The Coronavirus Aid, Relief, and Economic Security Act establishes mechanisms for relief that healthcare providers are anxious to access. This alert outlines those mechanisms.
Congress came together to pass the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), as its Phase III coronavirus (COVID-19) response and economic stimulus package, focused on providing relief to the healthcare industry and to healthcare providers. President Donald Trump signed the bill into law on March 27, 2020, setting into motion a virtual frenzy for accessing the monetary relief the law provides.
In addition to direct checks cut by the US Department of Treasury to individuals, the law establishes several mechanisms for relief that providers are anxious to access. The CARES Act follows the Families First Coronavirus Relief Act (FFCRA), directed at providing relief to employees, which created two new laws: the Emergency Paid Sick Leave Act and the Emergency Family and Medical Leave Expansion Act. Elements of both the FFCRA and the CARES Act could be useful for providers to access for its own employee base, in addition to some benefits that will accrue directly because of the laws.
In general, the CARES Act provides three funding mechanisms:
Providers should begin to take action now, while awaiting a myriad of further guidance on the many provisions highlighted below.
The CARES Act appropriates $100 billion for hospitals to cover expenses and loss revenue associated with the treatment of COVID-19. Eligible healthcare providers include public entities, Medicare/Medicaid enrolled suppliers and providers, and for-profit and nonprofit entities specified by the Secretary of the US Department of Health and Human Services (HHS) providing diagnosis, testing, or care for individuals with possible or actual cases of COVID-19.
We believe accessing the $100 billion fund will entail an application process administered through HHS, or a Medicare contractor. While we await further guidance, we advise that providers should immediately begin to document all expenses and lost revenue associated with the treatment of COVID-19. Documentation may include description of clinics closed, redeployed staff, or costs associated with creating space for surge capacity and new ICU beds. Additionally, it may include documentation of lost revenue associated with elective surgeries and outpatient services by pulling documentation from the same months during fiscal year 2019.
The Centers for Medicare & Medicaid Services (CMS) quickly published guidance regarding Section 3719 of the CARES Act concerning access to the Accelerated and Advance Payment Program. This provision allows facilities to request up to a six-month lump sum or periodic payment as an advance based on net reimbursement represented by unbilled discharges to unpaid bills. Forms have already become available and providers may begin to access these dollars today. With regard to receipt of the Medicare accelerated payments, providers can refer to the CMS Fact Sheet.
The CARES Act, Section 1102, creates a new $349 billion Paycheck Protection Program for the period between February 15, 2020, through June 30, 2020, that applies to businesses with less than 500 employees. Accordingly, the SBA is authorized to provide 100% federally guaranteed loans up to a maximum to cover expenses, such as payroll support, paid sick or medical leave, mortgage, rent, health benefits, insurance premiums, and utilities. The loans require no collateral or personal guarantees, interest rates are capped at no more than 4%, and there is no recourse by the lender against loan recipients for non-payment unless the recipient uses the loan proceeds for unauthorized purposes.
Section 2301 of the CARES Act provides employers access to a refundable tax credit against applicable employment taxes for 50% of qualified wages for each employee in each calendar quarter affected by the crisis (up to $10,000 per employee for all calendar quarters). Providers can take advantage of employee tax credit programs, as an alternative to the SBA Paycheck Protection Program, if their business exceeds the minimum to qualify.
To be eligible, employers must have carried on a trade or business in the 2020 calendar year and experienced in a quarter, either (1) a full or partial suspension of their business due to an order from an appropriate government authority limiting commerce, travel, or group meetings because of COVID-19; or (2) a significant decline in gross receipts as compared to gross receipts in the same quarter last year.
Section 2302 of the CARES Act defers payments of employer payroll taxes from the date of the act’s passage until January 1, 2021.
