In enacting the Coronavirus Aid, Relief, and Economic Security Act, Congress did not address the taxation of the provider relief funds.
However, the IRS updated its frequently asked questions page July 6 to emphasize that for-profit providers are not exempt from paying taxes on the relief payments.
The IRS said that the relief payments are not excludable from gross income under the qualified disaster relief provisions of U.S. Code 139 because a payment to a business, including a sole proprietorship, “does not qualify as a qualified disaster relief payment under section 139.”
Tax-exempt healthcare providers are not subject to tax on relief payments, the IRS said. However, the relief payment may be taxable under section 511 if the payment reimburses the tax-exempt provider for expenses or lost revenue attributable to an unrelated trade.
Find the FAQ page here.
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