Skip to Main Content

insightsarticles

Tax-exempt
organizations: The wait is over, sort of

08.29.18

IRS Notice 2018-67 Hits the Charts
Last week, in addition to The Eagles Greatest Hits (1971-1975) album becoming the highest selling album of all time, overtaking Michael Jackson’s Thriller, the IRS issued Notice 2018-67its first formal guidance on Internal Revenue Code Section 512(a)(6), one of two major code sections added by the Tax Cuts and Jobs Act of 2017 that directly impacts tax-exempt organizations. Will it too, be a big hit? It remains to be seen.

Section 512(a)(6) specifically deals with the reporting requirements for not-for-profit organizations carrying on multiple unrelated business income (UBI) activities. Here, we will summarize the notice and help you to gain an understanding of the IRS’s thoughts and anticipated approaches to implementing §512(a)(6).

While there have been some (not so quiet) grumblings from the not-for-profit sector about guidance on Code Section 512(a)(7) (aka the parking lot tax), unfortunately we still have not seen anything yet. With Notice 2018-67’s release last week, we’re optimistic that guidance may be on the way and will let you know as soon as we see anything from the IRS.

Before we dive in, it’s important to note last week’s notice is just that—a notice, not a Revenue Procedure or some other substantive legislation. While the notice can, and should be relied upon until we receive further guidance, everything in the notice is open to public comment and/or subject to change. With that, here are some highlights:

No More Netting
512(a)(6) requires the organization to calculate unrelated business taxable income (UBTI), including for purposes of determining any net operating loss (NOL) deduction, separately with respect to each such trade or business. The notice requires this separate reporting (or silo-ing) of activities in order to determine activities with net income from those with net losses.

Under the old rules, if an organization had two UBI activities in a given year, (e.g., one with $1,000 of net income and another with $1,000 net loss, you could simply net the two together on Form 990-T and report $0 UBTI for the year. That is no longer the case. From now on, you can effectively ignore activities with a current year loss, prompting the organization to report $1,000 as taxable UBI, and pay associated federal and state income taxes, while the activity with the $1,000 loss will get “hung-up” as an NOL specific to that activity and carried forward until said activity generates a net income.

Separate Trade or Business
So, how does one distinguish (or silo) a separate trade or business from another? The Treasury Department and IRS intend to propose some regulations in the near future, but for now recommend that organizations use a “reasonable good-faith interpretation”, which for now includes using the North American Industry Classification System (NAICS) in order to determine different UBI activities.

For those not familiar, the NAICS categorizes different lines of business with a six-digit code. For example, the NAICS code for renting* out a residential building or dwelling is 531110, while the code for operating a potato farm is 111211. While distinguishing residential rental activities from potato farming activities might be rather straight forward, the waters become muddier if an organization rents both a residential property and a nonresidential property (NAICS code 531120). Does this mean the organization has two separate UBI rental activities, or can both be grouped together as rental activities? The notice does not provide anything definitive, but rather is requesting public comments?we expect to see something more concrete once the public comment period is over.

*In the above example, we’re assuming the rental properties are debt-financed, prompting a portion of the rental activity to be treated as UBI.

UBI from Partnership Investments (Schedule K-1)
Notice 2018-67 does address how to categorize/group unrelated business income for organizations that receive more than one partnership K-1 with UBI reported. In short, if the Schedule K-1s the organization receives can meet either of the tests below, the organization may treat the partnership investments as a single activity/silo for UBI reporting purposes. The notice offers the following:

De Minimis Test
You can aggregate UBI from multiple K-1s together as long as the exempt organization holds directly no more than 2% of the profits interest and no more that 2% of the capital interest. These percentages can be found on the face of the Schedule K-1 from the Partnership and the notice states those percentages as shown can be used for this determination. Additionally, the notice allows organizations to use an average of beginning of year and end of year percentages for this determination.

Ex: If an organization receives a K-1 with UBI reported, and the beginning of year profit & capital percentages are 3%, and the end of year percentages are 1%, the average for the year is 2% (3% + 1% = 4%/2 = 2%). In this example, the K-1 meets the de minimis test.

