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SALT watch: Four issues to consider in 2021

06.10.21

Read this if you are a business owner.

As state and local governments look for new ways to stimulate their economies, incentivize employment and keep businesses afloat, the pressure for states to generate additional tax revenue continues. In response to this pressure, states are revisiting taxpayers’ compliance with their “nexus” rules and other tax policies and considering new taxes on digital services. In addition, many state governments are reconsidering the extent to which they are willing to conform to federal tax rules and legislation.

Taxpayers need to be aware of the tax rules in the states in which they operate. Taxpayers that cross state borders—even virtually—should review state nexus and other policies to understand their compliance obligations, identify ways to minimize their state tax liabilities, and eliminate any state tax exposure. The following are some of the state tax issues taxpayers should monitor and plan for in 2021:

  1. Passthrough entity (PTE) income tax elections
    It looks like the federal $10,000 “SALT cap” is sticking around, and more states are enacting a workaround in response. A growing number of states are allowing partnerships and S corporations to elect to be taxed at the entity level to help their resident owners get around the SALT cap. However, it is important that individuals understand the broad, long-term implications of the PTE tax election. Care needs to be exercised to avoid state tax traps, especially for nonresidents, that could exceed any federal tax savings.
  2. Impacts of federal income tax changes
    Federal tax legislation also has impact at the state level. While many states quickly settle on approaches to conform with or decouple from the federal legislation, other states have done nothing, leaving taxpayers to file state income tax returns with very little guidance on how or whether the federal changes apply.

    Now that tax years impacted by the Tax Cuts and Jobs Act are well into their audit cycles, state taxpayers that unknowingly did not correctly take federal changes into account when calculating their state taxes may be confronted by not only audit exposure, but in some cases refund opportunities. Taxpayers should review their state tax returns to identify opportunities to minimize exposure and identify refunds well in advance of state tax audits.
  3. Taxes on digital advertising services
    Maryland was the first state to enact a digital advertising services tax. Large tech companies immediately sued the state, and in response the legislature passed a bill to delay the implementation of the controversial tax until 2022. To date, several other states have introduced similar digital advertising taxes, and some states are proposing to include these services in their sales tax base. States will be closely following the litigation in Maryland as they consider their own legislation.

    The definition of digital advertising services can potentially be very broad and fact specific. Taxpayers should understand the various state proposals and plan for their potential impact.
  4. Sales and use tax nexus: Remote sellers and marketplaces
    Florida and Kansas have finally joined the ranks of states with a bright-line economic nexus threshold for remote retailers and marketplace providers. At this point, the only state without a bright-line standard or marketplace rules is Missouri.

However, retailers should not forget about physical presence. Even though most states have implemented economic nexus rules since Wayfair, the traditional physical presence rules are still alive and well. States are continuing to assess retailers that, sometimes unknowingly, have some form of physical presence in the state.

E-retailers should be sure they are in compliance with state sales and use tax laws and marketplace facilitator rules and have considered all planning opportunities. 

How we can help

We are experienced in income, franchise, gross receipts, sales and use, as well as credits and incentives. We can help taxpayers monitor state tax laws and nexus requirements, understand where they have state obligations and how to minimize them, identify and implement planning opportunities, identify and quantify tax exposures, and assist with state tax audits. 

For questions about your specific situation, please contact the State and Local Tax team. We’re here to help. 
 

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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 your company does business in the EU.

Major changes are coming to the EU VAT laws on the online supply of goods and services. The rules, which apply as from July 1, 2021, will affect U.S.-based businesses selling or facilitating sales to private individuals in EU member states. With just over a month remaining before the rules become effective, such businesses should begin immediately to prepare for their new VAT registration and collection responsibilities.

What are the new EU VAT rules?

The EU VAT rules applicable to cross-border B2C e-commerce activities are undergoing a major “refresh”—or modernization—as from July 1, 2021 (postponed six months from the originally planned effective date of January 1, 2021). From July, updated VAT rules will apply to online sales (including online marketplaces) to EU private consumers and to the import of low value goods. (The European Commission published explanatory notes on the rules on September 20, 2020, which include clarifications, FAQs and examples.)

The objectives of the new EU VAT rules are to: (i) simplify compliance obligations for vendors that potentially have to comply with the VAT rules in the 27 EU member states; (ii) increase VAT revenue for the individual member states by bringing more transactions within the scope of the EU VAT net; and (iii) reduce VAT fraud.

Any business making or facilitating online sales or deliveries of goods to consumers in the EU will likely be impacted in some way by the changes.

