Impact on HHS Provider Relief Funds, PPP Loans & Employee Retention Credits
The Consolidated Appropriations Act (CAA) was signed into law on Dec. 27, 2020. From the more than 5,000-page legislation, three key provisions were discussed at the Nashville Medical Group Management Association February meeting.
HHS Provider Relief Fund Reporting
Reporting the use of Provider Relief Funds (PRF) has been a confusing process for recipients. Since the initial funding in April 2020, there have been numerous changes in who reports, how to report and what to report.
Reporting guidelines issued by HHS on Jan. 15, 2021, confirm that any provider who received $10,000 or more in PRF must report the use of funds on the Health and Human Services (HHS) PRF Portal. The deadline to report was Feb. 15, 2021, but due to the reporting changes in CAA, the deadline has been indefinitely extended.
The reporting for PRF consists of two components:
- Calculation of 2020 unreimbursed expenses directly related to a COVID response, and
- Calculation of lost revenue for the calendar year 2020.
The calculation for lost revenue has gone through four iterations with HHS. In CAA, the calculation was defined in the legislation and consists of three different methodologies that recipients can use.
- Comparison of 2020 net patient revenue to 2019 net patient revenue
- Report by calendar quarter, by payer
- Comparison of 2020 net patient revenue to budget revenue for 2020
- Budget must have been approved by March 27, 2020
- Report by calendar quarter, by payer
- The CEO of the reporting entity must attest that the budget was approved by March 27,2020
- Any reasonable method
Option 3 is not recommended. If HHS decides that Option 3 is not reasonable, the entity will have 30 days to refile using Option 1 or 2.
CAA included positive provisions and clarifications for the first round of PPP Loans (PPP1). Regarding forgiveness, the legislation provided for simplified reporting for loans under $150,000.
In CAA, Congress also clarified that a forgiven PPP loan is completely tax-exempt and will not create taxable income. Additionally, the Economic Injury Disaster Grant (EIDL), also provided by the Small Business Administration (SBA), will not reduce forgiveness for the PPP loan and, likewise, is not taxable.
An additional $284 billion in funding is included in CAA for a second round of PPP loans (PPP2). Applications for PPP2 will be accepted through March 31, 2021.
To be eligible for PPP2, employers cannot have over 300 employees. Eligible applicants must have experienced a reduction of 25 percent or greater in gross receipts for one calendar quarter in 2020 compared to the same period in 2019. Gross receipts include all revenue in whatever form received or accrued based on the borrower's method of accounting. Since they are not taxable, PPP1 loan proceeds are not included in gross receipts.
Employee Retention Credit
Prior to CAA, if an entity received a PPP loan, they were not eligible to claim the Employee Retention Credit (ERC). CAA provided that all businesses (including non-profits) are eligible for the ERC even if they received a PPP loan, and eligibility is retroactive for 2020.
Wages that qualify for the ERC include wages paid in a quarter in which:
- Operations were fully or partially suspended due to a government order related to COVID, OR
- The business had a 50 percent or greater decline in revenue during a calendar quarter compared to 2019.
In Tennessee, Gov. Bill Lee issued Executive Order 18 to reduce the spread of COVID-19. The order effectively suspended non-emergency/elective medical procedures from March 24, 2020 to April 30, 2020 and non-essential dental services from March 24, 2020 to May 6, 2020. The EO created a partial suspension for healthcare entities providing these services.
The 2020 ERC calculation for employers with less than 100 employees (based on 2019 count) includes all wages (including owner wages) paid during the suspension period. Eligible wages include healthcare benefits. The maximum credit is equal to 50 percent of eligible wages not to exceed $10,000 per employee (maximum credit of $5,000 per employee).
For the 2020 credit, employers with over 100 employees (large employers) may only include as eligible wages amounts paid to employees (and owners) who were not performing services while the government order was in place.
The ERC was also extended through June 30, 2021. In 2021, the credit is equal to 70 percent of eligible wages and the decline in revenue to qualify is 20 percent (quarterly 2021 gross receipts compared to a comparable period in 2019). The definition of large employer was increased to entities with over 500 employees.
Lucy Carter, CPA, is a member and practice leader for the Healthcare Industry Team at KraftCPAs, PLLC. A well-known industry expert, Carter has more than 35 years of experience working with healthcare providers and executives. For more information, go online to KraftCPAs.com