In 2020, the impact of the COVID-19 pandemic was felt worldwide. Here, in the U.S., many businesses and industries suffered immeasurable loss and are still looking for ways to recover. With mandatory quarantines, stay-at-home orders, school shutdowns and curfews in effect nationwide, the transportation industry suffered immensely.
Opportunities to provide passenger transportation services were limited to essential workers and many transportation service providers lost 80% or more of their revenue between 2019 and 2020. While the federal government jumped in to assist other industries with COVID-19 relief packages, the transportation industry was left waiting.
In the meantime, transportation service providers were limited to the Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL) which had restrictive guidelines that limited the use of funds.
Finally, on Dec. 21, 2020, Congress passed the Bipartisan-Bicameral Omnibus COVID Relief Deal, a new COVID-19 relief bill that included the transportation industry under the Coronavirus Economic Relief for Transportation Services (CERTS) Act.
Now, with shutdowns ending, COVID-19 vaccines available, and quarantine orders lifted, businesses and people are looking forward to returning to normal — whatever that may be.
After being especially hit hard by the pandemic shutdowns, corporate transportation companies providing services with motorcoaches and school bus operators received some good news. On May 6, the U.S. Department of Treasury (Treasury) finally issued guidelines for the CERTS Act program, including eligibility, application requirements, and grant funding information. On June 17, the Treasury updated the guidelines for the CERTS Act program and opened the portal for applications on June 21.
Under the CERTS Act program, the Treasury will provide up to $2 billion in grants to motorcoach companies, school bus companies, passenger vessel companies, and pilotage companies.
Now that the guidelines have been released, transportation service providers have more information about what to expect from the CERTS Act program. The application process for the grants will be submitted to the Treasury via an online portal.
The online portal opened on June 19 and applicants will have only four weeks to submit their grant applications — the deadline is July 19. Applications will be reviewed and approved in the order submitted. In other words, the sooner companies submit their applications, the better.
The CERTS Act program does not allow applicants to request specific grant award amounts. Instead, the grant award will be based on the total applicant pool. The great news is that CERTS Act grants are non-competitive, which means all eligible companies that apply by the deadline and are approved by Treasury will receive a grant award.
This is a big deal for transportation service providers, as this is funding that companies will not have to pay back in the future. The goal of the CERTS Act program is to make transportation service providers whole again after the unexpected and difficult circumstances faced in 2020 due to the pandemic.
Based on the final language in the guidelines, the CERTS program is for motorcoach, school bus, passenger vessel, and pilotage vessel transportation service providers who were in business on March 1, 2020. Eligible transportation service providers must have experienced a revenue loss of 25% or more between calendar year 2019 and 2020 as a direct or indirect result of COVID-19.
The eligible transportation service provider will have either:
• 500 or fewer employees (full-time, part-time, or temporary), and not be the affiliate, subsidiary, or parent to any other entity with more than 500 employees.
• 500 or more employees (full-time, part-time, or temporary), and not received a loan under the Airlines Loan Program or the National Security Loan Program under the CARES Act.
The CERTS Act grants are intended to restore companies, to the extent possible, to the revenue earned in 2019. The Treasury will review and consider any COVID-19 federal assistance the company has received and subtract that amount from the overall revenue loss in 2020.
A company is ineligible if the COVID-19 federal assistance already received exceeds or equals the total amount of revenue earned in calendar year 2019. This includes assistance provided under the CARES Act, PPP or any other COVID-19 relief program funds. Participation in these federal assistance programs does not disqualify the company unless the other COVID-19 assistance amounts to more than the total revenue earned in 2019.
As an example, if “Bus Company A” made $100,000 in 2019 and in 2020 the same company only made $50,000 due to COVID-19 the amount of revenue lost from 2019 to 2020 is $50,000, or 50%. During 2020, the same business received a PPP loan for $20,000. When considering eligibility for the CERTS Act Program, the Treasury will consider Company A’s total loss in 2020 of $50,000 minus the PPP loan of $20,000, making the maximum grant consideration $30,000. Under the current guidelines, Company A could not receive more than $30,000 in CERTS Act grant funding. CERTS guidelines do not specify whether the Treasury will consider only the forgivable portion of any COVID-19 federal assistance received.
School Bus, Motorcoach Eligibility
To qualify for the CERTS Act program as a motorcoach transportation service provider, a company must be registered as an interstate carrier at the federal level or an intrastate carrier at the state level and provide passenger transportation services. A company must have at least one over-the-road bus that it uses in its principal business operations, and must operate its vehicles on a fixed route, commuter service, tour, or charter service model.
