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Authored by Paul Dillon, Michelle Hobbs, Mike Schiavo and Michael Wronsky

The Small Business Administration (SBA) announced via its website that applications for Restaurant Revitalization Fund (RRF) grants will open at noon Eastern time on Monday, May 3, 2021. SBA application portal registration will begin at 9 a.m. ET on Friday, April 30, 2021. Given the program is currently only funded with $28.6 billion, time is of the essence for qualified entities to apply. As discussed below, applicants will need to submit documentation supporting their applications. We strongly recommend gathering this information now to allow applications to be submitted as soon as possible after the window opens.

Grants will be awarded in the order received; however, priority will be given to those businesses owned and controlled by women, veterans or certain socially or economically disadvantaged individuals. Additional details regarding the registration and application processes can be found on the SBA’s website.

The RRF was created by the American Rescue Plan Act (ARPA) to provide restaurants with grants equal to their pandemic-related revenue loss, up to $10 million per entity (including affiliates), and limited to $5 million per physical location. Grant amounts are reduced by any Paycheck Protection Program (PPP) loan proceeds received. Eligible entities include restaurants, caterers, food trucks, bars, lounges, taverns, brewpubs, taprooms and tasting rooms. Though not expressly excluded by the ARPA, the SBA has indicated tax-exempt entities are ineligible for grants. Grants must be used for eligible purposes (including, but not limited to, payroll costs, mortgage and rent payments excluding prepayments, utilities, operational expenses, etc.) no later than March 11, 2023.

As part of the application process, program candidates will need to submit various documents in order to verify data used in the application. Their 2019 and/or 2020 federal income tax returns (Forms 1120, 1065, 1120-S, and 1040 Schedules C or F) will be required to support total gross receipts for each year. Furthermore, bank statements, income or profit/loss statements or Forms 1099-K will also be accepted. In addition, amounts and loan numbers of first- and second-draw PPP loans must be disclosed. Keep in mind, PPP loan proceeds (as well as some other disaster-relief-funding mechanisms) are not included in gross receipts for this purpose.

Certain applicants have additional substantiation requirements. For example, brewpubs, tasting rooms, breweries, wineries, distilleries and bakeries must also provide documents evidencing onsite sales to the public comprised 33% of their gross receipts in 2019. Inns must be able to prove at least 33% of their 2019 gross receipts came from onsite food and beverage sales to the public.

See our alert, SBA launch of Restaurant Revitalization Fund appears imminent, for additional information on this program. Please contact your Baker Tilly advisor for assistance with this application process or if you have questions on how the above may affect your tax situation.

The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.

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