Cost reports pertaining to providers' fiscal years ending in calendar year 1995 or 1996 will be governed by the information in this section. Cost reports pertaining to providers' fiscal years ending in calendar year 1997 and subsequent years will be governed by the information in §355.401 of this title (relating to Allowable and Unallowable Costs: 1997 and Subsequent Cost Reports). The following list of unallowable costs is not comprehensive, but rather serves as a general guide and clarifies certain key expense areas. The absence of a particular cost does not necessarily mean that it is an allowable cost. Except where specific exceptions are noted, the allowability of all costs is subject to the general principles specified in §355.303(a) and (b) of this title (relating to Allowable and Unallowable Costs: 1995 and 1996 Cost Reports):

1. (1) compensation in the form of salaries, benefits, or any form of perquisite provided to owners, partners, officers, directors, stockholders, employees, or others who do not provide recipient-care-related services directly to the recipient or staff of individual nursing facilities (NFs);
2. (2) personal expenses not directly related to the provision of long-term recipient care in an NF;
3. (3) forms of compensation that are not clearly enumerated as to dollar amount or which represent profit distributions;
4. (4) management fees paid to a related organization that are not clearly derived from the actual cost of materials, supplies, or services provided directly to an individual NF;
5. (5) advertising expenses other than those for yellow pages advertising, advertisements for employee recruitment, and advertising to meet any statutory or regulatory requirements;
6. (6) business expenses not directly related to the care of recipient in a long-term care facility. This includes business investment activities, stockholder and public relations activities, and farm and ranch operations;
7. (7) political contributions;
8. (8) depreciation and amortization of unallowable costs. This includes amounts in excess of those resulting from the straight-line method, capitalized lease expenses in excess of actual lease payments, and goodwill or any excess above the actual value of physical assets at the time of purchase;
9. (9) trade discounts of all types;
10. (10) donated facilities, materials, supplies, and services;
11. (11) dues to all types of political and social organizations, and to professional associations not directly and primarily concerned with long-term recipient care;
12. (12) entertainment expenses except those incurred for entertainment provided to the staff of an NF as an employee benefit;
13. (13) expenses for medical services not provided to Medicaid recipients;
14. (14) expenses incurred for services provided in an NF but not related to long-term recipient care. This includes meals not provided to recipients or to NF employees as a part of an employment contract, nonmedical rentals, barber and beauty shop operations, canteens and gift shops, and vending machines;
15. (15) boards of directors fees;
16. (16) fines and penalties for violations of regulations, statutes, and ordinances of all types;
17. (17) fund-raising and promotional expenses;
18. (18) tuition costs for nurse aide training required for certification, including course fees and associated materials and supplies;
19. (19) interest expenses on loans pertaining to unallowable items and on that portion of interest paid which is reduced or offset by interest income;
20. (20) insurance premiums pertaining to items of unallowable cost;
21. (21) accrued expenses that are not legal obligations of the provider entity or are not clearly enumerated as to dollar amount. This includes any form of profit-sharing and the accrued liabilities of deferred compensation plans;
22. (22) planning and evaluation expenses for the purchase of depreciable assets, except where purchases are actually made and the assets are put into service in the provision of long-term care;
23. (23) motor vehicles that are not generally suited or are not commonly used to transport recipients or facility supplies. This includes motor homes and recreational vehicles; sports and luxury automobiles; motorcycles; and heavy trucks, tractors, and equipment used in farming, ranching, and construction; and other activities unrelated to the provision of long-term care;
24. (24) values assigned to the services of unpaid workers and volunteers;
25. (25) returns, allowances, and refunds;
26. (26) costs of purchases from a related party which exceed the original cost to the related party;
27. (27) out-of-state travel expenses, except for provision of recipient-care-related services to NF personnel. This includes training and quality assurance functions;
28. (28) legal and other costs associated with litigation between a provider and state or federal agencies, unless the litigation is decided in the provider's favor;
29. (29) contributions to self-insurance funds which do not represent payments based on current liabilities;
30. (30) any expense incurred because of imprudent business practices;
31. (31) expenses which cannot be adequately documented;
32. (32) any expense not allowable under other pertinent federal, state, or local laws and regulations;
33. (33) federal, state, and local income taxes, and all expenses related to preparing and filing income tax forms;
34. (34) any expenses related to the direct delivery of specialized services and treatment required by preadmission screening and annual resident review (PASARR) for residents, since these costs are reimbursed through the Texas Department of Mental Health and Mental Retardation;
35. (35) any expense, and corresponding revenues, that are reimbursed directly through Medicaid voucher payment systems which are outside of the per diem rate payment system.

Source Note:The provisions of this §355.305 adopted to be effective October 1, 1990, 15 TexReg 5220; amended to be effective May 15, 1991, 16 TexReg 2009; amended to be effective October 1, 1991, 16 TexReg 4493; amended to be effective January 1, 1992, 16 TexReg 7361; amended to be effective September 1, 1996, 21 TexReg 7861; transferred effective September 1, 1997, as published in the Texas Register October 17, 1997, 22 TexReg 10311.