There is a bit of a caveat here—when determining an exempt organization's partnership interest, the interest of a disqualified person (i.e. officers, directors, trustees, substantial contributors, and family members of any of those listed here), a supporting organization, or a controlled entity in the same partnership will be taken into account. Organizations need to review all K-1s received and inquire with the appropriate person(s) to determine if they meet the terms of the de minimis test.

Control Test
If an organization is not able to pass the de minimis test, you may instead use the control test. An organization meets the requirements of the control test if the exempt organization (i) directly holds no more than 20 percent of the capital interest; and (ii) does not have control or influence over the partnership.

When determining control or influence over the partnership, you need to apply all relevant facts and circumstances. The notice states:

“An exempt organization has control or influence if the exempt organization may require the partnership to perform, or may prevent the partnership from performing, any act that significantly affects the operations of the partnership. An exempt organization also has control or influence over a partnership if any of the exempt organization's officers, directors, trustees, or employees have rights to participate in the management of the partnership or conduct the partnership's business at any time, or if the exempt organization has the power to appoint or remove any of the partnership's officers, directors, trustees, or employees.”

As noted above, we recommend your organization review any K-1s you currently receive. It’s important to take a look at Line I1 and make sure your organization is listed here as “Exempt Organization”. All too often we see not-for-profit organizations listed as “Corporations”, which while usually technically correct, this designation is really for a for-profit corporation and could result in the organization not receiving the necessary information in order to determine what portion, if any, of income/loss is attributable to UBI.

Net Operating Losses
The notice also provides some guidance regarding the use of NOLs. The good news is that any pre-2018 NOLs are grandfathered under the old rules and can be used to offset total UBTI on Form 990-T.

Conversely, any NOLs generated post-2018 are going to be considered silo-specific, with the intent being that the NOL will only be applicable to the activity which gave rise to the loss. There is also a limitation on post-2018 NOLs, allowing you to use only 80% of the NOL for a given activity. Said another way, an activity that has net UBTI in a given year, even with post-2017 NOLs, will still potentially have an associated tax liability for the year.

Obviously, Notice 2018-67 provides a good baseline for general information, but the details will be forthcoming, and we will know then if they have a hit. Hopefully the IRS will not Take It To The Limit in terms of issuing formal guidance in regards to 512(a)(6) & (7). Until they receive further IRS guidance,  folks in the not-for-profit sector will not be able to Take It Easy or have any semblance of a Peaceful Easy Feeling. Stay tuned.

Related Industries

Related Services

Read this if you are a not-for-profit looking to learn more about tax filing deadlines.

State of New Hampshire: If your organization has a December 31 year-end, your annual report filing with the Charitable Trusts Unit and related payment are still due by May 15. If you are not ready to file, you may file Form NHCT-4 for an extension by May 15. If your organization has a June 30 year-end, you may email the State Attorney General to ask for additional time to July 15.

April 24, 2020, UPDATE: Commonwealth of Massachusetts: The Massachusetts Attorney General’s office has extended the Form PC filing requirement. All filing deadlines for annual charities filings for fiscal year 2019 have been extended by six months. This extension is in addition to the automatic six month extension that many not-for-profits receive. In addition, original signatures, photocopies of signatures, and e-signatures (e.g., DocuSign) will be accepted.

On April 9, 2020, the Internal Revenue Service (IRS) issued Notice 2020-23, its third round of tax filing relief guidance, which amplifies relief set forth in previously issued IRS notices providing relief to taxpayers affected by COVID-19. Notice 2020-23 also provides additional time to perform certain other actions. The Notice holds the special distinction of being the first to provide specific relief to not-for-profit organizations with return filing and tax payment obligations due between April 1 and July 15, 2020. The details are highlighted below:

Tax deadline extended to July 15, 2020
The Notice explicitly states that Form 990-T tax payment and filing obligations due during the period between April 1 and July 15 will be automatically extended to July 15, 2020. Additionally, Form 990-PF (and associated tax payments) as well as quarterly Federal estimated tax payments remitted via Form 990-W are also explicitly noted and are granted an extension to July 15.
    
While this is certainly good news, the more eagerly anticipated news is the Notice also includes “Affected Taxpayers” who are required to perform “Specified Time-Sensitive Actions” referenced in Revenue Procedure 2018-58. The Revenue Procedure specifically mentions exempt organizations as “Affected Taxpayers” required to perform “specified time-sensitive actions”—one such action being the filing of Form 990.

