers (PATHH) initiative to provide financial assistance to timber harvesting and hauling businesses as a result of the pandemic. Businesses may be eligible for up to $125,000 in financial assistance through this initiative. 

Who qualifies for the assistance?

To qualify for assistance under PATHH, the business must have experienced a loss of at least 10% of gross revenue from January, 1, 2020 through December 1, 2020 as compared to the same period in 2019. Also, individuals or legal entities must be a timber harvesting or timber hauling businesses where 50% or more of its revenue is derived from one of the following:

  • Cutting timber
  • Transporting timber
  • Processing wood on-site on the forest land

What is the timeline for applying for the assistance?

Timber harvesting or timber hauling businesses can apply for financial assistance through the USDA from July 22, 2021 through October 15, 2021

Visit the USDA website for more information on the program, requirements, and how to apply.
If you have any questions about your specific situation, please contact our Natural Resources team. We’re here to help. 

Article
Temporary USDA assistance program for timber harvesters and haulers

Read this if you are a plan sponsor of employee benefit plans.

This article is the seventh in a series to help employee benefit plan fiduciaries better understand their responsibilities and manage the risks of non-compliance with Employee Retirement Income Security Act (ERISA) requirements. You can read the previous articles here.

The COVID-19 pandemic has challenged individuals and organizations to continue operating during a time where face-to-face interaction may not be plausible, and access to organizational resources may be restricted. However, life has not stopped, and participants in your employee benefit plan may continue to make important decisions based on their financial needs. 

To help you prepare for a potential IRS examination, we’ve listed some requirements for participants to receive Required Minimum Distributions (RMD), hardship distributions, and coronavirus-related distributions, recommendations of actions you can perform, and documentation to retain as added internal controls. 

Required Minimum Distributions

Recently, the IRS issued a memo regarding missing participants, beneficiaries, and RMDs for 403(b) plans. If an employee benefit plan is subject to the RMD rules of Code Section 401(a)(9), then distributions of a participant’s accrued benefits must commence April 1 of the calendar year following the later of 1) the participant attaining age 70½ or 2) the participant’s severance from employment. Under the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020, RMDs was temporarily waived for retirement plans for 2020. This change applied to defined contribution plans, such as 401(k), 403(b), 457(b) plans and IRAs. 

In addition, RMDs were waived for IRA owners who turned 70½ in 2019 and were required to take an RMD by April 1, 2020 and have not yet done so. Do note the waiver will not alter a participant’s required beginning date for purposes of applying the minimum distribution rules in future periods. Although you may be applying this waiver during 2020, it is important you prepare to make RMDs once the waiver period ends by verifying participants eligible to receive RMDs are not “missing.”

There are instances in which plans have been unable to make distributions to a terminated participant due to an inability to locate the participant. In this situation, the responsible plan fiduciary should take the following actions in applying the RMD rules:

  1. Search the plan and any related plan, sponsor and publicly available records and/or directories for alternative contact information;
  2. Use any of the following search methods to locate the participant: a commercial locator service, a credit reporting agency, or a proprietary internet search tool for locating individuals; and
  3. Attempt to initiate contact via certified mail sent to the participant’s last known mailing address, and/or through any other appropriate means for any known address(es) or contact information, including email addresses and telephone numbers.

If the plan is selected for audit by the IRS and the above actions have been taken and documented by the plan, the IRS instructs employee plan examiners not to challenge the plan for violation of the RMD rules. If the plan is unable to demonstrate that the above actions have been taken, the employee plan examiners may challenge the plan for violation of the RMD rules.

We typically recommend management review plan records to determine which participants have attained age 70½. Based on the guidelines outlined above, we recommend plans document the actions they have taken to contact these participants and/or their beneficiaries.

