Travel Tax Credit: The TRIP Act and Other COVID-19 Relief Bills Aid the Travel Industry

Jul 08, 2020

Update (as of March 15, 2021): On March 11, 2021, the Biden Administration passed a $1.9 trillion relief bill, with several provisions geared toward helping the travel industry and struggling travel agencies.

Another big coronavirus relief package is on its way.

Although still in its early stages, the package is set to be finalized by Congress in early August. Until then, the American Society of Travel Advisors (ASTA), is prioritizing three key pieces of legislation and urging travel professionals across the country to contact their representatives to have them passed (the association’s other priorities include fighting for an increase in funding for the U.S. Treasury’s travel agency loan program, and pushing for an extension to unemployment benefits, which are set to expire July 31).

“Sadly, travel is no closer to the recovery many expected would come in the second half of 2020 when the CARES Act was passed in March,” said Eben Peck, executive vice president of advocacy for ASTA. “Many of those programs are now expiring, and without additional relief, we face the prospect of widespread agency closures and mass layoffs.”

Here is what you need to know about the American TRIP Act, the JOBS Credit Act and the RESTART Act.

The American TRIP Act (S. 4031)
Its Purpose: Introduced by Arizona Republican Senator Martha McSally, the American Tax Rebate and Incentive Program Act (American TRIP Act) would encourage Americans to travel safely by creating a temporary, nonrefundable travel tax credit to be used for travel, hospitality, transportation and entertainment purposes.

What Is It?
Under the act, clients traveling domestically during 2020 or 2021 could be eligible for a tax credit equal to $4,000 (for a single filer) or $8,000 (for a joint tax return), with an additional $500 for each qualifying child.
Travel-related expenses that would qualify for this credit span a variety of categories, including food and beverage; lodging; transportation; live entertainment (including sporting events); or costs incurred from attending a conference or business meeting (although some exclusions apply here). If the American TRIP Act is passed, additional regulations, such as rules regarding the itemization of expenses, may be put in place.

Who Does It Benefit?
Clients traveling domestically will be eligible for this credit if their final destination is outside of a 50-mile radius from their primary residence, and if travel takes place after Dec. 31, 2019, and before Jan. 1, 2022. If travelers own a vacation home or secondary residence, their entertainment, transportation and food and beverage costs associated with that visit would still qualify, while their lodging expenses would not.

A $50 million grant program will also be established for each U.S. state, which will greatly benefit destination management organizations (DMOS) tasked with promoting such destinations to visitors. These grants will be issued no more than 30 days after the legislation passes.

Read the full text of the bill.

The JOBS Credit ACT (H.R. 6776)
Its Purpose: To enhance the CARES Act’s Employee Retention Tax Credit. The legislation was introduced to the House of Representatives by Florida Democrat Stephanie Murphy.

What Is It?
The “Jumpstarting Our Businesses’ Success Credit Act of 2020,” or the JOBS Credit Act, will improve the terms to the Employee Retention Tax Credit (a quarterly refundable payroll tax credit designed to incentivize business owners to keep employees on their payroll during the pandemic), which was established under the CARES Act.

If passed, the JOBS Credit Act will apply new terms to widen the credit’s scope and availability to business owners. Under the CARES Act, the cap for qualifying wages per employee is $10,000 annually with the tax credit maxing out at 50%, or $5,000. Under the new act, the cap for qualifying wages is $45,000 annually, with the credit maxing out of 80% of that, or $36,000. The new bill also includes a maximum credit of $15,000 per quarter.

Who Does It Benefit?
Business owners who have received a Paycheck Protection Program (PPP) loan are currently not eligible for the tax credit under the CARES Act, but the new bill would include borrowers who have received a PPP loan if they prove their funds could not be forgiven (due to a lack of qualifying expenses during the eight-week forgiveness period).

The bill also widens the scope of the credit to include government agencies, and changes the definition of a qualifying “large employer” from businesses of 100 or more full-time employees (under the CARES Act) to businesses with more than 1,500 full-time employees (under the JOBS Credit Act).

Read the full text of the bill.

The RESTART Act (S. 3814)
Its Purpose: To establish a new loan program for depressed industries (such as travel) for the second half of 2020. The legislation is a bipartisan bill introduced by U.S. senators Michael Bennet (a Democrat from Colorado) and Todd Young (a Republican from Indiana).

What Is It?
The “Reviving the Economy Sustainably Towards A Recovery in 2020 Act” (the RESTART Act) aims to help small- to mid-size businesses for the remainder of 2020 by further extending the loan forgiveness period of the PPP.

The PPP’s initial terms dictated that businesses had to fully rehire their staff by June 30, 2020, regardless of whether their businesses were actually able to resume full functionality. But under the RESTART Act, the PPP’s coverage period (for business owners to achieve full forgiveness of the loan) will be 16 weeks after the date of issuance, rather than eight weeks.

To be eligible, borrowers must be able to prove they have seen revenues decline by at least 25% for any eight-week period between Feb. 15 and July 31, 2020.

Who Does It Benefit?
The smallest businesses — those with fewer than 500 employees — will see the greatest loan forgiveness under this bill. Additionally, the RESTART Act will include nonprofit organizations with fewer than 5,000 full-time employees (such as DMOs or associations), as long as they are not more than 50% owned or controlled by the government. Their loans will have more favorable terms than businesses, including a lower interest rate, an option for loan forgiveness and a 10-year term (compared to the seven-year term for businesses).

Read the full text of the bill.