Under the recently released Treasury guidelines, the requirements to qualify as a school bus transportation service provider were significantly updated and changed. Under the May 6 guidelines, a school bus company was to provide its U.S. Department of Transportation (DOT) registration number for the Treasury to validate the company with the Federal Motor Carrier Safety Administration (FMCSA).
If the school bus company did not have a U.S. DOT registration number, the Treasury was to review the state registration number or other unique identifying number issued by the state or local agency, for the purpose of validating the company against information from state departments and agencies that issue school bus registrations.
A school bus company was also required to provide a copy of its primary or largest contract(s) with a school, school districts, or state department of education for which it provides school bus services to transport students to and from school and/or education-related events, activities, and competitions. A school bus company might be required to submit additional information to help determine eligibility, such as the vehicle license plate numbers for its school buses and the customer names, points of contact, and contract service periods for the school bus contracts upon request by the Treasury.
Under the June 17 guidelines, a school bus company must provide a current certificate of insurance with liability coverage as a school bus company, which describes operations as school bus transportation of students.
The treasury will rely on this information to validate the school bus company in addition to a sampling of the vehicle identification numbers (VINs), license plate numbers, and model years for a limited number of the company’s school buses and the name of a school, school district, or state department of education which the company provided school bus services for. School bus services includes transporting students to and from school and/or for education-related events in or after 2019.
These updated guidelines no longer require a U.S. DOT registration number, although a company may still provide one if the company is registered with FMCSA. The updated guidelines no longer limit eligibility to school bus providers with long-term contracts with a school or school district, which widens the applicant pool.
Each CERTS application must be linked to a federal tax return. All information reported on the application must match the information reported on the linked federal tax return. The primary factor in calculating the grant amount will be the difference in total annual revenues reported on the 2019 and 2020 tax returns. Companies that applied for and were granted an extension to file 2020 tax returns are also eligible to apply. They must provide a copy of their application for an extension to file or a copy of the IRS’s electronic acknowledgement.
Bankrupt Companies May be Eligible
Federal assistance for the transportation industry has taken its time to arrive, and, during the past year, many transportation service providers had no choice but to file for bankruptcy because of the effects of the pandemic shutdown. Luckily, the CERTS Act program does not immediately disqualify transportation service providers that have filed for bankruptcy.
If a company remains operational, or is no longer operational but not out of business, has met all other CERTS Act requirements, and is in bankruptcy under Chapter 11, the company is eligible for CERTS Act funds so long as the bankruptcy was filed after March 1, 2021. If a company is out of business, dissolved, or filed for bankruptcy before March 1, 2021, the company is not eligible for CERTS Act grants. If the bankruptcy was filed under or converted to Chapter 7, the company is not eligible for CERTS Act grants.
CERTS Act grant funds have a wider range of allowed uses than PPP loans. CERTS Act grants are intended to cover payroll costs, the acquisition of services, equipment, PPE, and protection measures from COVID-19 for workers and customers, continued operations, and maintenance of existing equipment and facilities, rent, leases, insurance, and interest on regular debt service.
The CERTS Act grant funds will be distributed equitably among the four eligible transportation industries based on an analysis of their industry size and cost structure. This analysis will be based on the actual applicant pool, meaning the number of companies from each industry that apply for the CERTS Act grants and the need identified based on these applications. Fund allocation will be determined after the application period closes on July 19 and based on data from eligible applicants in the pool.
Once the application period closes, the Treasury will publish the amount allocated to each of the four industries and use those allocations to determine the grant-sizing formula. The grant-sizing formula will set minimums and maximums for CERTS Act grant awards. The primary factor in grant-sizing will be the company’s lost revenues from 2019 to 2020. The CERTS Act grant amount, when combined with any other COVID-19 federal assistance, will not exceed the total revenue earned by the company in 2019.
As of June 21, the CERTS application portal officially opened and is accepting applications. The portal will be open for four weeks, closing on July 19 at 11:59 p.m. Eastern Time. To apply, interested companies should register to obtain an ID.me username and password. Companies can also register for updates from the Treasury.
Interested companies should gather copies of tax returns, income statements, and payroll information for the years 2019 and 2020. Companies should also determine the total of any prior COVID-19 federal aid received including EIDL, PPP, Main Street Lending Program loans, and any other COVID-19 related grant or loan.
For assistance in completing CERTS applications, review of your application before submitting, or to ask questions, contact me at email@example.com or at (212) 237-1106.
Matthew Daus is a partner of and chairs the Transportation Practice Group at Windels Marx Lane and Mittendorf. He also serves as transportation technology chair at the City University of New York’s Transportation Research Center.