Answers to MDS Coding and PPP
Monday, May 4, 2020
Posted by: Jo Formal
BKD has been receiving questions on the MDS Coding and the CMP Funds, and wanted to share additional information on these items. In addition, they are passing along additional information related to the deductibility of expenses under Paycheck Protection Program.
MDS Coding of Isolation in the Age of COVID-19
Coding isolation on the minimum data set (MDS) is new territory for many MDS coordinators. Up until now, isolation has been a rare occurrence in long-term care. While there have been no changes to the Resident Assessment Instrument (RAI) Manual instructions for coding isolation, many MDS nurses are wondering if current isolation due to the SARS-CoV-2 virus and incidence of COVID-19 meets MDS coding definitions. Check out the following article for four criteria that must be met for accurate MDS coding: https://www.bkd.com/article/2020/04/mds-coding-isolation-age-covid-19. If you have questions, please reach out to Amy Ray, Debbie Lake or your BKD advisor.
Nursing Facilities May Request CMP Funds Due to COVID-19 Expenses
CMS is allowing civil money penalty (CMP) funds to be used for purchasing devices such as tablets or web-cams as well as accessories, with a maximum of $3,000 allowed per facility to help with communications between residents and their families or friends. Check out the following article for additional information including a link to the State Contacts for Civil Money Penalty Reinvestment: https://www.bkd.com/alert-article/2020/04/nursing-facilities-may-request-cmp-funds-due-covid-19-expenses. For Indiana facilities, the following link will provide the application template: https://www.in.gov/isdh/files/ltcnews282020.pdf.
Paycheck Protection Program Loan Forgiveness Deductibility
On April 30th the IRS released Notice 2020-32, which provides guidance on the deductibility of expenses that are paid using PPP loan proceeds that are subsequently forgiven.
The CARES Act specifically states that any portion of a PPP loan that is forgiven is excluded from gross income. However, the statute was silent with respect to the deductibility of the underlying expenses paid with the PPP loan proceeds. Notice 2020-32 provides this guidance, indicating that no deduction is allowed for an expense that would otherwise be deductible, if the payment of the expense results in forgiveness of the loan under the Paycheck Protection Program.
In other words, to the extent you have all or a portion of your PPP loan forgiven, while the forgiven amount is excluded from taxable income, the underlying expenses that provided the loan forgiveness are not deductible for federal income tax purposes. As a reminder, the following would be the expenses considered in the loan forgiveness calculation and in turn would not be deductible to the extent all or a portion of the PPP loan is forgiven: (1) payroll costs, (2) any payment of interest on any covered mortgage obligation, (3) any payment on any covered rent obligation, and (4) any covered utility payment.
This guidance eliminates the double tax benefit that would have otherwise existed for a taxpayer claiming a deduction for expenditures paid with tax-free funds.
This information is being provided based on the best information we have as of May 1, 2020. If you have questions or we can be of assistance in this regard, please contact your BKD advisor.