2020 proved to a highly challenging year for the US restaurant industry. With dine-in services shutting down, restaurants and bars reportedly lost $130 billion in sales between March and October 2020. Over 2.1 million people also lost their jobs, and 110,000 restaurants shut down by December. Given the devastating impact of the pandemic, the COVID-19 stimulus package signed by President Biden is expected to provide welcome relief to struggling restaurant owners. Labeled the American Rescue Plan Act, the stimulus package has allotted $28.6 billion to the Restaurant Revitalization Fund program.
How does the program work and what type of financial support can you expect? This article discusses the rules guiding the fund and how you can qualify.
The Basics: Understanding the Restaurant Revitalization Fund
The Restaurant Revitalization Fund will provide tax-free grants to bars, restaurants, and other related food and beverage-related businesses. These grants are meant to compensate restaurant owners for the decline in revenue in 2020 due to the pandemic
To be eligible, applicants must verify that the funds are necessary for supporting the business’s ongoing operating expenses and other expenditures. Please bear in mind that a profitable restaurant with sufficient investment capital cannot qualify for this grant.
Who Is Eligible?
According to the American Rescue Plan Act, the following entities can qualify for the Restaurant Revitalization Fund:
- Restaurants
- Food trucks
- Food stands
- Inns
- Saloons
- Bars
- Taverns
- Brewpubs
- Other similar business establishments where the public gathers to be served food and drinks
Eligible establishments must not be a part of an affiliated group having over 20 locations. In addition to this, the business must not be publicly traded and must not have an application pending under the Save our Stages program.
The amount of funds you can qualify for also varies according to when the business was established. The Act divides fund amounts based on whether a business was operational before 2019, during 2019, or during 2020. You will also have to calculate your total loss in revenue. To do this, you need to:
- Subtract your gross revenue in 2020 from your gross revenue in 2019
- Reduce the amount of gross revenue loss above by the amount of loans provided under both the First and Second Paycheck Protection Program (PPP) (Economic Injury Disaster Loans (EIDL) or funds received through the Employee Retention Tax Credit (ERTC) program will not count towards reducing revenue. Learn more about the EIDL program.)
The Act also imposes a limit on the maximum funds that can be offered. In this case, there is a $10 million limit on affiliated restaurant groups and a $5 million limit on individual restaurants.
What Can You Use the Grant For?
The Act outlines a number of eligible expenses for which the funds can be used. These expenses must be a direct result of the COVID-19 pandemic, and you should have incurred them while trying to maintain business operations during the crisis. Here is a list of the expenses that you can use the funds for:
- Payroll and benefits – these do not include employee compensation over $100,000 per year
- Mortgage (Principal and Interest) (No prepayment)
- Rent (No prepayment)
- Maintenance and Repair Expenses
- Utilities
- Construction for accommodating outdoor seating
- Walls, deck surfaces, floors, fixtures, furniture, and equipment acquired for managing operations during COVID-19
- Supplies – these include Personal Protective Equipment (PPE) and cleaning materials purchased due to COVID-19
- Food and beverage expenses (within scope of normal business operations)
- Operational expenses
- Covered supplier costs as outlined by the Small Business Administration under the PPP program
- Paid sick leave
- Other essential expenses
How Long Do You Have to Use the Funds?
According to the Act, the funds provided can be used retroactively for eligible expenses incurred from 2/15/2020 through 12/31/21. Once the covered period ends, you must return the unused funds. However, the Small Business Administration may extend the covered period up to two years once the Rescue Act is signed and considered law.
It is also important to note here that since there is no way to predict when the COVID-19 pandemic will end, eligible entities that qualify for the funds should consider spending the money sooner rather than later. With vaccine rollouts underway, there is a possibility that the ongoing crisis will be over in the next few months. If this happens, things could go back to normal, impacting your qualification for the funds.
How Can You Apply?
Eligible entities that plan to apply for the grant will need:
- A DUNS (Data Universal Numbering System) number: This is a 9-character identification number. It is a way to identify businesses based on their location. You can get a DUNS number for free. Please visit the Dun & Bradstreet website or call the hotline (1-866-705-5711) for more information.
- SAM (System for Award Management) Registration: SAM refers to the official system designed by the US government to consolidate:
- The Central Contractor Registration (CCR)
- Online Representations and Certifications Application (ORCA)
- Federal Contract Registry (FedReg)
- Excluded Parties List System (EPLS)
To register with SAM, you will need to create a login.gov account. Once you have an account, you can use it to log in to the System for Award Management by clicking here. Follow the steps outlined by the website. Once you receive an email from SAM, your registration will be active.
In the final step, you will have to submit a notarized SAM registration letter to the Federal Service Desk.
Get Help with Applying for the Restaurant Revitalization Fund
Qualifying for a grant under the American Rescue Plan Act can get confusing. You will have to calculate your revenue loss accurately and take care of other details to make sure your application does not get rejected. Windes can help by offering audit and tax services to entities in the restaurant industry. Get in touch with us today to learn more about how we can help!
For questions or more information about this article, please contact our tax professionals at taxalerts@windes.com or toll free at 844.4WINDES (844.494.6337).