IRS Says Provider Relief Fund Payments Are Taxable

Between the CARES Act and the PPP Health Care Enhancement Act, which both passed earlier this year, $175 billion was allocated to the Provider Relief Fund. This funding was used to reimburse providers, including pharmacies, for lost revenue or expenses as a result of the COVID-19 pandemic. Many pharmacies either received funds in their bank accounts and/or applied for funding.  

Upon receiving the funds, a pharmacy had to attest to the receipt of the funds and abide by the terms and conditions. These funds do not have to be repaid, however, the IRS states that payments from the Provider Relief Fund do not qualify as qualified disaster relief payments under Code Section 139 and are therefore includible in gross income under Code Section 61 and subject to tax.  

Many pharmacies received significant funds from this program, so careful tax planning will be of utmost importance in 2020. If you have any questions on the Provider Relief Fund, tax planning for 2020 or any topics impacting your pharmacy, please schedule a call with us.

For additional information, see our video about Provider Relief Fund uses and accounting.