ARSA Joins Multiple Efforts to Improve CARES Act
To keep tabs on all of ARSA’s work related to the current pandemic, visit arsa.org/anti-viral-measures.
When a regulatory or legislative issue broadly impacts the maintenance industry, ARSA coordinates industry response. A broad coalition of aviation and business associations routinely and willingly supports these efforts and coordinates on issues of mutual interest.
But ARSA’s can’t be at the front of the pack on every policy issue, so it is occasionally a loyal and supportive partner when others seize the reins.
The CARES Act is a case in point. Working with members, ARSA convinced Congress to provide billions of dollars in relief for repair stations through the Paycheck Protection Program (PPP), the Air Carrier Worker Support Program and a special loan fund created for airlines and repair stations. Once the bill was signed into law, the association continued to work with Congress and the Treasury Department to ensure the new programs benefit as many repair stations as possible. (See updates below for full coverage of these efforts.)
But there’s a lot more to the CARES Act than just the maintenance industry economic relief; the law also includes a new employee retention tax credit (ERTC), modified net operating loss (NOL) carryback rules and other tax law changes to help businesses weather the storm. In recent months, ARSA has joined numerous informal coalitions to expand, protect or change certain parts of the CARES Act.
Net Operating Loss Carryback Rules
The CARES Act provides a five-year carryback for NOLs generated in 2018, 2019 or 2020. Second, the CARES Act suspends for 2018, 2019 and 2020 the otherwise applicable limitations on excess business losses for noncorporate taxpayers. Combined, these provisions allow businesses to apply losses incurred in the current tax year to prior years and get a tax refund. On June 22, ARSA joined more than 70 groups on a letter coordinated by the National Mining Association encouraging Congress to protect the NOL provisions.
In late May, in response to concerns that business could become targets of lawsuits because of their response to the pandemic, ARSA joined a letter coordinated by the U.S. Chamber of Commerce urging that the next round of coronavirus relief legislation include liability protections.
Employee Retention Tax Credit
ARSA also recently joined letters coordinated by the International Franchise Association in support of legislation to expand the ERTC, which many association members have indicated they plan to use. The letters express support for the JOBS Credit Act (H.R. 6776), which was introduced in May by Reps. Stephanie Murphy (D-Fla.) and John Katko (R-N.Y.). The bill would expand the ERTC credit percentage from 50 percent to 80 percent of qualified wages and increase the per-employee limitation from $10,000 for all calendar quarters to $15,000 per calendar quarter (and an aggregate of $45,000 for all calendar quarters) and improve coordination between the ERTC and the PPP so employers can be eligible for both programs.
By joining these and other efforts, ARSA is able to support advocacy efforts with impact while reserving its limited resources to focus on the issues that uniquely impact the maintenance community.
For more information about ARSA’s broad efforts to support industry needs, contact Executive Vice President Christian A. Klein.
Previous updates on ARSA-led relief efforts...
May 11, 2020
As Congress gears up for the next round of coronavirus relief legislation, ARSA has weighed in with lawmakers on the maintenance industry’s priorities.
In a statement submitted to leaders of the Senate Commerce, Science and Transportation Committee in conjunction with a May 6 hearing on COVID-19’s impact on the aviation industry, ARSA said that despite assistance for the maintenance industry provided by the CARES Act business conditions for repair stations remain dire and thousands of jobs are at risk.
In making the case for additional relief for the maintenance industry, ARSA cited Oliver Wyman CAVOK (OW) projections that a dramatic drop in aircraft utilization will result in global maintenance, repair and overhaul (MRO) spending dropping by more than 50 percent in 2020, from a pre-pandemic forecasted level of $91.2 billion to $42.3 billion in the post-pandemic world. In the United States, demand is expected to fall 43 percent.
Repair station workers are highly trained, and it takes years to gain the necessary expertise to be an effective technician. ARSA and its members are concerned that if the industry loses a substantial portion of its workforce, repair stations will lack the capacity to support the nation’s civil and military fleets as aviation activity returns to normal levels. This, in turn, will pose long-term risks to both the efficiency of the aviation system and to national security.
