Insights

Last week, the IRS announced plans to begin a campaign to audit personal use of business aircraft. The audits will focus on whether large corporations, partnerships and high-and ultra-high net worth aircraft owners have properly reported their business and personal aircraft usage for tax purposes, with a particular focus on ensuring that owners are only taking deductions to which they are entitled. Given the value of an aircraft, the amount of a deduction for aircraft related expenditures on a given taxpayer’s return can be in the tens of millions of dollars, and with more than 10,000 corporate jets operating in the U.S., IRS Commissioner Daniel Werfel recognized that much is at stake with this campaign.  The audit campaign is expected to focus initially on multinational and domestic corporations and complex partnerships but is expected to expand from there.

On December 28, 2023, the Department of Transportation (DOT) published a final rule increasing the statutory maximum monetary civil penalty for regulated entities. The final rule raised the minimum and maximum fines for 2024 by about 3.2 percent from the 2023 level across most DOT modes. The new fine amounts became effective on December 28, 2023 and will only apply to violations that take place after that date.

With days to spare, the FAA has officially extended the deadline for drone operators in the U.S. to comply with Remote ID equipage and transmission requirements by six (6) months, until March 16, 2024.  The original compliance date of September 16, 2023 was seen as unattainable by many drone operators due to the FAA’s slow approval of manufacturer Declarations of Compliance and unavailability of software updates from manufacturers. 

Every five years, Congress passes a bill to reauthorize full (or, in some years, interim) funding for the Federal Aviation Administration's (FAA) continued governance and regulation of the aviation industry, outlining the next steps the FAA can take to promote the growth and safety of U.S. aviation.  Timely FAA reauthorization is critical to ensuring that the FAA has the authority and funding that it needs to carry out its oversight, certification, strategic planning, and air traffic activities.

The Federal Aviation Administration (FAA) has issued a National Policy aimed at reducing the years long backlog affecting applicants for Part 135 certificates.  The Policy, which took effect on June 23, 2023, directs Aviation Safety Inspectors (ASIs) and Principal Inspectors (PIs) to reduce documentation requirements for certain Part 135 Air Operator certificate applicants, specifically in the Design Assessment phase of the certification process. 

On March 31, 2023, almost two years after issuing the Final Pilot Records Database (“PRD”) Rule (the “Rule”), the Federal Aviation Administration (“FAA”) issued a notice (the “Notice”) advising that it will review operators’ compliance with the Rule and may take enforcement action against noncompliance.  Crucially, each FAA office must survey compliance of at least twenty-five percent (25%) of the corporate flight departments under their purview by August 31, 2024.

Last week, the House passed the Drone Infrastructure Inspection Grant Act, which establishes programs within the Department of Transportation (DOT) to support the use of small unmanned aircraft systems (sUAS) when inspecting, repairing, or constructing a variety of types of infrastructure, including roads, electric grids, water, and other critical infrastructure. 

President Biden will soon sign into law the Inflation Reduction Act (IRA), which provides $750 billion in funding and major federal policy changes impacting the U.S. energy, environment, healthcare and tax sectors. On August 7, 2022, the IRA passed the U.S. Senate by an all-Democrat 50-50 party line vote, with Vice President Harris breaking the tie and ensuring passage. On August 12, 2022, the IRA passed the U.S. House by a vote of 220 to 207. The President's signature, will make the bill law, and allow President Biden, U.S. Senate Majority Leader Chuck Schumer (D-NY), and U.S. House Speaker Nancy Pelosi (D-CA) to claim a major victory while making progress on a portion of the President's Build Back Better agenda just three months before the mid-term elections on November 8, 2022.

Crowell & Moring held its Transportation & Logistics workshop on Thursday, March 10, 2022 in Dana Point, California. The conference featured key developments and trends in the transportation sector and legal strategies to support supply chain resiliency in the midst of industry uncertainty, evolving regulatory regimes, and unprecedented workforce challenges. Conference participants included transportation leaders and decision-makers across retail, food & beverage, hospitality, telecommunications, healthcare, rail, automotive, aviation, surface, maritime, mobility, shipping, logistics, and beyond. Topics included:

This week, the Department of Transportation (“DOT”) announced that the Aviation Manufacturing Jobs Protection (“AMJP”) program, which was created under the American Rescue Plan Act of 2021, began accepting applications on Tuesday, June 15. A previous client alert providing background information about the program objectives and parameters can be found here.