In summary (with the combined power of the Notice and Revenue Procedure), any entity with a Form 990, Form 990-EZ, Form 990-PF, Form 990-T, Form 990-W estimated tax filing requirement, Form 1120-POL or Form 4720 filing obligation due between April 1 and July 15, 2020 now have until July 15, 2020 to file. Needless to say this is very welcome news for an industry that like so many others, is being pushed to the brink during this turbulent and difficult time.

Additional extensions
Notice 2020-23 (with reference to Revenue Procedure 2018-58) also extends the due date of certain forms, notices, applications, and other exempt organization activities due between April 1 and July 15, 2020, until July 15, 2020 as noted below: 

  • Community health needs assessments (CHNAs) and Implementation Strategies
  • Application for Recognition of Exemption (Forms 1023 and 1024) 
  • Section 501(h) Elections and Revocations (Form 5768)
  • Information Return of US Persons with Respect to Certain Foreign Corporations (Form 5471)
  • Political Organization Notices and Reports (Forms 8871 and 8872)
  • Notification of Intent to Operate as a Section 501(c)(4) Organization (Form 8976) 

We are here to help
Please contact the BerryDunn not-for-profit tax team if you have any questions, or would like to discuss your specific situation.

Article
Not-for-profit May 15 tax deadline extended

Of all the changes that came with the sweeping Tax Cuts and Jobs Act (TCJA) in late 2017, none has prompted as big a response from our clients as the changes TCJA makes to the qualified parking deduction. Then, last month, the IRS issued its long-waited guidance on this code section in the form of Notice 2018-99

We've taken a look at both the the original provisions, and the new guidance, and have collected the salient points and things we think you need to consider this tax season. For not-for-profit organizations, visit my article here. And for-profit companies can read here.  

Article
IRS guidance on qualified parking: Our take

Read this if you work at a renewable energy company, developer, or other related business. 

When entering into agreements involving tangible long-lived assets, an asset retirement obligation can arise in the form of a legal obligation to retire the asset(s) at a certain date. In the alternative/renewable energy industry, these frequently present themselves in leases for property on which equipment (i.e., solar panels) is placed. In the leases there may be a requirement, for example, that at the conclusion of the lease, the lessee remove the equipment and return to the property to its original condition.

When an asset retirement obligation is present in a contract, a company should record the liability when it has been incurred (usually in the same period the asset is installed or placed in service) and can be reasonably estimated. The fair value of the liability, typically calculated using a present value technique, is recorded along with a corresponding increase to the basis of the asset to be retired. Subsequent to the initial recognition, the liability is accreted annually up to its future value, and the asset, including the increase for the asset retirement obligation, is depreciated over its useful life.

As a company gets closer to the date the obligation is realized, the estimate of the obligation will most likely become more accurate. When revisions to the estimate are determined, the liability should be adjusted in that period.

It is important to note that this accounting does not have any income tax implications, including any potential increase to the investment tax credit (ITC).

These obligations are estimates and should be developed by your management through collaboration with companies or individuals that have performed similar projects and have insight as to the expected cost. While this is an estimate and not a perfect science, it is important information to share with investors and work into cash flow models for the project, as the cost of removing such equipment can be significant. 

Recording the liability on the balance sheet is a good reminder of the approximate cash outflow that will take place in the final year of the lease. If you have any questions or would like to discuss with us, contact a member of the renewable energy team. We’re here to help.

Article
Asset retirement obligations in alternative/renewable energy

Read this if you are a business owner or interested in upcoming changes to current tax law.

As Joe Biden prepares to be inaugurated as the 46th President of the United States, and Congress is now controlled by Democrats, his tax policy takes center stage.

Although the Democrats hold the presidency and both houses of Congress for the next two years, any changes in tax law may still have to be passed through budget reconciliation, because 60 votes in the Senate generally are needed to avoid that process. Both in 2017 and 2001, passing tax legislation through reconciliation meant that most of the changes were not permanent; that is, they expired within the 10-year budget window. Here is a comparison of current tax law with Biden’s proposed tax plan.

