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Restaurant Revitalization Grants

Neil Zinser

On March 10, 2021, the American Rescue Plan Act of 2021 (Act) was passed by Congress and is expected to be signed into law by the end of the week. Provisions within the bill include another round of stimulus checks, enhancements and extensions of current‐law tax incentives, and additional funding for small businesses.

To support the restaurant and hospitality industry, the Act included $28.6 billion for the creation of the Restaurant Revitalization Fund to provide grants for businesses with less than 20 locations. The eligible businesses include restaurants, breweries, tap houses, food stands, food trucks, and most all other eating and drinking establishments. Of the $28.6 billion, $5 billion will be reserved for business with less than $500,000 in gross receipts in 2019, for the first 60 days of the program. The first 21 days of funds will only be made available to restaurants that are women or veteran‐owned, or socially and economically disadvantaged businesses. New breweries that opened in 2020 will also be able to apply for the grant as well as business that received a PPP loan.

The details of the application process and timing of the program have yet to be determined but additional guidance is to be issued by the SBA. Some representatives expect the program to be available in the next few weeks, but the application for the Shuttered Venues Grant that was included in the Consolidated Appropriations Act has yet to be opened. As timing will be a factor, brewers need to prepare and be ready when the application goes live.

The grant amount will not exceed $10 million per business and will be limited to $5 million per physical location. The grant amount will be determined by the eligible business pandemic–related revenue loss. The bill provides three options in calculating the pandemic‐related revenue loss depending on the timing of a business start date.

  1. Operations that began prior to 2019
    • 2019 gross receipts subtracted by 2020 gross receipts
  2. Operations that began during 2019
    • Annualized average monthly gross receipts for 2019 minus 2020 gross receipts
    • For example, a restaurant opened in July 2019 had an average, monthly gross receipts from July to December of $100,000. In 2020 the same restaurant had gross receipts of $500,000 for the entire year. The eligible grant would be $700,000 ($100,000 x 12 = $1,200,000 annualized 2019 gross receipts – $500,000 2020 gross receipts = $700,000)
  3. Operations that began in 2020
    • The difference between the qualified grant expenses (defined below) and gross receipts of 2020.

The amount of the grant received will be reduced by the amount of PPP loan proceeds the business received in 2020 or 2021. There is also language in the bill stating the SBA can base the grant on a formula that they determine.

Qualified Grant expenses may include the following:

  • Payroll costs
  • Mortgage Payments (no prepayment)
  • Rent (no prepayment)
  • Utilities
  • Maintenance
  • Construction to accommodate outdoor seating,
  • Supplies (including protective equipment and cleaning materials)
  • Food and beverage expenses,
  • Operational expenses,
  • Covered supplier costs as defined by the SBA under the PPP program
  • Sick leave
  • Any other expenses deemed essential by the Administrator
  • Grants can be spent on eligible expenses from 2/15/20 through 12/31/21 and the Administrator may extend the period through two years from enactment if conditions warrant.

Payroll costs are defined as they are in relation to the PPP loan and cannot be included if used for the Employee Retention Tax Credit.

As previously stated, the Act has not been signed into law and it may be sometime before the SBA issues any guidance on the grants. In the meantime, breweries can begin evaluating their situation by gathering the pertinent financial data and estimating the grant. Items to gather may include 2019 and 2020 financial statements and tax returns, PPP loan documents, PPP loan forgiveness applications and acceptance, and payroll data. Before applying for the grant, a brewery will most likely need to register with the System for Award Management (SAM).

If you have any questions about the grant or need additional information on any of the COVID‐19 related business relief funds, please contact me anytime. Cheers!

Neil Zinser, CPA

Author: Neil Zinser

This article was written by Neil Zinser, Partner at Strothman+Co. Neil has extensive experience providing tax services and business consulting to his clients. He specializes in complex tax structures including consolidating entities, multi-state entities, high net worth individuals and closely held business. It is his goal to provide meaningful tax advice to his clients and help them achieve their financial objectives. His industry experience includes restaurants, breweries, manufacturing, wholesale distributors, retail, commercial rental real estate, and nonprofit organizations.
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