A $2 billion federal program aimed at helping eligible transportation companies maintain payroll, hire back employees laid off during the pandemic, and cover applicable overhead and operational expenses has many business owners wondering whether the grants are taxable income.
The answer from the IRS this week is yes.
The Coronavirus Economic Relief for Transportation Services (CERTS) grant program, which was part of the $900 billion emergency COVID-19 relief bill signed into law in December, is meant to help school bus, motorcoach, passenger vessel, and pilot vessel companies that sustained a 25% or more revenue loss due to COVID-19. The CERTS online portal is now open and accepting applications through July 19.
In 2020 when the pandemic closed schools for in-person learning, and field trips, tours and college sports seasons were cancelled, school bus and motorcoach companies – many of them small and family-owned businesses – were financially devastated. Passenger vessels that depend on customers for ferries and recreational tours were also deeply impacted.
The CERTS grants can be used for operating expenses and for any debt created to help maintain payroll for employees, as well as any costs for personal protective equipment and other pandemic protection measures. Businesses do not request specific grant amounts under the program, according to the U.S. Treasury Department, which will use its own formula to calculate how much each applicant gets.
In response to questions from the transportation businesses, the IRS on Tuesday posted guidance on its website clarifying that a CERTS grant cannot be excluded from the recipient’s gross income and is, therefore, taxable.
The IRS also addressed the deductibility of expenses paid for with CERTS grant monies.
“Yes, the costs are deductible to the extent that they are otherwise deductible under the law,” the IRS said. “The tax law generally permits the payment of wages, salaries, and benefits to employees and other amounts paid to carry on a trade or business to be deducted as ordinary and necessary business expenses.”
Go here for more information about the CERTS grant program and to submit an online application.
The FAQ on CERTS grants on the IRS website can be found here.