N.H. Code Admin. R. He-E 806.13

Current through Register No. 25, June 20, 2024

Section He-E 806.13 - Leased Facility and Equipment

Leasing arrangements for property shall be an allowable cost pursuant to the following conditions:

(a) Rent expense on facilities and equipment leased from a related organization shall be limited by substituting the lower of the following:

(1) The actual interest, depreciation, and taxes incurred for the year under review; or

(2) The price of comparable services or facilities purchased elsewhere;

(b) The existence of the following conditions shall establish that a lease is a virtual purchase:

(1) The rental charge exceeds rental charges of comparable equipment in the area;

(2) The term of the lease is less than the useful life of the equipment;

(3) The NF provider has the option to renew the lease at a reduced rental; and

(4) The NF provider has the right to purchase the equipment at a price which appears to be less than what the fair market value of the equipment would be at the time acquisition by the provider is permitted;

(c) When a lease is a virtual purchase, as described in (b) above, allowable costs shall be subject to the following limitations:

(1) The rental charge shall be allowable only to the extent that it does not exceed the amount which would have been an allowable cost had the asset been purchased;

(2) The difference between the amount of rent paid and the amount of rent allowed as rental expense shall be considered as a deferred charge and capitalized as part of the historical costs of the asset when the asset is purchased;

(3) If the asset is returned to the owner, instead of purchased, the deferred charge shall be recorded as an expense in the year the asset is returned; and

(4) If the asset continues to be rented after the due date for the purchase, and rental has been reduced, the deferred charge shall be recorded as an expense to the extent of increasing the reduced rental to a fair market rental value; and

(d) Sale and leaseback agreements for property shall be allowable costs subject to the following conditions:

(1) Rental costs specified in sale and leaseback agreements, incurred by NF's through selling equipment, but not real property, to a purchaser not connected with or related to the NF provider and concurrently leasing back the same equipment shall be an allowable cost if the rental charges are as specified in 42 CFR 413.134(h) ; and

(2) Rental charges in sale and leaseback agreements shall be allowable only to the extent that they do not exceed the amount which would have been an allowable cost had ownership of the asset been retained.

N.H. Code Admin. R. He-E 806.13

#8547, eff 1-24-06 (formerly He-W 593.11 )