Updated May 11, 2020
The U.S. House and Senate have passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which was signed into law on March 27. This legislation provides more than $2 trillion of relief to the economy as we respond to the COVID-19 pandemic.
For NBAA members and the general aviation community, the CARES Act offers significant opportunities for relief; however, specific details on applying for many the programs are still under development. In the coming days and weeks, the Federal Reserve, Department of the Treasury, Small Business Administration, and others will begin issuing guidance for how businesses can apply for relief.
The information below is intended to provide a high-level summary of provisions in the CARES Act that could be of most interest to NBAA members. As the government provides additional details on how to apply for specific grants and loans, NBAA will work to make those details available. Also, due to the specific nature of your business, there could be additional relief programs or tax policy changes that are applicable, but not explicitly discussed below.
Business Tax Provisions
- Eligible employers who have had their operations suspended or have suffered more than a 50-percent decline in business due to the COVID-19 pandemic can be eligible for a 50-percent credit on qualified wages against their employment tax obligations. The refundable tax credit is 50% of up to $10,000 in wages paid by an eligible employer whose business has been financially impacted by COVID-19. Learn more about the Employee Retention Credit.
- Eligible employers and self-employed individuals will be able to defer payments of the employer share (6.2% of employee wages) of Social Security payroll taxes that would have otherwise been owed from the date of enactment of the legislation through Dec. 31, 2020; deferred taxes must be paid over a two-year period. Learn more about the tax deferral.
- Employers considering additional federal loan programs should use caution, as the payroll tax credit and suspension can limit your ability to access other programs.
- The interest deduction limitation for taxpayers is increased from 30-percent to 50-percent of adjusted taxable income.
- The CARES Act also includes other business tax provisions, including changes to Net Operating Loss Limitations, review NBAA’s article on these changes.
Economic Stabilization Fund
- There is a $500 billion fund, administered by the Treasury Department and Federal Reserve, to provide direct loans, loan guarantees and other investments to eligible businesses who have incurred or are expected to incur losses as a result of the COVID-19 crisis such that the operations of the business are in jeopardy.
- Within this fund, $25 billion is set aside for passenger air carriers and FAR Part 145 repair stations. The definition of “air carrier” used in the legislation is “a citizen of the United States undertaking by any means, directly or indirectly, to provide air transportation.”
- Loans are to be as short as possible, not to exceed 5-years.
- Businesses that receive the loans must make their best efforts to maintain employment levels as of March 25, and not reduce employment levels by more than 10-percent.
- There are also limits on stock buybacks and executive compensation under the loan program for air carriers.
- There is an additional $25 billion grant program for passenger air carriers and $4 billion for air cargo carriers to cover salary payments to employees.
- This would cover salary amounts the air carrier paid from April 1, 2019-Sept. 30, 2019.
- Air carriers receiving the grants would be required to enter into agreements not to reduce their services.
- Out of the $500 billion, $454 billion is dedicated to supporting the Federal Reserve’s lending facilities to eligible businesses, states and municipalities.
- Under the Federal Reserve Act, the Treasury must provide a portion of emergency funds lent by the central bank as credit protection against potential losses. The Fed can then leverage the Treasury’s $454 billion to provide up to $4 trillion or more in emergency funding to companies, states, and cities.
- The definition of “eligible business” is broad, and includes any business not otherwise receiving relief under the CARES Act.
- The Federal Reserve has established a “Main Street Lending Program” for small and medium-sized businesses, learn more about the program.
- The Treasury Department is instructed to create a lending facility for businesses with 500-1,000 employees.
- Loans made under the program are subject to an interest rate of no more than 2-percent.
- No payments would be due for the first 6-months.
- Businesses would need to make certifications regarding workforce retention, pay, and benefits and agree to not offshore jobs for the term of the loan plus 2-years.
Small Business Loan Programs
- In the bill, a small business is generally defined as a company (or non-profit) with not more than 500 employees or the applicable size standard for the industry as defined by the Small Business Administration (SBA), if that is higher.
- $350 billion is provided to small businesses for the “paycheck protection program,” which provides small businesses with zero-fee loans of up to $10 million.
- Up to 8 weeks of average payroll and other costs will be forgiven if the business retains its employees and their salary levels.
- Principal and interest is deferred for up to a year, and all borrower fees are waived.
- This program can be used with other COVID-financing assistance established in the CARES Act or any other existing SBA loan program.
- $10 billion is provided for an advance up to $10,000 to small businesses that apply for an SBA economic injury disaster loan within three days of applying for the loan.
- These loans are up to $2 million, with an interest rate of up to 3.75% and deferment of principal/interest available.
- The loans may be used to pay for expenses that could have been met had the disaster not occurred, including payroll and other operating expenses.
- $17 billion is provided to cover all loan payments for existing SBA borrowers, including principal, interest, and fees, for six months.
- This relief is also available to new borrowers that take out an SBA loan within six months after the President signs the bill.
Air Transportation Excise Tax Suspension
- Beginning on the date of the enactment of the CARES Act (March 27, 2020) through Jan. 1, 2021, the 7.5% tax on amounts paid for commercial air transportation is suspended.
- All applicable domestic and international segment fees are also subject to the suspension.
- In addition, the 6.25-percent tax on air transportation of property is suspended from the date of enactment through Jan. 1, 2021.
- The excise tax on kerosene used in commercial aviation (generally 4.3 cents/gallon) is also suspended from the date of enactment through Jan. 1, 2021.
- This suspension does not include the 0.1 cent/gallon Leaking Underground Storage Tank Trust Fund tax.
Assistance to Airports
- There are $10 billion in funds to be awarded as economic relief to eligible U.S. airports affected by the prevention of, preparation for, and response to the COVID-19 pandemic. These funds are derived from the U.S. Treasury’s General Fund and may be expended for any purpose for which airport revenues may be lawfully used. The goal is to make these funds available as quickly as possible and the FAA plans to begin distributing them in April.
- $100 million in funds is reserved especially for general aviation airports.
- The federal share for Airport Improvement Program (AIP) and supplemental discretionary grants already planned for fiscal year 2020 increased to 100 percent. Under normal circumstances, AIP grant recipients contribute a matching percentage of the project costs. This valuable provision will allow critical safety and capacity projects to continue as planned regardless of airport sponsors’ current financial circumstances.
- CARES Airport Program Funding Distribution:
- Primary commercial service airports, with more than 10,000 annual passenger boardings, will receive additional funds based on the number of annual boardings, in a similar way to how they currently receive AIP entitlement funds.
- All commercial service airports will receive funds based on the number of passengers that board aircraft there, the amount of debt an airport has, and the amount of money the airport has in reserve.
- General aviation airports will receive funds based on their airport categories, such as National, Regional, Local, Basic and Unclassified. Learn more about airport categories.