Kan. Admin. Regs. § 30-10-223 - ICF-MR interest expense
(a) Only necessary
and proper interest on working capital indebtedness shall be an allowable cost.
(b) The interest expense shall be
incurred on indebtedness established with:
(1) Lenders or lending organizations not
related to the borrower; or
(2)
partners, stockholders, home office organizations, or related parties, if the
following conditions are met:
(A) The terms
and conditions of payment of the loans shall resemble terms and conditions of
an arms-length transaction by a prudent borrower with a recognized, local
lending institution with the capability of entering into a transaction of the
required magnitude.
(B) The
provider shall demonstrate, to the satisfaction of the agency, a primary
business purpose for the loan other than increasing the per diem rate.
(C) The transaction shall be
recognized and reported by all parties for federal income tax purposes.
(c) When the
general fund of an ICF-MR "borrows" from a donor-restricted fund, this interest
expense shall be an allowable cost if it is considered by the agency to be
reasonable. In addition, if an ICF-MR operated by members of a religious order
borrows from the order, interest paid to the order shall be an allowable cost.
(d) The interest expense shall be
reduced by the investment income from restricted or unrestricted idle funds or
funded reserve accounts, except when that income is from gifts and grants,
whether restricted or unrestricted, which are held in a separate account and
not commingled with other funds. Income from the provider's qualified pension
fund shall not be used to reduce interest expense.
(e) Interest earned on restricted or
unrestricted reserve accounts of industrial revenue bonds of sinking fund
accounts shall be offset against interest expense and limited to the interest
expense on the related debt.
(f)
Loans made to finance that portion of the cost of acquisition of a facility
that exceeds historical cost or the cost basis recognized for program purposes
shall not be considered to be reasonably related to client care.
Notes
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