The EU VAT law changes are as follows:

Intra-EU sales to consumers

All B2C sales of goods will be taxed in the country of destination, meaning that sellers will need to collect VAT in the EU member state to which the goods are shipped.

The existing thresholds for distance sales in the EU will be abolished and replaced by an EU-wide registration threshold of €10,000 (approximately $12,000). This is an important change and potentially could create considerable EU VAT registration and reporting obligations for U.S.-based businesses selling goods from warehouses located in the EU if not proactively addressed.

To reduce the administrative burden and simplify VAT reporting, a new reporting system, called the One-Stop Shop (OSS) will be expanded to include the distance sale of goods. U.S. businesses can register for the OSS scheme in the EU member state of dispatch and can report and remit the VAT due via a pan-EU VAT return instead of having to VAT register in each EU member state.

Sales via online marketplaces

In certain circumstances, businesses that operate an online marketplace, known as an “electronic interface” in the EU) or that facilitate the sale of third-party goods through an online marketplace will be considered the “deemed supplier” of the goods sold to EU customers and will be required to collect and pay VAT on such sales. As a result, businesses that sell via online marketplaces (e.g., Amazon, eBay, etc.) will not be required to account for VAT on such sales. 
Imports of low value goods

The VAT exemption for “low-value imports,” i.e., goods coming from outside the EU that do not exceed a value of €22 (approximately $26) will be abolished. Instead, the sale of low-value goods not exceeding €150 (approximately $180) to consumers in the EU through the business’ own website will be subject to VAT at the applicable rate in the destination country. The VAT due on low value goods can either be collected at the point of sale by the seller or collected from the consumer before the goods are released by the customer broker/delivery service. Where the seller opts to collect VAT at the point of sale, it can VAT register under the new Import One-Stop Shop (IOSS) system to account for and remit the VAT due.

VAT registration under the IOSS has several benefits, including:

  • Transparency to consumers: The customer will not be faced with any unexpected VAT costs since the total amount paid for the goods is VAT-inclusive;
  • Reduced compliance burden: Sellers can use a single IOSS registration to report and pay the VAT due on all sales covered by IOSS. Otherwise, if the seller acts as the importer (e.g., sells goods under delivered duty paid terms), it may need to register for VAT in multiple EU member states;
  • Quick customs clearance: IOSS is designed to enable goods to be cleared through customs quickly as no VAT is due at the time of importation, thus facilitating the speedy delivery of goods; and
  • Flexible logistics: IOSS simplifies logistics since goods can be imported into the EU in any EU member state. If IOSS is not used, goods can only be imported and cleared for customs in the destination EU member state, which may result in delays and additional costs.

How will the changes impact nonresident sellers?

As noted above, the EU rule changes will significantly affect U.S.-based businesses selling or facilitating the sale of goods and services online to consumers located in the EU. With just over a month left before the rules become effective, any U.S.-based business that may be impacted should take immediate steps to:

  • Understand the EU rules and how they will apply;
  • Assess the impact of the rules on supply chains;
  • Consider the impact on pricing due to different VAT rates applying in different jurisdictions;
  • Identify any adjustments that can be made (where possible) to mitigate the impact of the rules;
  • Be prepared to comply with new VAT obligations, including additional registrations, charging and collecting VAT, filing tax and/or information returns, etc.;
  • Update and adapt accounting and billing systems and master data records to identify when VAT should be applied and the appropriate rates in multiple jurisdictions; and
  • Cancel existing EU VAT registrations for distance sales that may be replaced by the OSS registration.

Failure to comply with the rules could result in the imposition of interest and penalties on the historic VAT liability. In addition to the EU VAT consequences, business selling goods that are imported into these jurisdictions must also take into account any customs implications because any compliance deficiencies could result in imported goods being delayed in customs, causing customers to be frustrated by shipping delays.

For questions about your specific situation, please contact the International Tax team. We’re here to help. 

Article
New VAT rules in the EU: What U.S. e-commerce businesses need to know 

Read this if your company does business in Canada. 

Major changes are coming to Canada’s Goods and Services Tax/Harmonized Services Tax (GST/HST) on the online supply of goods and services. The rules, which apply as from July 1, 2021, will affect U.S.-based businesses selling or facilitating sales to private individuals in Canada. With just over a month remaining before the rules become effective, such businesses should begin immediately to prepare for their new GST/HST registration and collection responsibilities.

What are the GST/HST changes in Canada?