Late last week, the President signed the American Rescue Plan Act (ARP Act) into law. In addition to extending the Payroll Support Program (PSP), which has been a lifeline for air carriers and their contractors, the ARP Act expands assistance to the aviation industry to include an Aviation Manufacturing Jobs Protection program for qualifying aviation industry manufacturers. This new program establishes a $3 billion payroll support program within the Department of Transportation (DOT) to provide grants to eligible manufacturers and their suppliers to maintain their workforce during the pandemic. The temporary program would require cost-sharing of 50 percent by employers, with 50 percent being contributed by the federal government, and funds would be directed to an eligible employee group comprising of not more than 25 percent of the company’s U.S. workforce engaged in manufacturing or maintenance, repair, and overhaul activities. The funds must be used to retain current employees or to recall employees who were previously laid off and cannot be used for backpay of returning or re-hired employees.

This week, the FAA delivered on its promise to the drone industry that it would release a final rule of both Remote Identification of Unmanned Aircraft Systems (Remote ID) and Operations Over People before we all put 2020 in the rear view mirror. The release of the final rules is a major milestone for the drone industry; once fully implemented, the rules will enable routine, complex unmanned aircraft system (UAS or drone) operations, such as operations beyond visual line of sight (BVLOS) and operations over people, and will lay the groundwork for an Unmanned Traffic Management System that will allow for full integration of drones into the National Airspace System.

On Monday, December 21, 2020, Congress passed the Consolidated Appropriations Act of 2021, which includes the House-Senate compromise of the Boeing 737 MAX aircraft certification reform legislation, the Aircraft Certification, Safety and Accountability Act (“ACSAA”), as well as an extension of the Payroll Support Program, one of the significant lifelines provided to the aviation industry under the CARES Act.

Transportation policy is a central feature of the incoming Biden administration’s “Build Back Better” economic recovery plan, which includes a $2 trillion infrastructure plan that would reimagine the nation’s transportation sector to one that takes advantage of new technology, new energy sources, and new workers. President-Elect Biden announced Pete Buttigieg, the former mayor of South Bend, Indiana and presidential rival, as the nominee to serve as Secretary of Transportation. If confirmed, Buttigieg is expected to play a key role in steering President Biden’s infrastructure plan through Congress and ensuring it does not go off the rails (pun intended). To deliver these changes as promised, Congress and the incoming Biden administration will need to tackle a number of tricky policy issues that have bedeviled previous reform efforts.

Lawmakers continue to negotiate the 2021 National Defense Authorization Act (“NDAA”), which could prohibit federal procurement or operation of certain foreign-made drones, including those from China, due to national security concerns.  Meanwhile, some executive agencies are moving forward with agency-specific restrictions on use of federal funds for drone operations that rely on Chinese-made aircraft.  The most recent updates come from the Department of Interior (“DOI”) and the Department of Justice (“DOJ”).

This week, Treasury published additional guidance regarding funding under the Air Carrier Payroll Support Program (Division A, Title IV, Subtitle B of the CARES Act) and an update on payments made under the program. Treasury advised that it has received hundreds of Payroll Support Program applications and that earlier this week it disbursed $2.9 billion as the initial payments to two major airlines and 54 smaller passenger air carriers. Additional payments will be made to approved applicants on a rolling basis, though Treasury has not committed to a specific timeline.  

The CARES Act created a $46 billion pool of funds for loans and loan guarantees for the aviation industry and national security-related businesses. The total amount is further allocated to three separate buckets: 

Treasury recently announced additional guidance regarding the Payroll Support Program under Title IV of the CARES Act, which provides payroll support for American workers employed by passenger air carriers, cargo air carriers, and certain contractors to Part 121 air carriers. This guidance modifies Treasury's earlier requirement that applicants offer warrants, options, preferred stock, debt securities, notes, or other financial instruments as compensation for the provision of payroll support. 

The FAA announced several measures to provide COVID-19 related-relief for general aviation and Part 135 operators and enable many operators to continue flying during the global pandemic. These measures include:

One of the significant lifelines to the aviation industry provided by the CARES Act is financial assistance for payroll support in the form of a grant. This is part of an overall multi-billion dollar financial support package for the aviation industry which also includes direct loans and loan guarantees. The payroll support provisions (CARES Act §§ 4112-4117) cover U.S. providers of commercial air transportation operating both large and small aircraft, transporting passengers or cargo. This program also covers contractors to Part 121 air carriers (typically, airlines), including contractors performing catering services, loading and unloading property on and from aircraft, assistance to passengers with disabilities, airport ticketing and check-in functions, ground handling, aircraft cleaning, sanitation and waste removal, or subcontractors performing these functions.