April 20, 2021

Restaurant Revitalization Fund Offers Grants for Food and Beverage Industry

In an effort to help restaurants and bars recover from the financial impacts of COVID-19, $28.6 billion of the American Rescue Plan is allocated for a Restaurant Revitalization Fund (RRF). Below we cover the basics of the RRF as outlined by the SBA, including eligibility requirements, covered expenses and how to apply for RRF grant funding.

Who is eligible for Restaurant Revitalization Funding?

The American Rescue Plan outlines that businesses in which the public assemble for the primary purpose of being served food and drink are eligible. The Plan indicates that the following food and beverage establishments are eligible:

  • Restaurants
  • Bars
  • Food stands
  • Food trucks and carts
  • Caterers
  • Saloons
  • Inns
  • Taverns
  • Lounges
  • Brewpubs, tasting rooms and taprooms
  • Other similar places of business in which the public or patrons assemble for the primary purpose of being served food or drink

Businesses that are state or local government-operated, publicly traded or have 20 locations or more are not eligible. Those who have already applied for the Shuttered Venue Operators Grant are also ineligible for RRF funding.

How much can I apply for out of the Restaurant Revitalization Fund?

Through the RRF, eligible establishments will be able to apply for a grant equal to their pandemic-related revenue loss, up to $10 million per entity or $5 million per location, limited to 20 locations. Grants will be calculated by subtracting 2020 revenue from 2019 revenue.

Those businesses that have received PPP (round 1 or 2) funding will be eligible for an RRF grant, but the RRF grant total will be reduced by the amount of the PPP loan(s). EIDL loans and Employee Retention Tax Credit funding does not impact RRF funding.

For those establishments not operating for all of 2019, the maximum grant is the average monthly gross receipts in 2020 minus the average monthly gross receipts in 2019. Similar to PPP loan forgiveness, the RRF grant will not be taxable income and all associated expenses will be tax-deductible.

What can an RRF grant be used for?

According to the SBA, grant funding does not have to be paid back if it is used for eligible expenses from February 15, 2020 until March 11, 2023, including:

  • Business payroll costs, including sick leave and costs related to the continuation of group health care, life, disability, vision, or dental benefits during periods of paid sick, medical, or family leave, and group health care, life, disability, vision, or dental insurance premiums
  • Payments on any business mortgage obligation, both principal and interest. Note: this does not include any prepayment of principal on a mortgage obligation
  • Business rent payments, including rent under a lease agreement. Note: this does not include any prepayment of rent
  • Business debt service, both principal and interest. Note: this does not include any prepayment of principal or interest
  • Business utility payments for the distribution of electricity, gas, water, telephone, or internet access, or any other utility that is used in the ordinary course of business for which service began before March 11, 2021.
  • Business maintenance expenses including maintenance on walls, floors, deck surfaces, furniture, fixtures, and equipment
  • Construction of outdoor seating
  • Business supplies, including protective equipment and cleaning materials
  • Business food and beverage expenses, including raw materials for beer, wine, or spirits
  • Covered supplier costs, which is an expenditure made by the eligible entity to a supplier of goods for the supply of goods that:
    • Are essential to the operations of the entity at the time at which the expenditure is made; and
    • Is made pursuant to a contract, order, or purchase order in effect at any time before the receipt of Restaurant Revitalization funds; or
    • With respect to perishable goods, a contract, order, or purchase order in effect before or at any time during the covered period
  • Business operating expenses, which is defined as business expenses incurred through normal business operations that are necessary and mandatory for the business (e.g. rent, equipment, supplies, inventory, accounting, training, legal, marketing, insurance, licenses, fees). Business operating expenses do not include expenses that occur outside of a company’s day-to-day activities.

How can I apply for the RRF?

The SBA offers three ways to apply for the RRF funding:

  1. Through a recognized SBA Restaurant Partner
  2. Through SBA directly at restaurants.sba.gov
  3. By calling (844) 279-8898

Download the latest SBA Restaurant Revitalization Funding Program Guide for more information on the RRF and documentation requirements. The application process is expected to open soon, with the first 21 days being prioritized for women-owned, minority-owned and veteran-owned businesses.

Our advisors are closely following COVID-19 relief efforts and will continue to publish insights to keep you informed. Visit our COVID-19 Resource Center for more resources. To discuss your situation and recovery options, contact an Anders advisor below.

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February 21, 2021

2021 Anders Tax Pocket Guide

September 1, 2020

How a CARES Act Correction to Qualified Improvement Property Can Increase Cash Flow for Bars and Restaurants

After the Tax Cuts and Jobs Act (TCJA) of 2017 brought some unintended consequences to the tax treatment of qualified improvement property, a long-awaited change has come that could provide an immediate cash flow opportunity for restaurants, bars and the hospitality industry as a whole. Businesses that have made any qualified improvements such as ceilings, installation of drywall, interior doors, electrical or plumbing during the last two years can benefit from a technical correction made by the Coronavirus Aid, Relief and Economic Security (CARES) Act.

While the pandemic has had a particularly difficult effect on those in the restaurant and hospitality industry, this new tax savings opportunity could go a long way in helping those within the industry recoup some of the income lost during this time.

Bonus Depreciation Eligibility

Before COVID-19, many restaurants, breweries and bars made improvements to their nonresidential buildings during the last couple of years, such as updating a lobby, kitchen, or distillery. Whether these improvements were remodels, new signage or drive thru windows, these large expenditures were most likely then met with a much higher tax liability than anticipated for 2018 and 2019. The CARES Act provided a technical correction that most have been waiting for since the end of 2017. The CARES Act treats Qualified Improvement Property (QIP) as 15-year property, resulting in taxpayers being eligible to take 100% bonus depreciation on QIP rather than the previously stated depreciation over 39 years. This change is retroactive to January 2018.

Taking Advantage of the New QIP Rules and Retroactive Benefits

It’s important for restaurants and all businesses who have yet to file their 2019 return to re-evaluate all potential QIP for this tax saving opportunity.

Taxpayers who have filed their 2018 and/or 2019 tax returns, and had placed  QIP in service, may consider amending their 2018/2019 return to treat any QIP as 15-year property and eligible for bonus depreciation. Another option to filing an amended return, taxpayers may consider filing Form 3115, Application for Change in Accounting Method, with their 2019 tax return (if not yet filed) or their 2020 tax return and claim the previously missed depreciation as a 481(a) adjustment. This change in accounting method will allow taxpayers to “catch up” all missed QIP depreciation from the beginning of 2018 to current.

Our advisors are closely following COVID-19 relief efforts and will continue to publish insights to keep you informed about potential impacts and benefits. Visit our COVID-19 Resource Center for more resources. To discuss your situation and recovery options, contact an Anders advisor below.

All Insights

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