Taxability and deductibility are now clearer for some transportation companies regarding pandemic Treasury grants, thanks to new guidance from the Internal Revenue Service.
The Coronavirus Economic Relief for Transportation Services Act of the Consolidated Appropriations Act of 2021 lets the Treasury provide grants to transportation service companies (including those running motor coaches, school buses and passenger vessels) that saw annual revenue losses of 25 percent or more as a result of the COVID-19 pandemic.
These companies should generally prioritize the use of the grants for payroll costs, though the funds can be used for certain operating expenses (including services and equipment needed to protect workers and customers from COVID-19) and the repayment of debt accrued to maintain payroll. Funds that aren’t used for eligible activities within a year of receipt of the grant must be returned to the Treasury.
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- Are the grants taxable? Yes, a CERTS Act grant is not excluded from the recipient’s gross income, and is taxable; and,
- Are costs for which the grants are used deductible? Yes, they are, to the extent that they are otherwise deductible. Wages, salaries and benefits to employees and other amounts paid to carry on a trade or business can generally be deducted as ordinary and necessary business expenses.