Currently, only nonresidents that carry on business in Canada are generally required to register for and collect GST/HST (levied at the federal level in Canada) on taxable supplies of goods and services made in Canada. If the nonresident does not conduct business in Canada, it need not register for or collect GST/HST.

The impending rules aim to level the playing field between Canadian businesses (which must charge GST/HST on the supply of goods and services) and foreign suppliers by ensuring that GST/HST applies to all goods and services used in Canada, regardless of how they are supplied or whether the supplier is Canadian or nonresident. The rules will significantly impact nonresident vendors and online platform operators, in that foreign businesses will be required to register for GST/HST, collect GST/HST from customers, and report and remit tax to the Canadian tax authorities. Three types of supplies by foreign businesses will be affected:

  • Supplies of digital services
  • Supplies of accommodation made through an accommodation platform (AP)
  • Online supplies of goods through a fulfilment warehouse

Digital services

Foreign businesses and platforms that do not have a physical place of business in Canada but that supply goods and services online to Canadian consumers and/or non-GST/HST-registered businesses (i.e., B2C transactions) will be required to register for GST/HST, resulting in an obligation to collect, remit and report tax. The tax rate will be the rate applicable in the province where the consumer is resident.

Nonresident businesses will have to register for GST/HST purposes when their sales exceed CAD 30,000 (approximately USD 25,000) over a 12-month period or they may register voluntarily where the threshold is not exceeded. A simplified online registration will be available for these businesses, but it will not be possible for the nonresident business to reclaim GST/HST incurred on its own purchases. If nonresident businesses wish to recover GST/HST paid on business expenses, they may be able to register under the regular GST/HST regime.

Accommodation platforms

An AP is a digital platform that facilitates the supply of short-term rental accommodations (i.e., rentals for less than one month) to private customers for a price of at least of CAD 20 (approximately USD 16) per day (e.g., Airbnb, VRBO, etc.).

Nonresident APs will be required to register for GST/HST, and to collect, remit and report tax on the rental charges in cases where the owner of the property is not GST/HST-registered. Where the property owner is GST/HST registered, the AP will not be responsible for GST/HST; instead, the property owner will be required to collect/remit GST/HST on the rental charges. The GST/HST rate will be the rate applicable in the province where the property is located.

APs subject to these changes should register for GST/HST under the simplified online registration.

Fulfilment warehouses and websites

GST/HST registration will be required for the following types of transactions in cases where the nonresident business’ sales to consumers exceed, or are expected to exceed, CAD 30,000 over a 12-month period:

  • Direct sales of goods by a nonresident business directly (i.e., not via a distribution platform) through its website to Canadian consumers: In this case, the nonresident business will have to register, charge and account for GST/HST. 
  • Sales of goods by a nonresident business through a distribution platform to consumers in Canada: The distribution platform operator will be required to register for GST/HST and account for GST/HST in Canada. It should be noted that no GST/HST will be due on the service fee charged by the distribution platform operator to nonresident businesses.
  • Online sales of goods by a nonresident business (but not through a distribution platform) to customers, where the goods are located in a Canadian fulfilment warehouse: The nonresident business will be required to register for GST/HST and will need to keep records on its foreign vendors and submit these to the Canadian tax authorities. These information returns will give the tax authorities insight into which nonresident businesses need to be GST/HST-registered.

Nonresident businesses that carry out the above transactions will have to register under the standard GST/HST rules rather than under the new simplified regime and will generally be able to reclaim GST/HST incurred on their purchases.

Potential Provincial Sales Tax (PST) implications

In addition to having GST/HST registration and collection obligations, nonresident vendors also may be required to register for PST. Currently, British Columbia, Manitoba, Quebec, and Saskatchewan impose a PST, and three of these provinces (i.e., British Colombia, Quebec, and Saskatchewan) have introduced rules requiring nonresident vendors selling to customers in these provinces to register for PST purposes. The rules vary by province and will need to be considered in addition to the new GST/HST rules.

How will the changes impact nonresident sellers?

As noted above, the Canadian rule changes will significantly affect U.S.-based businesses selling or facilitating the sale of goods and services online to consumers located in Canada. With just over a month left before the rules become effective, any U.S.-based business that may be impacted should take immediate steps to:

  • Understand the Canadian rules and how they will apply;
  • Assess the impact of the rules on supply chains;
  • Consider the impact on pricing due to the GST/HST and the varying PST rates applied in in the aforementioned provinces;
  • Identify any adjustments that can be made (where possible) to mitigate the impact of the rules;
  • Be prepared to comply with new GST/HST obligations, including additional registrations, charging and collecting GST/HST, filing tax and/or information returns, etc.; and
  • Update and adapt accounting and billing systems and master data records to identify when GST/HST should be applied and the appropriate rates in multiple jurisdictions.

