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Q&A: Payroll Support to Air Carriers and Contractors 

April 20, 2020 

Following are answers to FAQs regarding the Payroll Support Program under Division A, Title 

IV, Subtitle B of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). 

Applicants to the Payroll Support Program whose applications are approved by the Treasury 

Department enter into a Payroll Support Program Agreement (Agreement), a form of which is 

available here. 

APPLICATIONS AND ELIGIBILITY 

1. When can applicants expect to hear from the Treasury Department about applications 

they have submitted? 

The Treasury Department has received hundreds of Payroll Support Program applications 

and is working to review all applications as quickly as possible. Some applications require 

additional information before the Treasury Department’s review can be completed. The 

Treasury Department will contact you directly if you are required to provide additional 

information. 

2. 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? 

Yes, if they meet the eligibility requirements for the Payroll Support Program. Eligibility for 

contractors under the Payroll Support Program will be determined without regard to 

eligibility for loans under Division A, Title IV, Subtitle A of the CARES Act. A contractor 

applicant for Payroll Support should consider whether it qualifies as an eligible “contractor” 

under the Payroll Support Program. For purposes of the Payroll Support Program, an eligible 

contractor must perform, under contract with a passenger air carrier, (a) catering functions, or 

(b) functions on the property of an airport that are directly related to the air transportation of 

persons, property, or mail, such as loading and unloading of property on aircraft; assistance 

to passengers under 14 CFR part 382; security; airport ticketing and check-in functions; 

ground-handling of aircraft; or aircraft cleaning and sanitization functions and waste 

removal. A subcontractor that performs such functions is also eligible. 

3. Can an air carrier or contractor apply for the Payroll Support Program if it is in 

bankruptcy? 

Air carriers and contractors currently in bankruptcy proceedings or contemplating bankruptcy 

may submit applications for the Payroll Support Program. The Treasury Department will 

consider these circumstances in connection with its review of each application. 
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4. For cargo air carriers and contractors, what financial instruments will be required as 

appropriate compensation to taxpayers? 

The Treasury Department is considering this question and intends to issue further guidance. 

PAYROLL SUPPORT PROGRAM AGREEMENT: REPORTING 

5. When does the requirement to provide quarterly reports to Treasury under paragraph 

12 of the Agreement expire? 

Recipients of Payroll Support (Recipients) must report certain information to the Treasury 

Department on a quarterly basis under paragraph 12 of the Agreement, and all Recipients 

must continue to submit these periodic reports at least until the calendar quarter that begins 

after March 24, 2022. 

In addition, if a Recipient or its affiliate has issued notes, warrants, or other financial 

instruments to the Treasury Department as compensation for the Payroll Support (which we 

refer to as Taxpayer Protection Instruments), the Recipient must continue to submit quarterly 

reports to the Treasury Department until the Taxpayer Protection Instruments are either no 

longer outstanding or no longer held by the Federal Government. However, with respect to 

these Recipients, beginning with the calendar quarter that begins after March 24, 2022, only 

the financial statements described in paragraph 12(b) will be required. In addition, if the 

relevant Taxpayer Protection Instrument is a warrant, it will be considered no longer 

outstanding if it has been exercised in full. 

Treasury may waive, in its sole discretion, any requirement to report information under 

Paragraph 12 that it determines is no longer necessary for determining compliance with the 

Agreement. 

All Recipients will remain subject to the other reporting and recordkeeping requirements 

under the Agreement, in addition to those under paragraph 12, as set forth in the Agreement. 

6. Are all Recipients required to submit audited financial statements to the Treasury 

Department? 

Paragraph 12(b) of the Agreement requires Recipients to periodically provide the Treasury 

Department with their financial statements. In the case of annual financial statements, such 

statements must generally be audited by an independent certified public accountant. 

However, if a Recipient does not prepare audited financial statements in the ordinary course 

of its business, the Treasury Department will permit the Recipient to submit certified 

financial statements that are unaudited. 
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7. May Recipients submit their financial statements to the Treasury Department by 

providing a link to the Recipients’ SEC filings? 

Yes. Recipients that file their financial statements with the Securities and Exchange 

Commission may provide a link to the relevant filing on EDGAR in order to satisfy the 

requirement in paragraph 12(b) of the Agreement to provide their financial statements to the 

Treasury Department. 

8. For purposes of paragraph 38 of the Agreement, may Recipients rely on proxy 

statements in addition to other reports filed with the SEC? 

