Woman paying her bill at restaurant

The American Rescue Plan Act of 2021 (the Act) passed the U.S. Senate and the House of Representatives and is on its way to being signed into law by President Biden. Of the $1.9 trillion spending bill, $28.6 billion is designated for the Restaurant Revitalization Fund, which is based on the Real Economic Support That Acknowledges Unique Restaurant Assistance Needed To Survive (RESTAURANTS) Act of 2020, will provide relief for small and midsize restaurants.

With the passage of this new legislation, restaurant operators need to understand their eligibility and the benefits provided to them. Similar to the Paycheck Protection Program (PPP) loans, the borrower is required to make a good faith certification that the uncertainty of the current economic conditions makes the grant necessary to support their ongoing operations. Additionally, the business cannot apply for a Shuttered Venue Operators Grant. The eligible businesses that can apply for a grant include:

  • Restaurants
  • Food stands/trucks/carts
  • Caterers
  • Bars/taverns or similar drinking establishments
  • Brewpubs/tasting or tap rooms

To qualify for funding, restaurants must not be part of an affiliated restaurant or restaurant group with more than 20 locations. Public companies also are not eligible. Food and drink entities with 20 locations or fewer will qualify for grants equal to the difference between their 2020 and 2019 revenue, with alternative calculations for entities not in business all of 2019 or 2020. The amount of pandemic-related revenue loss is reduced by any amounts received under the PPP loan program. The Act will provide up to $10 million in relief per entity and affiliated businesses (limited to $5 million per physical location). Grants received under this program are exempt from federal income tax, and expenses paid with the funds are deductible. The first 21 days of the grant period will prioritize providing funding to entities owned and controlled by women, veterans and socially and economically disadvantaged small businesses.

The list of eligible expenses is long, allowing every restaurant to determine their biggest need and seek the appropriate funding. The types of eligible expenses include:

  • Payroll, including paid sick leave
  • Mortgage principal and interest (but not prepayment of the mortgage)
  • Rent and utilities
  • Maintenance, including construction to accommodate outdoor seating
  • Supplies including protective equipment and cleaning supplies
  • Food and beverages
  • Covered supplier costs and operational expenses
  • Other costs determined by the administrator to be essential

Baker Tilly professionals can help you take advantage of timely and important tax credits for the restaurant industry.

Todd C. Bernhardt
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