At the heart of this legislation is the idea of a tax holiday, a policy vacation of sorts for recipients of certain government grants. Specifically, the bill targets those benefiting from the Coronavirus Economic Relief for Transportation Services (CERTS) Act – a component of the government’s ongoing response to the impacts of the pandemic.
But what does it mean for these CERTS Act beneficiaries? Should the legislation pass, they would find themselves excluded from the requirement to include this monetary grant in their gross income – shorthand for not having to pay federal taxes on the relief funds. It’s like hitting a financial home run and not having to bat an eye at the IRS.
Beneath all the legislative lingo, the nitty-gritty of the proposed amendment to Section 421 of the CERTS Act fires off three key changes, making this somewhat of a big-league triple play.
Firstly, the total sum received as a grant won’t be part of what tax folks call “gross income.” This is the bread and butter of your tax return, and the size of this number can immensely change the outcome of your tax bill. So, imagine the relief amongst CERTS beneficiaries when they find that these grants won’t be nudging them into a higher tax bracket.
Secondly, the tax-exempt status of these grants won’t affect other deductions, tax attributes, or basis increase. In the spirit of tax season, consider this as the legislative equivalent of having your cake and eating it too. You’re dodging a tax bullet on your grant, and it won’t impact your ability to claim your routine, money-saving deductions.
The third part of the triple play is a bit more technical, relating to transportation service providers who classify as partnerships or S corporations. These entities would enjoy tax-exempt income status. Also, unless the Secretary of the Treasury (or his or her delegate) pops up with alternative provisions, there will be an increase in the adjusted basis of a partner’s interest in a partnership relating to certain deductions, mirroring the grant used to cover the costs.
The bill has been reviewed twice and is currently hanging out in the Finance Committee. If they give it the thumbs up, it must navigate the gauntlet of the Senate and House of Representatives before landing on the President’s desk for final approval.
So, who would this bill impact the most? Look no further than that bus rumbling down your street or the Uber you hailed last weekend. Transportation providers, especially those hit hard by the COVID19 pandemic, stand to gain significantly if the CERTS Tax Exemption Act is enacted.
By providing a tax exemption, the bill is shining a spotlight on the ongoing issue of pandemic-induced economic struggle, especially within the transportation sector. Its objective is clear – release the transportation service industry from a fiscal chokehold, fostering a financial environment that allows it to steer towards recovery.
The stipulations of this legislation could serve as dominoes in the grand scheme of economic recovery post-pandemic. Giving transportation service providers a chance to catch up on their losses might stimulate job growth within the industry. However, the legislation may stir some criticism as it may represent a loss of potential tax revenue for the federal government.
While waiting for its journey through the legislative process, the CERTS Tax Exemption Act of the 118th Congress offers an interesting question to ponder. If becoming law, will it be a lifesaver for the industry it aims to help, or will its impacts veer off in unintended directions? Only time will tell. But for now, it presents a hopeful note for those navigating the choppy economic waters of a post-pandemic world.