ARSA is therefore urging Congress to:
- Improve repair station access to federal relief by directing the Small Business Administration (SBA) to immediately increase the small business size standard for all North American Industry Classification System (NAICS) codes applicable to aviation maintenance industry companies to at least 1,500 (and, ideally, to 3,000) employees. (The industry’s main small business size standard is currently $35 million in annual revenues, so PPP access is limited to companies that have 500 or fewer employees. Increasing the size standard would give more maintenance companies access to the PPP.)
- Temporarily exempt companies covered by those NAICS codes from SBA’s affiliation rules for purposes of accessing pandemic relief. (The affiliation rules have prevented even small companies with private equity backing from tapping into the PPP).
- Give air carrier maintenance contractors and subcontractors not located at airports access Air Carrier Worker Support (ACWS) resources. (The CARES Act requires most contractors and subcontractors to be located at airports to access ACWS assistance.)
- Provide significant additional resources for both the Paycheck Protection and ACWS programs.
- Refrain from imposing unnecessary restrictions and requirements on companies seeking access to relief.
- Create temporary tax incentives and grant programs to encourage business investment in worker training, equipment and facilities and air carrier investment in maintenance.
- Resolve the uncertainty surrounding the tax treatment of PPP loans. (The IRS has recently raised questions about the deductibility of business expenses paid using PPP funds.)
Another issue not raised in ARSA’s letter to the Commerce Committee is the problem of airlines not paying their bills for past work. It is bad optics from a public relations standpoint for the airlines to be taking taxpayer money and then stiffing small business vendors. Airlines would likely respond that the various programs are very specific and restrictive about how relief money may be used (i.e., payroll, benefits, etc.). ARSA is therefore exploring the possibility of amending the CARES Act to clarify that paying external vendors is an acceptable use of ACWS funds.
However, obtaining additional relief is likely to be a challenge in the current political environment. The negative publicity surrounding the PPP (large companies getting access, administrative issues, etc.) has clearly soured members of both parties on the PPP and members of Congress on both sides of the aisle seem disinclined to expand eligibility. Expanding access to the ACWS may get more traction as it does not make sense to discriminate against airline maintenance contractors and subcontractors based on location (on-airport vs. off-airport).
Another complicating factor is that whereas ARSA and other aviation trade associations were at the front of the line requesting assistance at the outset of the CARES Act debate, lawmakers are now receiving pleas for relief from businesses in every sector of the economy, making it less likely (though not impossible) that there will big bailout packages for specific industries.
ARSA welcomes suggestions for other near- and long-term relief proposals to help the maintenance industry weather what is likely to be a long period of uncertainty. To share your ideas or get more involved in the association’s advocacy, please contact ARSA Executive Vice President Christian Klein at firstname.lastname@example.org.
To read ARSA’s full statement, click here.
May 11, 2020
Another round of coronavirus relief legislation is on the way to the president’s desk after clearing the House on April 23 and the Senate on April 21. The Paycheck Protection Program and Health Care Enhancement Act (H.R. 266) provides $321 billion in additional funding for the Paycheck Protection Program (PPP) created by the CARES Act, as well $60 billion for small business economic disaster loans, $75 billion for hospitals and $25 billion for coronavirus testing.
H.R. 266 is the fourth coronavirus bill passed since the pandemic crisis began in early March and brings the total relief spending approved by Congress to $2.7 trillion.
At the urging of ARSA and its members, Congress has made significant resources available to help repair stations weather the storm. The CARES Act included $25 billion for loans to airlines, repair stations and ticket agents and $3 billion for “Payroll Support Program” grants for airline contractors. The PPP, which was replenished by H.R. 266, provides small businesses and companies with fewer than 500 employees access to forgivable loans of up to $10 million to cover payroll and other expenses.
