IRS says these COVID-19 relief funds are taxable

If you receive money from the COVID-19 Provider Relief Fund, it will probably be taxed.

The Internal Revenue Service (IRS) has confirmed that Provider Relief Fund payments made available through the federal Coronavirus Aid, Relief, and Economic Security Act (CARES Act) cannot be excluded from taxation under a disaster relief exemption. Therefore, the payments do constitute gross taxable income, unless otherwise carved out under an existing exclusion, such as if the provider is a 501(c) nonprofit.

The IRS guidance came in response to a question about whether a health care provider that receives a Provider Relief Fund payment may exclude it from gross income as a qualified disaster relief payment under section 139 of the Internal Revenue Code. The IRS responded “No,” and said a payment to a business does not fit the definition of a qualified disaster relief payment under section 139, even if the business is a sole proprietorship. The relief fund payment is therefore included in gross income under section 61 of the code.

This guidance is now reflected in the updated Provider Relief Fund frequently asked questions page on the U.S. Department of Health and Human Services website.

— Kent Moore, Senior Strategist for Physician Payment at the American Academy of Family Physicians