Under paragraph 38 of the Agreement, Recipients must report certain executive 

compensation if certain conditions are met and the public does not have access to such 

information through periodic reports filed under section 13(a) or 15(d) of the Securities 

Exchange Act of 1934 or section 6104 of the Internal Revenue Code of 1986. For purposes 

of this paragraph, it is also sufficient if the public has access to such information through 

proxy statements filed with the SEC under section 14 of the Securities Exchange Act; those 

companies will not be required to report under paragraph 38. 

PAYROLL SUPPORT PROGRAM AGREEMENT: AFFILIATES 

9. For purposes of the Agreement, are a Recipient’s directors and officers considered to be 

“Affiliates”? 

No. Directors and officers of the Recipient, as well as other natural persons, will not be 

considered to be “Affiliates” for purposes of the Agreement. 

10. For purposes of paragraph 6 of the Payroll Support Program Agreement, are 

subsidiaries of the Recipient allowed to pay dividends to the Recipient? 

Under paragraph 6 of the Payroll Support Program Agreement, through September 30, 2021, 

the Recipient is prohibited from paying dividends, or making any other capital distributions, 

with respect to the common stock (or equivalent equity interest) of the Recipient. This 

prohibition only applies to the entity that signs the Agreement and any of its Affiliates that 

are air carriers. Accordingly, the prohibition in paragraph 6 applies to subsidiaries of the 

Recipient that are air carriers but does not apply to the Recipient’s other subsidiaries. 

PAYROLL SUPPORT PROGRAM AGREEMENT: STOCK BUYBACKS 

11. Does the prohibition on stock buybacks restrict the issuance or settlement of convertible 

debt, or net settlement of stock-based compensation? 

Under paragraph 5 of the Agreement, the Recipient and its Affiliates are prohibited from 

purchasing an equity security of the Recipient or of any direct or indirect parent company of 

the Recipient that is listed on a national securities exchange. Paragraph 5 does not prohibit a 
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Recipient from engaging in transactions in which the Recipient and its Affiliates do not 

repurchase outstanding shares of the Recipient’s or parent company’s publicly traded stock. 

For example, a Recipient is not prohibited from issuing convertible debt securities. Further, 

a net share settlement of outstanding convertible debt securities will not violate paragraph 5 

of the Agreement if it does not involve the company’s repurchase of shares of publicly traded 

stock. The exercise of a call right to repurchase convertible debt securities that are not listed 

on a national securities exchange will also not violate paragraph 5 of the Agreement. 

With respect to stock-based compensation, paragraph 5 does not prohibit net exercises of 

stock options or other types of net issuance, if the transaction does not involve the company 

repurchasing shares. For example, without violating paragraph 5, in a net settlement of stock 

options the Recipient may reduce the number of shares it issues in connection with the 

exercise of the stock option, to reflect the exercise price or withholding taxes associated with 

the exercise. Similarly, paragraph 5 does not prohibit the net issuance of shares upon the 

vesting of restricted stock units, where the number of shares issued is net of the number of 

shares required to satisfy tax withholding obligations or other taxes associated with the 

vesting of the restricted stock unit. In these examples, the prohibition under paragraph 5 is 

not implicated because the Recipient is reducing the number of shares it issues but is not 

repurchasing outstanding shares. 

PAYROLL SUPPORT PROGRAM AGREEMENT: CONTINUATION OF SERVICE 

12. If the Department of Transportation exempts the Recipient from a continuation of 

service obligation, can the Recipient terminate its service consistent with the 

exemption? 

Paragraph 10 of the Agreement requires recipients to comply with any applicable 

requirement issued by the Secretary of Transportation under Section 4114(b) of the CARES 

Act to maintain scheduled air transportation service to any point served by the Recipient 

before March 1, 2020. The recipient must therefore comply with all applicable orders issued 

by the Department of Transportation under Section 4114(b). A recipient subject to an 

exemption issued by the Department of Transportation will not violate paragraph 10 of the 

Agreement by acting in accordance with the exemption. 

USE OF PAYROLL SUPPORT FUNDS 

13. Can Recipients use Payroll Support for the payment of employee wages, salaries, and 

benefits after September 30, 2020? 

Yes. There is no deadline for a Recipient to use Payroll Support, provided the Recipient uses 

the funds exclusively for the continuation of employee wages, salaries, and benefits. Certain 

restrictions and requirements under the Agreement continue to apply after the Recipient has 

used all of the Payroll Support funds. 
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TAX 

14. Are Payroll Support payments taxable under the Internal Revenue Code? 

The IRS will post FAQs on the Federal income tax consequences of Payroll Support 

payments, which will be available here.