Current Tax Law
(TCJA–present)
Biden’s stated goals
Corporate tax rates and AMT

Corporations have a flat 21% tax rate and no corporate alternative minimum tax (AMT), which were both changed by the TCJA.

These do not expire.

Biden would raise the flat rate to the pre-TCJA level of 28% and reinstate the corporate AMT, requiring corporations to pay the greater of their regular corporate income tax or the 15% minimum tax (while still allowing for net operating loss (NOL) and foreign tax credits).

Capital gains and Qualified Dividend Income

The top tax rate is 20% for income over $441,450 for individuals and $496,600 for married filing jointly. There is an additional 3.8% net investment income tax.

Biden would eliminate breaks for long-term capital gains and dividends for income above $1 million. Instead, these would be taxed at ordinary rates.

Payroll taxes

The 12.4% payroll tax is divided evenly between employers and employees and applies to the first $137,700 of an individual’s income (scheduled to go up to $142,400 in 2020). There is also a 2.9% Medicare Tax which is split equally between the employer and the employee with no income limit.

Biden would maintain the 12.4% tax split between employers and employees and keep the $142,400 cap but would institute the tax on earned income above $400,000. The gap between the two wage levels would gradually close with annual inflationary increases.

International taxes (GILTI, offshoring)

GILTI (Global Intangible Low-Tax Income): Established by the TCJA, U.S. multinationals are required to pay a foreign tax rate of between 10.5% and 13.125%.

A scheduled increase in the effective rate to 16.406% is scheduled to begin in 2026.

Offshoring taxes: The TCJA includes a tax deduction for corporations that manufacture in the U.S. and sell overseas.

GILTI: Biden would double the tax rate to 21% and assess a minimum tax on a country-by-country basis.

Offshoring taxes: Biden would establish a 10% penalty surtax on profits for goods and services manufactured offshore and a 10% advanceable “Made in America” tax credit to create U.S. manufacturing jobs. Biden would also close offshoring tax loopholes in the TCJA.

Estate taxes

The estate tax exemption for 2020 is $11,580,000. Transfers of appreciated property at death get a step-up in basis.

The exemption is scheduled to revert to pre-TCJA levels.

Biden would return the estate tax to 2009 levels, eliminate the current step-up in basis on inherited assets, and eliminate the step-up at death provision for inherited property passed along by the decedent.

Individual tax rates

The top marginal rate is 37% for income over $518,400 for individuals and $622,050 for married filing jointly. This was lowered from 39.6% pre-TCJA.

Biden would restore the 39.6% rate for taxable income above $400,000. This represents only the top rate.

Individual tax credits

Currently, individuals can claim a maximum of $2,000 Child Tax Credit (CTC) plus a $500 dependent credit.

Individuals may claim a maximum dependent care credit of $600 ($1,200 for two or more children).

The CTC is scheduled to revert to pre-TCJA levels ($1,000) after 2025.

Biden would expand the CTC to $3,000 for children age 17 and under and offer a $600 bonus for children age 6 and under. It would also be fully refundable.

He has also proposed increasing the child and dependent care tax credit to $8,000 ($16,000 for two or more children), and he has proposed a new tax credit of up to $5,000 for informal caregivers.

Separately, Biden has also proposed a $15,000 tax credit for first-time homebuyers.

Qualified Business Income Deduction under Section 199A

As previously discussed, many businesses qualify for a 20% qualified business income tax deduction lowering the effective rate of tax for S corporation shareholders and partners in partnerships to 29.6% for qualifying businesses.

Biden would phase out the tax benefits associated with the qualified business income deduction for those making more than $400,000 annually.

Education

Forgiven student loan debt is included in taxable income.

There is no tax credit for contributions to state-authorized organizations that sponsor scholarships.

Biden would exclude forgiven student loan debt from taxable income.

Small businesses

There are current tax credits for some of the costs to start a retirement plan.

Biden would offer tax credits for businesses that adopt a retirement savings plan and offer most workers without a pension or 401(k) access to an “automatic 401(k)”.

Itemized deductions

For 2020, the standard deduction is $12,400 for single/married filing separately and $24,800 for married filing jointly.

