Created: 05 April 2021
$28.6 Billion in Relief for Restaurant Industry
American Rescue Plan Act of 2021 (“ARPA”)—Restaurant Revitalization Act (“RRA”) Summary
KEY Points
• A good deal of money is obtainable!
• Grants are non-taxable!
• All of your independent restaurants/beverage establishments will surely qualify!
• The ARPA provides $28.6 billion in grants designed to support the recovery of small and medium-sized food and beverage businesses. The grants will be awarded by the SBA (the federal Small Business Authority), and individual businesses are eligible to receive up to $5 million in grants, while businesses with up to 20 locations are eligible for a maximum of $10 million.
• The RRA grants are not treated as taxable gross income by the IRS.
• Eligible Entity— any restaurant is eligible if it’s consider a place where public or patrons can gather for the primary purpose of being served food or drink. Businesses that are not eligible include: state or local government-operated businesses; businesses, that as of March 13, 2020, own or operate more than 20 locations; publicly traded companies; and businesses with a pending application for or have received a grant as part of the “Save our Stages Act.”
• Distribution— for the first 60 days after enactment, $5 billion will be dedicated to businesses that had a maximum of $500,000 in gross receipts during 2019. During the initial 21-day period, grants will be prioritized for socially and economically disadvantaged small businesses and businesses owned by women or veterans. Remaining $23.6 billion will be distributed in first come first-served basis, and in an equitable manner to eligible entities based on annual gross receipts.
• Grant Amount— the amount of the grant will be equal to the pandemic-related revenue loss, measured by comparing the businesses’ 2020 revenue with its pre-pandemic revenue in 2019. Additional factors include length of time a business has been operating and whether it has received any PPP loans. Grant amounts will be reduced by the amount of PPP loans received by the business. The difference between the 2019 and 2020 gross receipts, minus the amount of PPP loans received must yield a value greater than $0 to be eligible.
• Eligible Expenses— payroll costs, rent payments, utilities, maintenance expenses (including construction of outdoor seating and wall, floors, deck surfaces, furniture, fixtures, and equipment), supplies, food and beverage expenses that are within the scope of normal business practice, operational expenses, paid sick leave, covered supplier costs and covered operational expenditures (as defined by the SBA under the PPP program), and any other expenses deemed essential by the SBA.
• Returning Funds— if a business is unable to use the full grant by December 31, 2021 or permanently closes before December 31, 2021, all remaining funds must be returned to the government.
• Application Process— Details on how to apply have not yet been made available by SBA. To apply for a grant, businesses must make a “good faith certification” that the uncertainty of current economic conditions make it necessary for them to request a grant to support their ongoing operations and that they have not applied for or received any grants that are part of the Save our Stages Act. (NOTE: Recipients of NPP-CRF funding are not disqualified from applying!)
IMPORTANT: Restaurants should prepare for this grant NOW!
Here is where you can help them get a leg up in this process while the formal kick-off is being readied. Restaurants need to do the following:
1. Secure a DUNS number at https://www.dnb.com/duns-number/get-a-duns.html (if they don’t already have one.)
2. Register online at SAM.gov (the Federal grant management system – if not already registered)
3. Create a login.gov user account (the online portal for accessing Federal agencies – if not already registered)
POLICY STATEMENTS FOR THE RESTAURANT REVITALIZATION FUND GRANTS
An eligible business may receive a tax-free federal grant equal to the amount of its pandemic-related revenue loss, calculated by subtracting its 2020 gross receipts from its 2019 gross receipts. If the business is not in operation for the entirety of 2019, the total is the difference between 12 times the average monthly gross receipts for 2019 and the average monthly gross receipts in 2020 (or a formula from SBA).
If the business is not in operation until 2020, it can receive a grant equal to the amount of “eligible expenses” subtracted by its gross receipts received (or a formula from SBA).
If the business is not yet in operation as of the application date, but it has made “eligible expenses,” the grant would be made equal to those expenses (or a formula from SBA). DEDUCTION OF 1ST AND 2ND DRAW PPP LOAN FUNDS Pandemic-related revenue losses for business are reduced by any amounts received from Paycheck Protection Program (PPP) First Draw and Second Draw loans in 2020 and/or 2021.
DISTRIBUTION The SBA can adjust awards based on demand and “relative local costs” in the markets where RRF businesses operate. Otherwise; $23.6 billion is available for the SBA to award in an equitable manner to businesses of different sizes based on annual gross receipts. $5 billion is available to businesses with gross receipts of $500,000 or less during 2019. Maximum: The total grant amount for an eligible business and any affiliated businesses is capped at $10 million and is limited to $5 million per physical location of the business.
Updated 03/09/2021 THE AMERICAN RESCUE PLAN ACT ESTABLISHES A $28.6 BILLION “RESTAURANT REVITALIZATION FUND” (RRF) WITHIN THE U.S. SMALL BUSINESS ADMINISTRATION (SBA) LEARN MORE Visit RestaurantsAct.com
RESTAURANT REVITALIZATION FUND PRIORITIZATION For an initial 21-day period, the SBA will prioritize awarding grants for small business concerns owned and controlled by women, veterans, or socially and economically disadvantaged small business concerns. COVERED PERIOD Eligible expenses are those incurred from February 15, 2020 to December 31, 2021, or a date determined by the SBA. If all grant funds are not spent by the business, or the business permanently closes before the end of the covered period, the business must return unused funds to the Treasury.
ELIGIBLE EXPENSES Funds must be spent on payroll; principal or interest on mortgage obligations; rent; utilities; maintenance including construction to accommodate outdoor seating; supplies such as protective equipment and cleaning materials; normal food and beverage inventory; certain covered supplier costs; operational expenses; paid sick leave; and any other expenses that the SBA determines to be essential to maintaining operations.
ELIGIBLE ENTITY Own or operate 20 or fewer establishments (together with any affiliated business), regardless of ownership type of the locations and whether those locations do business under the same or multiple names, as of March 13, 2020. An affiliated business has an equity or right to profit distribution of 50 percent or more, or has contractual authority to control the direction of the business, provided that such affiliation “shall be determined as of any arrangements or agreements in existence as of March 13, 2020.” Eligible entities include a restaurant, food stand, food truck, food cart, caterer, saloon, inn, tavern, bar, lounge, brewpub, tasting room, taproom, licensed facility or premise of a beverage alcohol producer where the public may taste, sample, or purchase products, or other similar place of business in which the public or patrons assemble for the primary purpose of being served food or drink. Entities can apply using their existing business identifiers, as the SBA will avoid imposing additional burdens on applicants. Publicly-traded companies are ineligible. Entities must submit a good faith certification that: • Uncertainty of current economic conditions makes necessary the grant request to support the ongoing operations. • The entity has not applied for nor received a “Shuttered Venue Operators” grant (generally for performing arts, live venues, theaters, etc.).
TAX TREATMENT Grants are not taxed like income and all normal federal tax deductions are protected. New Limitations on Private Funds and Anti-Evasion.
Source: National Restaurant Association
LEARN MORE: Visit RestaurantsAct.com