Failure to comply with the rules could result in the imposition of interest and penalties on the historic GST/HST liability. In addition to the GST/HST implications in Canada, business selling goods that are imported into these jurisdictions must also take into account any customs implications because any compliance deficiencies could result in imported goods being delayed in customs, causing customers to be frustrated by shipping delays.

For questions about your specific situation, please contact the International Tax team. We’re here to help. 

Article
New GST/HST rules in Canada: What U.S. e-commerce businesses need to know  

Read this if you are a business owner or advisor to business owners.

With continued uncertainty in the business environment stemming from the COVID-19 pandemic, now may be a good time to utilize trust, gift, and estate strategies in the transfer of privately held business interests.

In simple terms, business valuation is a function of future cash flow and the risk in achieving those cash flows. As uncertainty in the ability to achieve future cash flow rises, risk rises at the same time. The value of a business is driven by risk. Holding all else equal, as risk continues to increase, the value of a business decreases. Similarly, if all else is equal, a continuing decline in anticipated cash flow results in decreased business values. An increase in risk, coupled with growing uncertainty and decline in cash flow may create a compounding effect of depressing business values. 

Cash flow challenges

Even if the cash flow of a privately held business has held up thus far, there is great uncertainty as to future cash flow. The duration of this uncertainty is a major concern for many business owners in the current environment. It was not long ago that many were anticipating the pandemic impact would be short-lived, resulting in a v-shaped recovery. Those expectations have given way as national unemployment numbers continue to climb. This continued uncertainty may lessen the value of privately held businesses. Depending on the company, its expectations, and impact from industry and economic factors, the effect on future cash flow may be significant.

With these elements in mind, the current and near-term may serve as an advantageous time to consider the transfer of interests in a privately held business. Increased risk and lowered future expectations will combine, resulting in lower values—particularly as compared to performance during the recent strong economy. 

Further opportunities exist if you are considering transferring a non-controlling interest in a company. Discounts applicable to minority or fractional interests typically include discounts for lack of control and lack of marketability, and in some cases discounts for lack of voting rights. These discounts may serve to further reduce the overall value transferred through a given strategy. 

What strategies can be used to capitalize in this environment?

From a federal perspective, gift and estate tax lifetime exemption amounts are at all-time highs; currently, $11.58 million per individual in 2020. With portability, a married couple can gift or transfer over $23 million in value without incurring a federal gift or estate tax.

Coupled with the ever-increasing annual gift tax exclusion amount of $15,000 per recipient in 2020, executing a succession plan could not come at a better time. Individuals should be aware of the scheduled sunset of the above referenced amounts in 2025 with reversion back to previous levels of $5.0 million (adjusted for inflation).

Building on future uncertainty, the 2020 presidential election is quickly approaching, as well as budget concerns from federal and state administrative agencies resulting from COVID-19. As it is unknown whether the current estate gift and estate tax exemptions will remain at these all-time highs, it may be an opportune time to leverage the current lifetime exemption or annual gift tax exclusion. 

Given the likely decline in value of closely held business interests or marketable securities combined with historically low interest rates currently, transferring assets now that will likely rebound in value later will provide transferors/donors with the most bang for their buck. 

Certain trust vehicles are often beneficial in a low-interest rate environments and provide varying forms of flexibility to the grantor or donor. When combined with the increase in the charitable deduction limits for taxpayers who itemize their deductions, this is an optimal time for transferring assets.  

One of the most important aspects of estate planning is to review and update your estate plan regularly for changes in your financial or family situation. Estate plans are not static and should be periodically reviewed to ensure they achieve your goals based upon your current situation.

Our mission at BerryDunn remains constant in helping each client create, grow, and protect value. If you have questions about your unique situation, or would like more information, please contact the team.

Article
2020 estate strategies in times of uncertainty for privately held business owners

Read this if you are at a financial institution.

Feeling stuck, or maybe even frozen, in your CECL readiness efforts? No matter where you are in the process, here are three things you can do right now to ensure your CECL implementation is on track:

  1. Create or re-visit your 2022 timeline
    With just under 12 months to the January 2023 CECL adoption date, it’s important to make every moment count. Consider CECL adoption your Olympic moment and, like every great Olympic athlete, you have interim events—a timeline of major milestones—to ensure you are ready for “Day 1” and beyond. One strategy to ensure you do not “run out of time” is to start at the end of your timeline and work backward.