After 2025, the standard deduction is scheduled to revert to pre-TCJA amounts, or $6,350 for single /married filing separately and $12,700 for married filing jointly.

The TCJA suspended the personal exemption and most individual deductions through 2025.

It also capped the SALT deduction at $10,000, which will remain in place until 2025, unless repealed.

Biden would enact a provision that would cap the tax benefit of itemized deductions at 28%.

SALT cap: Senate minority leader Charles Schumer has pledged to repeal the cap should Biden win in November (the House of Representatives has already passed legislation to repeal the SALT cap).

Opportunity Zones

Biden has proposed incentivizing - opportunity zone funds to partner with community organizations and have the Treasury Department review the program’s regulations of the tax incentives. He would also increase reporting and public disclosure requirements.
Alternative energy Biden would expand renewable energy tax credits and credits for residential energy efficiency and restore the Energy Investment Tax Credit (ITC) and the Electric Vehicle Tax Credit.


If you have questions about your specific situation, please contact us. We’re here to help.

Article
Biden's tax plan and what may change from current tax law

Read this if your company is seeking guidance on PPP loans.

The Consolidated Appropriations Act, 2021 (H.R. 133) was signed into law on December 27, 2020. This bill contains guidance on the existing Paycheck Protection Program (PPP) and guidelines for the next round of PPP funding.

Updates on existing PPP loans

Income and expense treatment of PPP loans. Forgiven PPP loans will not be included in taxable income and eligible expenses paid with PPP funds will be tax-deductible. This tax treatment applies to both current and future PPP loans.

Tax attributes and basis adjustments. Tax attributes such as net operating losses and passive loss carryovers, and basis increases generated from the result of the PPP loans will not be reduced if the loans are forgiven.

Economic Injury Disaster Loans (EIDL). Any previous or future EIDL advance will not reduce PPP loan forgiveness. Any borrowers who already received forgiveness of their PPP loans and had their EIDL subtracted from the forgiveness amount will be able to file an amended forgiveness application to have their PPP forgiveness amount increased by the amount of the EIDL advance. The SBA has 15 days from the effective date of this bill to produce an amended forgiveness application. 

Simplified forgiveness application for loans under $150,000. Borrowers who received PPP loans for $150,000 or less will now be able to file a simplified one-page forgiveness application and will not be required to submit documentation with the application. The SBA has 24 days from the effective date of this bill to make this new forgiveness application available. 

Use of PPP funds. Congress expanded the types of expenses that may be paid with PPP funds. Prior eligible expenses were limited to payroll (including health benefits), rent, covered mortgage interest, and utilities. Additional expenses now include software and cloud computing services to support business operations, the purchase of essential goods from suppliers, and expenditures for complying with government guidance relating to COVID-19.

These additional expenses apply to both existing and new PPP loans, but they do not apply to existing loans if forgiveness has already been obtained.
 
In addition, the definition of "payroll costs" has been expanded to include costs for group life, disability, dental, and vision insurance. These additions also apply to both existing and new loans.

Information for new PPP loans

Application deadline. March 31, 2021 

Eligibility for first-time borrowers. A business that did not previously apply for or receive a PPP loan may apply for a new loan. The same requirements apply from the first round of loans. The business must employ fewer than 500 employees per physical location and the borrower must certify the loan is necessary due to economic uncertainty.

Eligibility for second-time borrowers. Businesses that received a prior PPP loan may apply for a second loan, however the eligibility requirements are a little more stringent. The business must have fewer than 300 employees per physical location (down from 500 previously) and it must have experienced a decline in gross revenue of at least 25% in any quarter in 2020 as compared to the same quarter in 2019. The business must have also expended (or will expend) their initial PPP loan proceeds. 

Maximum loan amount. Lesser of $2 million or 2.5x average monthly payroll for either calendar 2019 or the 12-month period prior to the date of the loan. Businesses operating in the accommodations and food service industry (NAICS code 72) can use a 3.5x average monthly payroll multiple. If the business previously received a loan less than the new amount allowed, or if it returned a portion or all of the previous loan, it can apply for additional funds up to the maximum loan amount. 

New types of businesses eligible for loans.

