The IRS has provided answers to questions that certain transportation companies may have regarding Treasury grants and related taxes, https://www.irs.gov/newsroom/coronavirus-economic-relief-for-transportation-services-certs-frequently-asked-questions. These companies must largely prioritize the use of the grants for payroll costs, though grants may be used for operating expenses, including the acquisition of services and any equipment needed to protect workers and customers from COVID-19. In addition, the funds may also be used for the repayment of debt accrued to maintain payroll. The IRS reminded the companies that funds not used for eligible activities within one year of receipt of the grant, must be returned to the Treasury.
The Service reminded the companies that the Coronavirus Economic Relief for Transportation Services (CERTS) Act ( P.L. 117-24) authorizes the Treasury to provide grants to transportation service providers that experienced annual revenue losses of 25 percent or more as a result of COVID-19. Under which, the IRS posted answers to two questions:
- are the grants taxable? Yes, the receipt of a CERTS Act grant is not excluded from the recipient’s gross income under the Code and therefore is taxable; and
- are costs for which the grants are used deductible? Yes, the costs are deductible to the extent that they are otherwise deductible under the law. 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.