    Tip: Whether it be 1/1/2023 (“Day 1” adoption), or the first date by which you want to start parallel runs, fix the date of that final must-hit milestone, and work backward. For example, in order to adopt CECL on 1/1/2023, what major milestone has to be achieved before then and how much time will you need for that? Setting milestones from the final date backward will help you fit the remaining major activities into the time you have left—you can’t “run out of time” this way!



     
  2. Assess where you are, tactically, and fill in the gaps
    What would an Olympic athlete be without a training schedule, and coaches, trainers, and other professionals to guide and push them? In order to make the most of each event (or milestone) in the countdown to CECL adoption, let’s fill in our training schedule. What key decisions still need to be made or documented? Who has the authority to approve them? What’s the right time and venue to obtain that approval? Will these be one-to-one, small group, or committee/board meetings? Will meetings be set up as-needed, or is the meeting schedule (e.g. quarterly executive/board) already set? Who are you engaging for model validation and key control review? What is the date of that review work? 

    Tip: Add those key approval, review, and validation dates to your timeline, and make sure the meeting time you need with decision-makers is booked in their calendars now. Scheduling this time in advance is a transparent and tangible sign that you’ve charted the course, helps ensure decision-makers are available to you when needed most, and incremental progress is being consistently made toward your ultimate goal. 
  3. Identify the top three tasks to complete this week, reserve the time in your calendar, and complete them!
    Like any athlete, you are now “in training”, and daily and weekly actions you take will ensure you reach your goal in as strong a position possible. Whether it’s scheduling those meetings, identifying subject matter experts you can rely upon for coaching, or putting the finishing touches on model documentation and internal control mapping, booking that time with yourself to complete these tasks is key to feeling prepared and ready for CECL adoption. 

    Tip: Set aside a few minutes at the end or start of each week to review your timeline/milestones and identify the next key actions to complete.

Would you like assistance with certain aspects of your CECL readiness efforts? Are you ready for some validation/review work, or need guidance on policy, governance, or internal/financial reporting controls?

Contact our Financial Institutions team. We'll help you get your CECL implementation over the finish line. 


 

Article
CECL implementation: Three steps for a medal-winning adoption 

The Centers for Medicare & Medicaid Services (CMS) issued the final rule for the PPS and consolidated billing for SNFs for FY 2022 (published in the Federal Register on August 4, 2021). The rule:

  • Updates the PPS payment rates for SNFs for FY 2022 using the market basket update and budget neutrality factors effective October 1, 2021.
  • Makes changes based on Section 134 of the Consolidated Appropriations Act, 2021—New Blood Clotting Factor Exclusion from SNF Consolidated Billing.
  • Updates the SNF Quality Reporting Program (QRP).
  • Makes changes to the SNF Value-Based Purchasing (VBP) program due to the public health emergency (PHE).
  • Adopts changes in Patient Driven Payment Model (PDPM) International Classification of Diseases, Version 10 (ICD-10) code mappings.
  • Updates the methodology for recalibrating the PDPM parity adjustment.

2022 PPS rate calculations

CMS rebased and revised the SNF market basket index to improve payment accuracy under the SNF PPS by using 2018 Medicare–allowable total cost data to update the PPS payment rates, instead of 2014 data. The final rule includes:

  • A 1.2% net market basket increase based on a 2.7% SNF market basket update, less a 0.8 percentage point forecast error adjustment and a 0.7 percentage point productivity adjustment.
  • A budget neutrality factor of 1.0006.
  • A decrease in the labor-related weight from 71.3% for FY 2021 to 70.4% for FY 2022.

CMS projects an overall impact of this final rule to be an estimated increase of $410 million in aggregate payments to SNFs during FY 2022. This reflects a $411 million increase from the update to the payment rates and a $1.2 million decrease due to the reduction to rates to account for the excluded blood-clotting factors. 

The final rule also estimates an increase in costs to SNFs of $6.63 million related to the FY 2022 SNF QRP changes and an estimated reduction of $191.64 million in aggregate payments to SNFs during FY 2022 as a result of the changes to the SNF VBP Program.

The projected overall impact to providers in urban and rural areas is an average increase of 1.1% and 1.6%, respectively, with a low of .2% for rural New England providers and a high of 2.6% for rural South Atlantic providers―actual impact will vary. 