  • Broadcast news stations, radio stations, and newspapers that will use the proceeds to support the production and distribution of local and emergency information 
  • Certain 501(c)(6) organizations with fewer than 300 employees and that are not significantly involved in lobbying activities 
  • Housing cooperatives with fewer than 300 employees 
  • Companies in bankruptcy if the bankruptcy court approves

Ineligible businesses. A business that was ineligible to receive a PPP loan during the first round is still ineligible to receive a loan in the new round. The new legislation also prohibits the following businesses from receiving a loan in the second round:

  • Publicly traded companies 
  • Businesses owned 20% or more by a Chinese or Hong Kong entity or have a resident of China on its board 
  • Businesses engaged primarily in political or lobbying activities
  • Businesses required to register under the Foreign Agents Registration Act 
  • Businesses not in operation on February 15, 2020 

Forgiveness qualifications. New PPP loans will be eligible for forgiveness if at least 60% of the proceeds are used on payroll costs. Partial forgiveness will still be available if less than 60% of the funds are used on payroll costs. 

Covered period. The borrower may choose a covered period (i.e., the amount of time in which the PPP funds must be spent) between 8 and 24 weeks from the date of the loan disbursement.

Employee Retention Tax Credit. The CARES Act prohibited a business from claiming the Employee Retention Tax Credit if they received a PPP loan. The new legislation retroactively repeals that prohibition, although it is unclear how an employer can claim retroactive relief. The new bill also expands the tax credit for 2021. 

Additional guidance is expected from the SBA in the coming weeks on many of these items and we will provide updates when the information is released.

We’re here to help.
If you have questions about PPP loans, contact a BerryDunn professional.

Article
Paycheck Protection Program: Updates on new and existing loans

Read this if you are a construction company.

I am pleased to introduce 2020 Tax Planning Opportunities: CARES Act, published in conjunction with CICPAC (Construction Industry CPAs-Consultants Association) by a national group of tax professionals focused on the construction industry. BerryDunn is proud to be one of CICPAC’s 65 member firms across the US, and one of only two in New England.

Within the document you’ll find an abundance of useful insights on the following topics and more related to the Coronavirus Aid, Relief and Economic Security (CARES) Act:

  • Paycheck Protection Program (PPP) loans
  • Net operating losses and excess business loss limitations
  • Qualified Improvement Property (QIP)
  • Payroll cash flow opportunities and employer tax credits

Every business has been impacted by COVID-19 in some form. The CARES Act offers opportunities galore for virtually every business. Now, perhaps more than ever, it’s time to work closely with your BerryDunn tax professional to ensure recovery through this difficult time. 

Read the entire document

Article
2020 tax planning opportunities: CARES Act whitepaper available now

Read this if you are a renewable energy company, investor, or related business.

Maine recently released a Climate Action Plan to address Maine’s climate future. Titled Maine Won’t Wait, the extensive plan tapped experts from across industries and professions to create a comprehensive blueprint for Maine’s climate future. BerryDunn is one of many Maine businesses to sign on in support of the plan, and will endeavor to help make it become a reality in the years, and decades to come. The far-reaching, ambitious plan covers many areas to address climate change, and renewable energy takes center stage. 

From the plan: In June 2019, Governor Janet Mills signed LD 1679 into law, with strong support from the Maine Legislature, to create the Maine Climate Council. The Council—an assembly of scientists, industry leaders, bipartisan local and state officials, and engaged citizens—was charged with developing this four-year Climate Action Plan to put Maine on a trajectory to decrease greenhouse gas emissions by 45% by 2030 and 80% by 2050, and achieve carbon neutrality by 2045.

Highlighted strategies of Maine's Climate Action Plan include:

  • Embrace the future of transportation in Maine 
  • Modernize Maine’s buildings: Energy-efficient, smart and cost-effective homes and businesses
  • Reduce carbon emissions in Maine’s energy and industrial sectors through clean energy
  • Grow Maine’s clean-energy economy and protect our natural resource industries 

Renewable energy opportunities

These strategies provide many opportunities for renewable energy companies to grow their businesses, increase the renewable workforce in Maine, and have a major impact on the success of Maine’s climate future. The plan also states that Maine will: 

  • Achieve an electricity grid where 80% of Maine’s usage comes from renewable generation by 2030
  • Launch a workforce initiative by 2022 that establishes ongoing stakeholder coordination between industry, educational, and training organizations to support current and future workforce needs
  • Establish programs and partnerships by 2022 for clean-tech innovation support to encourage the creation of clean-energy and climate solutions
  • More than double the number of Maine’s clean-energy and energy-efficiency jobs by 2030 

The plan recommends that Maine commit to increasing its current clean-energy workforce, while establishing new supply chains for Maine-based manufacturers to create sustained, good-paying skilled-labor jobs across the state.

