In an email circulated to providers last week, CMS reminded providers to comply with reasonable cost rules in determining allowable healthcare-related taxes, or provider taxes. Payments to a provider that are “associated with” an otherwise allowable provider tax must be netted against the provider tax reported on the provider’s cost report.

According to CMS, only the provider’s net tax expense is an allowable cost—i.e., “taxes deemed reasonable, that have been actually incurred and paid by a provider, reduced by payments the provider received that are associated with the tax.” Providers must maintain documentation and financial records to support the net tax expense incurred. Failure to do so could result in disallowance of the entire claimed provider tax amount.