On April 21, the Treasury Department issued additional guidance confirming that repair stations located at airports are eligible to apply for “Payroll Support Program” grants. However, the Treasury Department has said nothing about the eligibility of off-airport maintenance subcontractors (to read ARSA’s April 2 letter to Treasury Secretary Steven Mnuchin, click here). The deadline to apply is April 27.
On April 23 the Treasury Department also updated its PPP guidance, produced in coordination with the Small Business Administration.
While the vast majority of ARSA members can benefit from the various programs Congress has created since mid-March, certain businesses (particularly mid-size companies with off-airport repair stations) have found it difficult to access relief. As such, the association is working to include additional support for the maintenance industry in the next round of coronavirus legislation. To get involved in those efforts, please contact ARSA Executive Vice President Christian A. Klein at email@example.com.
April 22, 2020
On April 20, the U.S. Treasury Department issued guidance confirming that repair stations are eligible for grants from the Air Carrier Worker Support (ACWS) program created by the Coronavirus Aid, Relief and Economic Security (CARES) Act (H.R. 748).
In addition to the Paycheck Protection Program for small businesses and companies with fewer than 500 employees and a special $25 billion loan fund for air carriers and repair stations, the CARES Act authorized $32 billion in direct financial assistance to airlines ($25 billion), cargo carriers ($4 billion) and airline contractors ($3 billion). The deadline to apply for money out of the program is April 27.
Although it was always ARSA’s position that maintenance providers were intended to be included in the ACWS program, the legislative language is ambiguous. ARSA sent a letter to Treasury Secretary Steven Mnuchin on April 2 urging the law be interpreted to include repair stations – both those serving air carriers at airports and those acting as subcontractors off-airport. Several members of Congress also contacted the Treasury Department about the issue.
The guidance – which is organized in Q&A format – is clear about the eligibility of on-airport repair stations:
“Are Part-145 certified repair station operators and ticket agents that are eligible for loans under Division A, Title IV, Subtitle A of the CARES Act also eligible to apply for the Payroll Support Program as contractors?”
The answer is:
“Yes, if they meet the eligibility requirements for the Payroll Support Program.” The guidance then goes on to restate the requirements, including being a contractor for a part 121 air carrier and being on the property of an airport.
The clarification is good news for on-airport repair stations serving air carriers either as direct contractors or subcontractors because they can now tap into the $3 billion grant pool. However, the Treasury Department did not answer the second question ARSA raised in its letter to Mnuchin: whether, like contractors, subcontractors must be “on-airport”. The guidance simply restates what is in the CARES Act: “A subcontractor that performs such functions is also eligible”. ARSA’s position is because the law does not explicitly state that subcontractors must be on-airport, location should not be a factor in determining eligibility.
As the association continues its efforts to clarify the CARES Act and ramp up for the next round of coronavirus relief legislation, please share suggestions about other things Congress can do to help companies weather the pandemic. Send suggestions and thoughts to ARSA Executive Vice President Christian Klein at firstname.lastname@example.org.
More information about the ACWS program and other Treasury coronavirus responses initiatives is at home.treasury.gov/policy-issues/cares/preserving-jobs-for-american-industry.
April 6, 2020
In an April 2 letter to U.S. Department of Treasury Secretary Steven Mnuchin, ARSA asked the administration to interpret the most recent pandemic response bill – the Coronavirus Aid, Relief and Economic Security (CARES) Act – to ensure repair stations are able to benefit from relief provided to airline contractors.
ARSA’s lobbying helped ensure repair stations, along with airlines and ticket agents, were eligible for a special $25 billion CARES Act loan and loan guarantee program. However, maintenance companies were not included in a non-exclusive list of air carrier contractor functions eligible for $3 billion in grants provided by the bill. The letter to Secretary Mnuchin said that because repair stations provide an essential service to air carriers they should be allowed to tap into the resources, regardless of whether they were direct contractors to airlines or subcontractors working on aircraft equipment such as components or engines.
The letter also urged the Treasury Department to use its discretion not to require repair stations to provide warrants, stock, promissory notes or other items as collateral for obtaining grants.