Hardship distribution rules

A common issue we identify during our employee benefit plan audits is that the rules for hardship distributions are not always followed by the plan sponsor. If the plan allows hardship withdrawals, they should only be provided if (1) the withdrawal is due to an immediate and heavy financial need, (2) the withdrawal must be necessary to satisfy the need (you have no other funds or ways to meet the need), and (3) the withdrawal must not exceed the amount needed. You may have noted we did not add the plan participant must have first obtained all distribution or nontaxable loans available under the plan to the list of requirements above. This is due to the recently enacted Bipartisan Budget Act of 2018 (the Act), which removed the requirement to obtain available plan loans prior to requesting a hardship. Thus, the removal of this requirement may increase the number of eligible participants to receive hardship withdrawals, if the three requirements noted are satisfied. The plan sponsor should maintain documentation the requirements for the hardship withdrawal have been met before issuing the hardship withdrawal.

The IRS considers the following as acceptable reasons for a hardship withdrawal:

  1. Un-reimbursed medical expenses for the employee, the employee’s spouse, dependents or beneficiary.
  2. Purchase of an employee's principal residence.
  3. Payment of college tuition and related educational costs such as room and board for the next 12 months for the employee, the employee’s spouse, dependents, beneficiary, or children who are no longer dependents.
  4. Payments necessary to prevent eviction of the employee from his/her home, or foreclosure on the mortgage of the principal residence.
  5. For funeral expenses for the employee, the employee’s spouse, children, dependents or beneficiary.
  6. Certain expenses for the repair of damage to the employee's principal residence.
  7. Expenses and losses incurred by the employee as a result of a disaster declared by the Federal Emergency Management Agency (FEMA), provided that the employee’s principal residence or principal place of employment at the time of the disaster was located in an area designated by FEMA for individual assistance with respect to the disaster.

Prior to the enactment of the Act, once a hardship withdrawal was taken, the plan participant would not be allowed to contribute to the plan for six months following the withdrawal. The Act repealed the six-month suspension of elective deferrals, thus plan participants are allowed to continue making contributions to the plan in the pay period following the hardship withdrawal. Prior to the Act we had seen instances where the plan participant was allowed to continue making contributions after the hardship withdrawal was taken. Now we would expect participants who received a hardship distribution to continue making elective deferrals following receipt of the distribution.

Coronavirus-related distributions

Under section 2202 of the CARES Act, qualified participants who are diagnosed with coronavirus, whose spouse or dependent is diagnosed with coronavirus, or who experience adverse financial consequences due to certain virus-related events including quarantine, furlough, or layoff, having hours reduced, or losing child care, are eligible to receive a coronavirus-related distribution. 

Distributions are considered coronavirus-related distributions if the participant or his/her spouse or dependent has experienced adverse effects noted above due to the coronavirus, the distributions do not exceed $100,000 in the aggregate, and the distributions were taken on or after January 1, 2020 and on or before December 30, 2020.  Such distributions are not subject to the 10% penalty tax under Internal Revenue Code (IRC) § 72(t), and participants have the option of including their distributions in income ratably over a three year period, or the entire amount, starting in the year the distribution was received. Such distributions are exempt from the IRC § 402(f) notice requirement, which explains rollover rules, as well as the effects of rolling a distribution to a qualifying IRA and the effects of not rolling it over. Also, participants can be exempt from owing federal taxes by repaying the coronavirus-related distribution. 

Participants receiving this distribution have a three-year window, starting on the distribution date, to contribute up to the full amount of the distribution to an eligible retirement plan as if the contribution were a timely rollover of an eligible rollover distribution. So, if a participant were to include the distribution amount ratably over the three-year period (2020 – 2022), and the full amount of the distribution was repaid to an eligible retirement plan in 2022, the participant may file amended federal income tax returns for 2020 and 2021 to claim a refund for taxes paid on the income included from the distributions, and the participant will not be required to include any amount in income in 2022. We recommend the plan sponsor maintain documentation supporting the participant was eligible to receive the coronavirus-related distribution. 

There is much uncertainty due to the current status of the COVID-19 pandemic, and this has forced many of our clients to review and alter their control environments to maintain effective operations. With this uncertainty comes changes to guidance and treatment of plan transactions. We have provided our current understanding of the guidance the IRS has provided for the treatment surrounding distributions, specifically RMDs, hardship distributions, and coronavirus-related distributions. If you and your team have any additional questions which may be specific to your organization or plan, an expert from our Employee Benefits Audit team will be gladly willing to assist you. 
 

