Читать книгу The Law of Tax-Exempt Healthcare Organizations - Bruce Hopkins R., Bruce R. Hopkins, David Middlebrook - Страница 29

Among the most noteworthy features of the CARES Act was the establishment of a series of economic recovery loans. The Small Business Administration (SBA) received funding and authority through the Act to modify existing loan programs and to establish new loan programs to assist small businesses that were adversely impacted by the COVID‐19 pandemic. This included the provision of up to $500 billion for a Main Street Lending Program to provide financial assistance to eligible businesses, states, and municipalities. The Act also expanded the Economic Injury Disaster Loan (EIDL) program, administered by the SBA, which enables low‐interest loans that are available to most nonprofit, tax‐exempt organizations. Under the program, an unsecured EIDL loan can be obtained for up to $25,000, while a secured EIDL loan may be obtained for up to $2 million.

However, the loan program that received the most public attention was a $350 billion small business loan program administered by the SBA intended to enable employers to keep their workforce employed during the COVID‐19 crisis during the early days of the pandemic (from February 15 through August 8, 2020). Under a new Paycheck Protection Program (PPP), the CARES Act temporarily permitted the SBA to guarantee 100 percent of certain loans. The loans were low interest at a 1 percent fixed rate annually, repayable over a two‐year period. The PPP also provides for forgiveness of up to the full principal amount of qualifying loans. In May 2020, Congress provided an additional $320 billion in funding for PPP loans.

Under the PPP, businesses with no more than 500 employees were eligible to receive loans of up to $10 million. Similar small business loans were available from the SBA prior to the CARES Act, but nonprofit organizations were not eligible for them. The loan amounts are fully forgivable provided that the loan proceeds are used to cover payroll costs, mortgage interest, rent, and utility costs over an eight‐week period after the loan is made and employee and compensation levels are maintained.

In most cases, hospitals are among the largest employers in their communities and would not be eligible for such loans. However, smaller rural hospitals (particularly critical access hospitals), as well as development foundations that support them, and healthcare associations commonly have fewer than 500 employees and many took advantage of this opportunity.

Highly unusual was the implementation of this massive program in an extremely short period of time, as well as the informality of the guidance process used to implement the program. The initial tranche of $350 billion was made available within a week's time with virtually no guidance and minimal paperwork. Rather than roll out the program with a notice of proposed rulemaking or a detailed procedural notice, the initial and primary guidance was provided in the form of a frequently asked questions (FAQ) sheet posted on the SBA and Treasury websites. This was perhaps necessary in order to be able to roll out the stimulus program as quickly as possible, given the economic distress caused by the COVID pandemic and the resulting lockdowns of businesses. However, the guidance provided under the FAQs shifted substantially during the period of the program and different interpretations of qualification for the loans applied, depending on when the loans were applied for and the issuance date of the relevant FAQ. As a court recently concluded in a non‐PPP case where the IRS also used FAQs for primary guidance, such attempts at rulemaking are not what was contemplated by the Administrative Procedure Act and are vulnerable to findings that they were arbitrary and capricious.⁵⁸

One FAQ addressed an issue that often arises for nonprofit hospitals in other tax exemption contexts: whether nonprofit hospitals exempt from taxation under section 115 of the Internal Revenue Code (as instrumentalities of government) qualify as “nonprofit organizations” under section 1102 of the CARES Act.⁵⁹ The SBA answered that section 1102 of the CARES Act defines the term nonprofit organization as “an organization that is described in section 501(c)(3) of the Internal Revenue Code of 1986 and that is exempt from taxation under section 501(a) of such Code.” The answer notes, however, that the SBA understands that “nonprofit hospitals exempt from taxation under section 115 of the Internal Revenue Code are unique in that many such hospitals may meet the description set forth in section 501(c)(3) of the Internal Revenue Code to qualify for tax exemption under section 501(a), but have not sought to be recognized by the IRS as such because they are otherwise fully tax‐exempt under a different provision of the Internal Revenue Code.” While this is true, many such hospitals also obtained recognition of exemption under section 501(c)(3) as “dual status” hospitals.⁶⁰ The SBA determined that it will treat a nonprofit hospital exempt from taxation as an instrumentality of government as meeting the definition of “nonprofit organization” under section 1102 of the CARES Act “if the hospital reasonably determines, in a written record maintained by the hospital, that it is an organization described in section 501(c)(3) of the Internal Revenue Code and is therefore within a category of organization that is exempt from taxation under section 501(a).” The guidance does not identify what qualifies as such a written record or explain how or why a public hospital that had not sought dual status would maintain such a record. Its rationale for effectively according dual status treatment to non‐dual status hospitals was that it helped accomplish the statutory purpose of ensuring that borrowers “including entities that are helping to lead the medical response to the ongoing pandemic, can benefit from the loans provided under the PPP.”

Having reached this conclusion, however (perhaps because it had consulted with the Secretary of the Treasury, as noted in the FAQ), the SBA then tries to navigate the consequences of such treatment for charitable hospitals that are obligated to satisfy certain standards for addressing community health needs, financial assistance policies, and billing and collection practices.⁶¹ It concludes that “for purposes of the PPP, the requirements of section 501(r) do not apply to the determination of whether an organization is “described in section 501(c)(3).”⁶² And perhaps to further ensure that its unique characterization does not spread further (and to keep the IRS happy), the SBA concludes that the guidance under this FAQ “is solely for purposes of qualification as a ‘nonprofit organization’ under section 1102 of the CARES Act and related purposes of the CARES Act, and does not have any consequences for federal tax law purposes.”⁶³

Subsequently, on December 27, 2020, the President signed into law the Consolidated Appropriations Act, 2021 (“CAA”), which included an additional $900 billion in stimulus relief to address the continuing economic effects of the COVID‐19 pandemic.⁶⁴ The Act included the Coronavirus Response and Relief Supplemental Appropriations Act, 2021 (Division M of the CAA), along with additional COVID‐19 relief provisions (Division N of the CAA). The COVID‐19 relief provisions included additional Paycheck Protection Program funding and the opportunity for second‐draw loans; additional stimulus checks for individuals of $600; extended increased federal unemployment benefits; and funding for vaccines, testing, and healthcare providers.