To read ARSA’s letter, click here.
To review key resources from Treasury, which are also available on the Anti-Viral Measures page, use the following links:
(1) Air Carrier Worker Support – Assistance for airlines, cargo carriers and certain airline contractors and subcontractors
(2) CARES Act loans – Air carriers, cargo carriers, repair stations and businesses essential to national security
(3) Guidelines and Application Procedures for Payroll Support to Air Carriers and Contractors
(4) Paycheck Protection Loans – Forgivable loans for small businesses and companies with 500 or fewer employees
(5) Procedures and Minimum Requirements for Loans to Air Carriers and Eligible Businesses and National Security Businesses
(6) Q&A: Loans to Air Carriers and Eligible Businesses and National Security Businesses Added on April 7
(7) Treasury Loan Application for Air Carriers and Certain Eligible Businesses Updated on April 9
March 27, 2020
On March 27, Congress officially responded to the aviation maintenance industry’s pleas for economic assistance in the face of pandemic-related air travel disruptions. The Coronavirus Aid, Relief and Economic Security Act (CARES) Act passed this week by the Senate and House directs specific relief to repair stations and their employees.
Since President Trump’s national emergency declaration on March 13, ARSA has been working to provide resources to help its members weather the storm. Central to that effort is a campaign to urge Congress to provide short-term help to the maintenance industry. Association members from around the country weighed in with their representatives and senators in support of ARSA’s call for grants and loans to help repair stations meet payroll. That unprecedented grassroots campaign has yielded significant results.
The relief legislation contains several provisions aimed at providing aircraft maintainers with liquidity to avoid layoffs. Sec. 4003(b)(1) of the bill sets aside $25 billion for loans to repair stations, airlines and ticket agents. Aviation maintenance companies that are located at airports and perform work for air carriers should also be able to benefit from a $3 billion financial assistance program for airline contractors and subcontractors (Secs. 4111 to 4120).
The aviation provisions aside, the legislation provides broad relief for individuals in the form of direct payments and forgivable loans to help small businesses and companies with 500 or fewer employees meet payroll and keep businesses operating (Sec. 1102). The overwhelming majority of repair stations are small and medium-size entities that will be able to tap into those resources.
The effort on Capitol Hill to provide maintenance industry relief was led by Sens. Jim Inhofe (R-Okla.) and Tammy Duckworth (D-Ill.), “While ARSA is grateful to all the members of Congress and staffers who’ve worked tirelessly in recent weeks to craft the bill, Senators Inhofe and Duckworth deserve special recognition,” ARSA Executive Vice President Christian A. Klein said. “Thanks to them, there are 250,000 men and women working in the maintenance sector – including 12,000 employees in Oklahoma and 7,000 in Illinois – who can rest a little bit easier knowing that financial help to keep their companies afloat is on the way.”
March 26, 2020
On March 25, House, Senate and White House negotiators reached a deal on a massive coronavirus relief package. In addition to resources for healthcare workers and others on the front lines, the legislation contains provisions aimed at businesses and specific resources for the aviation maintenance community.
Repair station inclusion no accident; ARSA members answered the call to action in unprecedented numbers, reaching House and Senate offices to echo ARSA’s request for assistance (see below) and direct lobbying. The message was simple: In the wake of widespread aviation disruptions, repair stations need help to maintain liquidity and pay highly trained and dedicated workers.
It’s clear elected representatives heard that message loud and clear.
Sec. 4003(b)(3) of the draft bill provides $25 billion in loans and loan guarantees to repair stations, passenger airlines and ticket agents. Cargo airlines would have access to an additional $4 billion in loans.