Article
Defined contribution plan distributions: Considerations and recommendations

Read this if you are at a not-for-profit organization.

There is no question that cryptocurrency has been gaining in popularity over the past few years. It may be hard to believe, but Bitcoin, the first and most commonly known form of cryptocurrency, has been around since the good old days of 2009! What was once only seen as a quasi-asset traded solely on the dark web by a handful of private yet savvy investors has recently begun to step out into the light. With this newly found mainstream popularity come many questions from the not-for-profit (NFP) sector about how their organizations should proceed when it comes to donations of cryptocurrency, and how they might benefit (or not) from doing so. 

This article will answer some of the questions we’ve received from clients in this area and attempt to shed some light on the tax reporting and compliance requirements around cryptocurrency donations for not-for-profit organizations, as well as other topics not-for-profit organizations should consider before dipping their toes into the crypto current.

So, what exactly is cryptocurrency? 

Cryptocurrency is a digital asset. It generally has no physical form (no actual coins or paper money). Further, it is not issued by a central bank and is largely unregulated. Its value is dependent upon many factors, the largest being supply and demand.

Can a not-for-profit organization accept cryptocurrency as a donation?

Yes! For tax purposes, cryptocurrency is considered noncash property, and is perfectly acceptable for not-for-profit organizations to accept.

With that said, NFPs absolutely need to review and update their gift acceptance policies as necessary as to whether or not they are willing to accept cryptocurrency. Having a clear and established policy position in place one way or the other can mitigate any confusion or misunderstanding between the organization and a potential donor.

The organization may also want to consider adding language to the policy regarding its intent to either hold the asset or sell it as soon as administratively possible. A savvy donor may request that the organization hold the cryptocurrency donation for a period of time after the donation is made, so organizations will want to have clear policies in place.

What about acknowledging the donor’s gift?

Standard donor acknowledgement rules still apply. Any donation of $250 or more requires a standard “thank you” acknowledgement to the donor. Remember, the IRS has deemed cryptocurrency to be noncash property, which means a description of the donated property (but not its value) should be mentioned in the donor acknowledgement.

Are there any other forms I need to be aware of?

Yes. Forms 8283 & 8282 apply to donations of cryptocurrency. Where the donation is noncash, the donor should be providing the organization with Form 8283, Noncash Charitable Contributions, for a claimed value of more than $500. Further, if the claimed value is more than $5,000, the Form 8283 should be accompanied by a qualified appraisal report. Form 8283 should be signed by the donor, the qualified appraiser (if applicable), as well as the recipient organization upon acceptance.

NOTE: Form 8283, Part V, Donee Acknowledgement, contains a yes/no question asking if the organization intends to use the property for an unrelated use. Where the property in question is cryptocurrency, the answer to this question is likely always to be ‘yes’.

Should the organization sell the underlying cryptocurrency within three years of acceptance, the organization must complete Form 8282, Donee Information Return, and file a copy with the IRS as well as providing a copy to the original donor. Other rules apply if the organization transfers the property to a successor donee.

NOTE: Organizations may want to consider referencing the Forms 8283 & 8282 in their aforementioned gift acceptance policy.

How is a cryptocurrency donation reported on the financial statements and Form 990?

If donated and held by the organization as of the end of the year, it will be reported as an intangible asset on the balance sheet, and contribution revenue on the statement of activities. 

Similar reporting would follow for 990 purposes—the donation would be reported as part of noncash contribution revenue with additional reporting on 990, Schedule B, Schedule of Contributors, and Schedule M, Noncash Contributions, as necessary.

Why should I accept cryptocurrency?

This is by far the hardest question to answer, for a variety of reasons. There is no question that cryptocurrency has its risks. Cryptocurrency is known to be highly volatile. Bitcoin, which originally was valued at eight cents per coin in 2010 soared to an all-time high of over $63,000 back in April of 2021—and then two months later sold for around $34,000 per coin. And who could forget the recent Dogecoin (I’m still not sure how to pronounce that) phenomenon? It too in recent months became a sensation only to see its value plummet by almost 30% in a single day after an appearance by Elon Musk on Saturday Night Live (it did subsequently rebound after a Musk tweet).

