Updated Jan. 11, 2021
On Dec. 21, 2020, Congress passed the “Consolidated Appropriations Act, 2021” (H.R. 133). This legislation, expected to be signed into law shortly, contains fiscal year 2021 appropriations and a “Phase 4” COVID-19 relief package.
The legislation is nearly 6,000 pages, representing one of the largest measures ever passed by Congress. With that in mind, the following is a high-level summary of provisions that are of specific interest to the business aviation community. You are encouraged to carefully review the complete legislative text and work with qualified advisers to understand the impact of specific provisions to your business.
Air Carrier Payroll Support
The bill provides an additional $15 billion to fund the payroll support program for employees of passenger air carriers. As was the case under the CARES Act, 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.”
In addition, qualified contractors that perform services for Part 121 air carriers are eligible for an additional $1 billion in payroll support.
Details have yet to be released on the specific application process, but the program will be administered by the Department of the Treasury as was the case under the CARES Act. As specifics on the application process are released, NBAA will provide those details to members.
Also, numerous changes and additional requirements were added to the payroll support program under this legislation. The following is a summary of the changes:
- For air carriers not required to report wages under Part 241 (this generally includes FAR Part 135 operators), the following rules for awards apply:
- Carrier can receive an award equal to what it received under the CARES Act plus an additional 15-percent of that amount.
- Or, the carrier can request an amount equal to wages/salaries from April 1, 2019, to Sept. 30, 2019 that it would have been required to report had it been covered by Part 241.
- Plus, an additional amount equal to the difference between the above and what the carrier was awarded under the CARES Act.
- If a carrier did not receive an award under the CARES Act, it could request an amount equal to wages and salaries from Oct. 1, 2019, to March 31, 2020.
- If the air carrier received an award under the CARES Act, it must recall all employees that were involuntarily furloughed between Oct. 1, 2020, and the date the carrier enters into the new payroll support agreement.
- Returning employees must be compensated for lost pay/benefits between Dec. 1, 2020 and the date of the new payroll support agreement.
- If the air carrier did not receive an award under the CARES Act, the following rules apply:
- Recall all employees that were involuntarily furloughed between March 27, 2020, and the date of the payroll support agreement.
- Pay lost wages/benefits for returning employees between Dec. 1, 2020, and the date of the award.
- Air carriers must refrain from conducting involuntary furloughs through March 31, 2021.
- There are restrictions on stock buybacks and executive compensation as was the case under the CARES Act.
- The standards for taxpayer protection are similar to what they were under the CARES Act, and Treasury has broad discretion in this area.
Provisions for Small Businesses
The legislation makes numerous changes to the Paycheck Protection Program (PPP) and extends the program until March 31, 2021. An additional $284.45 billion is appropriated for PPP under the bill. Some of the key changes include:
- Additional expenses, including PPE for workers, are now eligible for PPP funds.
- There is a simplified application process for loans under $150,000 including the process for receiving loan forgiveness.
- Qualifying businesses are eligible for a “second draw” loan up to $2 million.
- The business must have fewer than 300 employees.
- It must have used/will use its first PPP loan.
- It must demonstrate at least a 25-percent reduction in gross receipts in the first, second, or third quarter of 2020 relative to the same 2019 quarter.
- In general, borrowers may receive a loan amount of up to 2.5 times the average monthly payroll costs in the one year prior to the loan or the calendar year.
- Second draw loans are eligible for forgiveness.
Business Tax Provisions
The legislation also makes significant tax changes, many of which do not specifically relate to COVID relief. The following issues are likely of specific interest to business aviation:
- Business expenses from a forgiven PPP loan are generally deductible for federal tax purposes. The provision is effective from the date of enactment of the CARES Act and applies to second-draw PPP loans.
- Employers that deferred payroll taxes under the President’s Aug. 8 memorandum have an extended repayment period through Dec. 31, 2021.
- An extension through June 30, 2021, and various expansions of the employee retention tax credit (ERTC) that provides employers a credit on qualified wages against their employment tax obligations:
- Increase in the credit rate from 50-percent to 70-percent of qualified wages and an increase in the limit on per-employee creditable wages from $10,000 per year to $10,000 per quarter.
- Expands eligibility for the by reducing the required year-over-year gross receipts decline from 50-percent to 20-percent
- Businesses with 500 or fewer employees can advance the credit at any point during the quarter based on wages paid in the same quarter in a previous year
- There is a 100-percent deduction for business meals that are paid or incurred in 2021 and 2022, currently, there is only a 50-percent deduction available.
- Airports will receive $2 billion in relief to continue operating and provide a safe environment for passengers.
- Of this amount, $45 million is for general and commercial service airports that are not primary airports.
Privacy Protections for Business Aviation
- The FAA must offer a program that allows private aircraft operators to block their Mode S transponder code and similar identifying information from real-time or near real-time public tracking.