As Maine heads toward a cleaner energy future, the plan sets up strong opportunities for renewable companies to play a large role in creating a sustainable renewable energy economy. You can read the full plan here. If you have any questions about the potential for your renewable energy business, contact the team. We’re here to help.

Article
Maine's Climate Action Plan unveiled: Renewable energy to play a big role

Read this if your facility or organization has received provider relief funds.

The rules over the use of the provider relief funds (PRF) have been in a constant state of flux since the funds started to show up in your bank accounts back in April. Here is a summary of where we are as of November 30, 2020 with allowable uses of the funds.
 
The most recent Post-Payment Notice of Reporting Requirements is dated November 2, 2020. In accordance with the notice, PRF may be used for two purposes:

  1. Healthcare-related expenses attributable to coronavirus that another source has not reimbursed and is not obligated to reimburse
  2. Lost revenue, up to the amount of the difference between 2019 and 2020 actual patient care revenue

The Department of Health and Human Services (HHS) has issued FAQs as recently as November 18, 2020.  The FAQs include the following clarifications on the allowable uses:

Healthcare related expenses attributable to the coronavirus

  1. PRF may be used for the marginal increased expenses or incremental expenses related to coronavirus.
  2. Expenses cannot be reimbursed by another source or another source cannot be obligated to reimburse the expense.
  3. Other sources include, but are not limited to, direct patient billing, commercial insurance, Medicare/Medicaid/Children’s Health Insurance Program (CHIP), or other funds received from the Federal Emergency Management Agency (FEMA), the Provider Relief Fund COVID-19 Claims Reimbursement to Health Care Providers and Facilities for Testing, Treatment, and Vaccine Administration for the Uninsured, and the Small Business Administration (SBA) and Department of Treasury’s Paycheck Protection Program (PPP). This would also include any state and federal grants received as a result of the coronavirus.
  4. Providers should apply reasonable assumptions when estimating the portion of costs that are reimbursed from other sources.
  5. The examples in the FAQs for increased cost of an office visit and patient billing seem to point to only supplemental coronavirus related reimbursement needing to be offset against the increased expense.
  6. PRF may be used for the full cost of equipment or facility projects if the purchase was directly related to preventing, preparing for and responding to the coronavirus; however, if you claim the full cost, you cannot also claim the depreciation for any items capitalized.
  7. PRF cannot be used to pay salaries at a rate in excess of Executive Level II which is currently set at $197,300.

Lost revenues attributable to the coronavirus

  1. Lost revenues attributable to coronavirus are calculated based upon a calendar year comparison of 2019 to 2020 actual revenue/net charges from patient care (prior to netting with expenses).
  2. Any unexpended PRF at 12/31/20 is then eligible for use through June 30, 2021 and calculated lost revenues in 2021 are compared to January to June 2019.
  3. Reported patient care revenue is net of uncollectible patient service revenue recognized as bad debts and includes 340B contract pharmacy revenue.
  4. This comparison is cumulative, for example, if your net income improves in Q4, it will reduce lost revenues from Q2.
  5. Retroactive cost report settlements or other payments received that are not related to care provided in 2019 or 2020 can be excluded from the calculation.

Whether you are tracking expenses or lost revenues, the accounting treatment for both is to be consistent with your normal basis of accounting (cash or accrual).
 
As a reminder, the first reporting period (through December 31, 2020) is due February 15, 2021. The reporting portal is supposed to open January 15, 2021. Any unexpended PRF at December 31, 2020 can be used from January 1, 2021 through June 30, 2021, with final reporting due July 31, 2021.

The guidance continues to change rapidly and new FAQs are issued each week. Please check back here for any updates, or contact Mary Dowes for more information.

Article
Provider relief funds: Allowable usesĀ