The fact is no one really knows where the value of cryptocurrency is headed, so should a not-for-profit organization decide to proceed, you should be aware it may not be worth what it was when originally accepted, which could be either good or bad depending on the day. Ultimately, any value is still good for a not-for-profit organization, but the risks with cryptocurrency and its volatility are very real.

Other things to know about crypto

As of right now, cryptocurrency has its own trading platforms. Robinhood, a platform in the news recently when it halted trading of Gamestop’s stock when speculative traders got the price to soar to all new highs, being the most well known. Large investment firms are well on their way to creating their own platforms as cryptocurrency gains in popularity, so we certainly recommend speaking with your current investment advisors to find the platform that best suits your needs.

Cryptocurrency is held in a digital wallet, which can only be accessed by a password, or private keys. Digital wallets can be stored locally on a computer, but there are also web-based wallets.

There have been horror stories about people losing or forgetting passwords, ultimately rendering the cryptocurrency worthless because it cannot be accessed. Cryptocurrency, due to its private nature, is very desirable by hackers who could also potentially access the wallet and steal its contents. And if stored locally, the currency could be lost forever if the computer containing the wallet were to become corrupted or compromised.

Organizations holding cryptocurrency will need to ensure proper internal controls are in place to make sure the funds are secure and cannot be easily accessed or potentially stolen. Working with your internal IT department is a good strategy here. The questions above are not intended to be all inclusive. Cryptocurrency is still finding its way in the world and we’ll continue to keep an eye on any developments and keep clients up to date as cryptocurrency continues to expand its reach and as further guidance is issued.

If you have any questions, please contact me or another member of our not-for-profit tax services team. We're here to help.

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Cryptocurrency and the charitable contribution conundrum

Read this if you are required to collect sales tax in Massachusetts.

New tax updates and prepayment requirements have been announced for Massachusetts businesses.

They include new due dates and prepayment requirements. The changes apply to: 

  • Sales/use tax
  • Sales tax on services
  • Meals tax
  • Room occupancy excise tax 

Due date for sales and use tax returns

The due date on these taxes filings has also changed. Instead of due dates being the 20th of the following month, the date has been changed to 30 days after the previous month end. For example, a January return will now be due on March 2nd instead of February 20th.

Note: If your tax liability exceeded $150,000 for the calendar year 2020, prepayment of tax collected in 2021 is required:

  • Tax collected for the 1st through the 21st of the month are due on the 25th
  • Remainder due when return is filed

State resources:

If you have questions on these changes, and how they may affect your filing, please contact our Tax Consulting Team. We’re here to help.

Article
Changes to Massachusetts sales and use tax

Read this if you do business in New Hampshire.

On June 10, 2021, Governor Chris Sununu signed Senate Bill 3-FN (“SB3”) into law, clarifying New Hampshire’s state income tax treatment of federal loans under the Paycheck Protection Program (“PPP”). As a result of this legislation, New Hampshire now fully conforms to the federal income tax treatment of the debt forgiveness and deduction for expenses related to PPP Loans. New Hampshire businesses that had PPP loans forgiven may now exclude the debt forgiveness from gross business income and deduct the related business expenses in the same manner that they can for federal income tax purposes.

The exemption of PPP loan forgiveness from the New Hampshire Business Profits tax base is applied retroactively to taxable years ending after March 3, 2020, corresponding with the date of the enactment of the federal Coronavirus Aid, Relief, and Economic Security Act (CARES Act). New Hampshire taxpayers who received debt forgiveness through the federal Paycheck Protection Program should review their 2020 New Hampshire tax returns to evaluate whether an amended return should be filed for potential refund opportunities.  

If you have questions about how the tax law changes may affect you, please contact a member of our state and local tax team.

Article
Attention taxpayers doing business in New Hampshire

Read this if you are working with an auditor.