The applicable wage index continues to be based on the hospital wage data, unadjusted for occupational mix, rural floor, or outmigration adjustment (from FY 2018) in the absence of SNF specific data.

Section 134 of the Consolidated Appropriations Act, 2021—New Blood Clotting Factor Exclusion from SNF Consolidated Billing

Section 134 in Division CC of the Consolidated Appropriations Act, 2021 added blood clotting factors used for the treatment of patients with hemophilia and other bleeding disorders and items and services related to the furnishing of such factors under section 1842(o)(5)(C) to the list of items and services excluded from the consolidated billing requirements under the SNF PPS effective for items and services furnished on or after October 1, 2021.

CMS is finalizing a reduction in the SNF rates to account for this new exclusion. This methodology will result in a proportional reduction of $0.02 in the unadjusted urban and rural rates which equates to an estimated decrease of approximately $1.2 million in aggregate Part A SNF spending to offset the increase in Part B spending that will occur due to these items and services being excluded from SNF consolidated billing.

SNF QRP update

CMS adopted two new measures beginning with FY2023; the SNF Healthcare-Associated Infections Requiring Hospitalization measure (SNF HAI) and the COVID-19 Vaccination Coverage among Healthcare Personnel (HCP) measure, and updated the calculation for another measure, the Transfer of Health (TOH) Information to the Patient—Post-Acute Care (PAC) measure. In addition, CMS made a modification to revise the number of quarters used for publicly reporting certain SNF quality measures due to the PHE. 

SNF VBP Program

CMS will suppress the SNF readmission measure for scoring and payment adjustment purposes for the FY 2022 SNF VBP Program Year because circumstances caused by the PHE for COVID-19 have significantly affected the measure and the ability to make fair, national comparisons of SNFs’ performance scores. As part of a special scoring policy for FY 2022, CMS will assign a performance score of zero to all participating SNFs, irrespective of how they perform using the previously finalized scoring methodology, to mitigate the effect that PHE-impacted measure results would otherwise have on SNF performance scores and incentive payment multipliers. CMS will also reduce the adjusted Federal per diem rate for each SNF by 2% and award SNFs 60% of that withhold, resulting in a 1.2% payback percentage for FY2022. Finally, SNFs that qualify for the low-volume adjustment will continue to receive 100% of that 2% withhold.

Finally, CMS revised the performance period for the FY 2022 SNF VBP program and finalized the performance period for the FY 2023 and FY 2024 SNF VBP Program.

BerryDunn created an interactive rate calculator to assist you with the calculation of your PPS rates for FY 2022, which has been updated and now reflects VBP adjustments. You can access the PPS interactive rate calculator now.

Download the 2022 SNF PPS Rate Calculator

If you have any specific questions about the Final Rule or how it might impact your facility, please contact Ashley Tkowski or Melissa Baez.

Article
FY 2022 Prospective Payment System (PPS) and Consolidated Billing for Skilled Nursing Facilities (SNFs) Final Rule

Read this if you used COVID-19 relief funds to pay essential workers.

The Coronavirus Aid, Relief, and Economic Security (CARES) and American Rescue Plan (ARPA) Acts allowed states and local governments to use COVID-19 relief funds to provide premium pay to essential workers. Many states took advantage of this opportunity, giving stipends or hourly rate increases to government and other frontline employees who worked during the pandemic, such as healthcare workers, teachers, correctional officers, and police officers.

States’ initial focus was to get the money to the essential workers as quickly as possible, but these decisions may cause them to be out of compliance with the Fair Labor Standards Act (FLSA), which sets standards for minimum wage, overtime pay, and recordkeeping. As a result, states should review how the funds were disbursed and if payroll adjustments are necessary. The amount, form, and recipients of the pay varied widely from state to state, making determining whether states are compliant with FLSA and calculating any discrepancies an immensely complex task. 

For example, states that disbursed one-time payments to essential workers will likely be able to treat those payments like standard one-time bonuses, while recurring stipends or hourly rate increases should be included in employee’s regular rate when calculating overtime pay. Because this is an unprecedented situation for both states and the federal government, clear guidance is not yet available from the Department of Labor. 

Fortunately, BerryDunn is already working with clients to review their use of the COVID-19 relief funds to help ensure essential workers were paid fairly. Our team is qualified to guide you through your unique situation and help you remain in compliance with FLSA guidelines.

If you have questions about your particular circumstances, please call our Compliance and Risk Management consulting team. We are here to help and happy to discuss options to pay for these services using federal funds.

Article
Was your COVID-19 essential worker hazard pay FLSA-compliant?