Among the numerous provisions directed at mitigating medical supply shortages, the CARES Act added a provision to the Public Health Services Act (Section 3103) that addresses liability protection during an emergency and adds to the definition of “covered countermeasures,” the production of personal protective equipment. This would apply to manufacturers and distributors during the public health crisis to further incentivize the production and distribution of face masks and respirators in short supply.
As noted, many of the changes applicable to providers occur via amendments to the Medicare statute as follows:
Section 2201 establishes a refundable tax credit for eligible employees, paid in cash, of $1,200 to individuals with adjusted gross income (AGI) of $75,000 or less ($112,500 or less for head of household filers) and $2,400 to married couples filing jointly with AGI of $150,000 or less. Individuals will also receive an additional $500 for each “qualifying child.”
The credit is gradually phased out for taxpayers with AGI over the $75,000/$112,500/$150,000 amounts, and eliminated for individuals with AGI of $98,000 and over, head of household filers with AGI of $136,500 and over, and married taxpayers with AGI of $198,000 and over. Nonresident alien individuals, anyone who is a dependent of another taxpayer, and estates and trusts, are not eligible for the credit. Eligible individuals and qualifying children must have a Social Security number to receive or be considered for payment purposes.
The CARES Act contemplates that the Internal Revenue Service (IRS) will principally administer the issuance of payments by looking to 2019 federal income tax returns to (1) calculate the payments based upon AGI, filing status, and number of dependents; and (2) identify the individual’s address and direct deposit information. If individuals have not filed their 2019 federal tax return, the IRS will utilize their 2018 tax return information, and in circumstances where an individual did not file a 2018 federal tax return, the IRS will utilize information from the Social Security Administration to determine eligibility.
No later than 15 days after the IRS distributes a payment (either electronically or by mail) it will mail a notice to the eligible individual stating the payment method and amount, and contact information for individuals to report any failures to receive the payment. In addition, the relevant governmental agencies shall conduct a public awareness campaign to provide information on payments to eligible individuals and to provide information to individuals who may not have filed a 2018 or 2019 tax return. The payments are not be subject to reduction or offset by any federal income tax or other liability the eligible taxpayer otherwise owes.
Federal student loan borrowers will not be required to make a payment through September 30, 2020 (Section 3513). During this time, no interest would accumulate on those federal loans (payment suspension applies only to loans held by the US Department of Education, not private loans). Regardless, loan borrowers should call their lender to verify eligibility.
The CARES Act extends unemployment insurance by 13 weeks and includes a four-month enhancement of benefits (Sections 2104, 2107). Unemployment compensation is available for those not eligible for regular unemployment insurance, including those who may have exhausted benefits.
Although related specifically to the FFCRA, it is important to mention that paid FMLA leave under FFCRA is capped at $200 per day and $10K in the aggregate. Paid sick leave under the FFCRA is capped at $511 per day and $5,110 in the aggregate; this drops to $200 per day and $2,000 in the aggregate for sick leave taken to care for a family member or because of a school closing.
All individual taxpayers, whether they itemize their deductions or not, can deduct up to $300 for cash contributions made in 2020 to organizations described in Internal Revenue Code Section 170(b)(1)(A) (Section 2204). While $300 is a relatively small amount, this provision is an important development for nonprofits because it represents a course correction from the Tax Cuts and Jobs Act (P.L. 115-97), which put the charitable contribution deduction out of reach for all but the top 10% of taxpayers. The new provision will help those nonprofits that traditionally have relied on contributions from lower- and middle-class donors for support, including many charities that provide direct services to the needy, houses of worship, and religious organizations. The provision excludes gifts to private non-operating foundations, supporting organizations, and gifts to establish new or maintain existing donor-advised funds.
For our clients, we have formed a multidisciplinary Coronavirus COVID-19 Task Force to help guide you through the broad scope of legal issues brought on by this public health challenge. We also have launched a resource page to help keep you on top of developments as they unfold. If you would like to receive a daily digest of all new updates to the page, please subscribe now to receive our COVID-19 alerts.
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