Dear Clients and Friends:
The Small Business Association (SBA) just released details regarding the Restaurant Revitalization Fund (RRF). The $28.6 billion RRF, authorized by the March 2021 American Rescue Plan Act (ARPA), will soon start taking applications for grants designed to equal a venue’s pandemic losses.
The Revitalization Fund will kick off after the SBA conducts a seven-day test run of the application portal over the next two weeks. No firm date has been set.
The purpose of the RRF is to support the restaurant industry by providing funding to those that have suffered significant pandemic-related revenue loss. The RRF also includes specific requirements to ensure equitable distribution to small business concerns owned by women, veterans, and socially and economically disadvantaged Applicants.
Most American restaurants and bars that lost revenue in 2020 versus 2019 will be eligible to apply for RRF grants. The ARPA explicitly names the following types of establishments that should be eligible: “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.”
Although bakeries, brewpubs, tasting rooms, taprooms, breweries, wineries, distilleries, and inns are eligible for the grants, they must be able to document that at least 33% of their 2019 gross receipts were attributable to on-site sales to the public.
The SBA will administer and disperse the RRF grants. To apply, businesses will need to either apply through SBA-recognized point-of-sale restaurant partners or directly with the SBA using an application portal. (No date has been set for the application portal launch as of mid-April 2021.)
Applicants will need to collect and submit documentation to show how hard their business has been hit. Documentation will include tax information verification with the submission of a signed IRS Form 4506-T.
Applicants that operate as a brewpub, tasting room, taproom, brewery, winery, distillery, bakery or inn have additional requirements, so be sure to thoroughly review what information is needed from the SBA before the portal goes live.
The first 21 days of the program will prioritize businesses run by women, veterans, or people from economically and socially disadvantaged groups. After that, everyone else will be able to apply. The SBA will specifically set aside $5 billion for food businesses earning not more than $500,000 per year; $4 billion to mid-sized venues taking in $501,000 to $1.5 million annually; and $500 million to establishments making under $50,000.
How Much –
Generally speaking, restaurants can apply for grants that are equal to 2020 gross revenue minus 2019 gross revenue minus PPP loan amounts. For businesses in operation for all of 2019 and 2020, the maximum grant size will be $5 million for restaurants and $10 million for restaurant groups (fewer than 20 locations, and not a publicly traded company). Grant funds will not be taxed like income.
If a restaurant was not operating for all of 2019, the maximum grant value is the average monthly gross receipts in 2020 minus the average monthly gross receipts in 2019 minus PPP loan amounts. If a restaurant was not in operation for all of 2020, it could potentially receive a grant that totals the amount of “eligible expenses” between February 15, 2020, and March 11, 2021 minus 2020 gross receipts minus PPP loan amounts.
Qualified Expenses –
The RRF grants are only able to be used on specific expenses. These include: Payroll costs; Payments of principal or interest on any mortgage obligation; Rent payments, including rent under a lease agreement; Utilities; Maintenance; including new outdoor seating construction; Supplies, including PPE and cleaning materials; Food and beverage inventory; Covered supplier costs; Operational expenses; Paid sick leave; Any other expense SBA says is essential to maintain operations.
The “covered period” for what expenses can be paid by the grant must be incurred between February 15, 2020, to March 11, 2023.
With additional guidance and details surrounding the Restaurant Revitalization Fund, your business may now have an opportunity to take advantage of this grant program. Please call our office to discuss the RRF, and other business tax relief, under the American Rescue Plan Act, 2021.
DUFFY KRUSPODIN, LLP