Secs. 4111 to 4120 provide grants for airlines ($25 billion), cargo airlines ($4 billion) and airline contractors working at airports and their subcontractors ($3 billion) to pay wages, salaries and benefits. Some repair stations may be able to benefit from the latter pot of money, given that the definition of contractor includes those that perform “functions on the property of an airport that are directly related to the air transportation of persons, property, or mail” and their subcontractors. While maintenance is not on the list of enumerated contractor functions (baggage handling, security, ticketing, aircraft cleaning, etc.), the fact that the words “including but not limited to” appear before the list means that it’s not intended to be exhaustive. ARSA will be working with allies on the Hill and those in the administration to resolve any ambiguity.
The grant money comes with certain strings; among other things, it can only be used to pay wages, salaries and benefits. Recipients must also refrain for furloughing workers, engaging in stock buybacks or paying dividends. There are also limitations on executive compensation.
The aviation provisions aside, the legislation provides broad relief for individuals in the form of direct payments and assistance for companies of all sizes, including forgivable loans equal to ten weeks payroll (up to $10 million) for businesses with fewer than 500 employees. The overwhelming majority of repair stations are small and medium-size entities that will be able to tap into those resources. ARSA is still digging through the hundreds of pages of legislation to identify the provisions most important for the maintenance industry.
This analysis is based on a draft of the relief bill obtained by ARSA. Changes will be made before the Senate votes, so don’t take the news to the bank (literally or figuratively!). However, as of 3:00 p.m. on March 25, things have moved in the right direction. ARSA’s “anti-viral” webpage will bring further updates and analysis.
The maintenance industry helped itself get to this point; it establishes the power of grassroots and growing visibility of the maintenance industry on Capitol Hill. When the fat lady sings, if you were one of the many who reached out to Capitol Hill, please circle back with lawmakers’ offices to thank them for their support so the momentum is not lost.
To download a copy of the bill published by POLITICO, click here.
Note: The original version of this post noted that the forgivable loans equal to ten weeks payroll would be available to business with fewer than 500 employees per location. It is not clear from the text of the bill that the employee account applies to specific locations as opposed to total corporate size, with few exceptions, so that language has been updated.
March 17, 2020
In the wake of severe aviation industry impacts due to the coronavirus, ARSA has proposed a maintenance, repair and overhaul (MRO) industry relief package to Congress and the president designed to ensure repair stations can continue to pay employees and to encourage airlines to continue to contract for maintenance during the downturn.
In a March 17, 2020 letter to President Trump and House and Senate leaders distributed to all congressional offices, ARSA said it is hearing from members concerned about cashflow in light of maintenance work being canceled and customers potentially unable to pay bills. The maintenance industry – which includes FAA-certificated repair stations and parts manufacturers and distributors – employs more than 250,000 workers nationwide and generates approximately $50 billion in direct annual economic activity.
As lawmakers huddle to craft economywide and industry specific relief legislation, ARSA is proposing a 50 percent tax credit for airline contract maintenance work performed at U.S. repair stations between April 1 and Dec. 31, 2020. The association said that historically, tax incentives such as the highly successful depreciation bonus created after 9/11 have stimulated economic activity by encouraging businesses to shift future purchasing into the present. The temporary tax credit ARSA is proposing would encourage airlines to continue to contract for maintenance during the anticipated downturn.
ARSA is also urging the administration and Congress to provide repair stations with $11 billion in relief split between grants ($8 billion) and loans or loan guarantees ($3 billion). These amounts would help ensure repair stations are able to maintain their present workforce for the next six months, which will be essential to having the necessary capacity to perform maintenance when commercial aviation activity returns to normal and preventing large industry job losses that would put additional pressure on existing government benefit programs. (e.g., unemployment insurance).
ARSA also pointed out that the maintenance industry has long been suffering from a severe and well-documented technician shortage and maintaining a highly trained workforce is critical to ensuring the long-term stability of the entire U.S. aviation sector.
“The simple fact is that we don’t know how long the coronavirus disruptions will last and what the impacts will be,” ARSA Executive Vice President Christian A. Klein said. “Congress needs to act swiftly to limit damage to the aviation maintenance industry, which has both a huge impact on the economy and which is so essential to the safe operation of aircraft.”
To read ARSA’s full letter, click here.