The standard report an auditor issues on an entity’s financial statements was created in 1988, and has only had minor tweaking since. Amazing when we think about how the world has changed since 1988! Back then:

  • The World Wide Web hadn’t been invented
  • The Simpsons wasn’t yet on TV, and neither was Seinfeld
  • The Berlin Wall was still standing
  • The Single Audit Act celebrated its fourth birthday

The Auditing Standards Board (ASB), an independent board of the American Institute of CPAs (AICPA) that establishes auditing rules for not-for-profit organizations (as well as private company and federal, state, and local governmental entities) has decided it was high time to revisit the auditor’s report, and update it to provide additional information about the audit process that stakeholders have been requesting.

In addition to serving as BerryDunn’s quality assurance principal for the past 23 years, I’ve been serving on the ASB since January 2017, and as chair since May 2020. (And thanks to the pandemic our meetings during my tenure as chair have been conducted from my dining room table.)  We thought you might be interested in a high-level overview of the coming changes to the auditor’s report, which will be effective starting with calendar 2021 audits, from an insider’s perspective.

So what’s changing?

The most significant changes you’ll be seeing, based on feedback from various users of auditor’s reports, are:

  1. Opinion first
    The opinion in an audit report is the auditor’s conclusion as to whether the financial statements are in accordance with the applicable accounting standards, in all material respects. People told us this is the most important part of the report, so we’ve moved it to the first section of the report.
  2. Auditor’s ethical responsibilities
    We’ve pointed out that an auditor is required to be independent of the organization being audited, and to meet certain other ethical responsibilities in the conduct of the audit.
  3. “Going concern” responsibilities
    We describe management’s responsibility, under U.S. generally accepted accounting principles, and the auditor’s responsibility, under the auditing rules, for determining whether “substantial doubt” exists about the organization’s ability to continue in existence for at least one year following the date the financial statements are approved for issuance.
  4. Emphasis on professional judgment and professional skepticism
    We explain how an audit requires the auditor to exercise professional judgment (for example, regarding how much testing to perform), and to maintain professional skepticism, i.e., a questioning mind that is alert to the possibility the financial statements may be materially misstated, whether due to error or fraud.
  5. Communications with the board of directors
    We point out that the auditor is required to communicate certain matters to the board, such as difficulties encountered during the audit, material adjustments identified during the audit process, and which areas the auditor treated as “significant risks” in planning and performing the audit.
  6. Responsibility related to the “annual report”
    If the organization issues an “annual report” containing or referring to the audited financial statements, we explain the auditor is required to review it for consistency with the financial statements, and for any known misstatements of fact.
  7. Discussion of “key audit matters”
    While not required, your organization may request the auditor to discuss how certain “key audit matters” (those most significant to the audit) were addressed as part of the audit process. These are similar to the “critical audit matters” publicly traded company auditor’s reports are now required to include.

Yes, this means the auditor’s report will be longer; however, stakeholders told us inclusion of this information will make it more informative, and useful, for them.

Uniform Guidance standards also changing

Is your organization required to have a compliance audit under the federal Uniform Guidance standards? That report is also changing to reflect the items listed above to the extent they’re relevant.

What should you do?

Some actions to consider as you get ready for the first audit to which the new report applies (calendar 2021, or fiscal years ending in 2022) include:

  1. Ask your auditor what your organization’s auditor’s report will look like
    Your auditor can provide examples of auditor’s reports under the new rules, or even draft a pro forma auditor’s report for your organization (subject, of course, to the results of the audit).
  2. Outline and communicate your process for developing your annual report
    If your organization prepares an annual report, it will be important to coordinate its timing with that of the issuance of the auditor’s report, due to the auditor’s new reporting responsibility related to the annual report.
  3. Discuss with your board whether you would like the auditor to include a discussion of “key audit matters” in the auditor’s report
    While not required for not-for-profits, some organizations may decide to request the auditor include a discussion of such matters in the report, from the standpoint of transparency “best practices.”

If you have any questions about the new auditor’s report or your specific situation, please contact us. We’re here to help.
 

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A new auditor's report: Seven changes to know