The Restaurant Revitalization Fund: What You Need to Know State and Local Tax

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The Restaurant Revitalization Fund: What You Need to Know

The Restaurant Revitalization Fund: What You Need to Know

On March 11, 2021, after the closure of 110,000 establishments and the layoff of 2.5 million people, the long-awaited Restaurant Revitalization Fund (“Revitalization Fund”) was enacted through the American Rescue Plan Act of 2021 (P.L. 117-2, “ARPA”).1 The Revitalization Fund dedicates $28.6 billion to the owners of qualifying restaurants that suffered from the COVID-19 pandemic. Funding is available on a first-come, first-served basis subject to a priority funding period for small and socially or economically disadvantaged businesses and will remain open until March 11, 2023 unless the funds are depleted sooner.2  

Who Is Eligible?

Congress established the Revitalization Fund within the Small Business Administration (SBA) which opened the Revitalization Fund for applications effective April 17, 2021. The Revitalization Fund offers broad relief to the hard-hit industry, and Eligible Entities include a broad array of venues, including restaurants, food stands, food trucks, food carts, caterers, saloons, inns, taverns, bars, lounges, brewpubs, tasting rooms, taprooms, licensed facilities or premises of a beverage alcohol producer where the public may taste, sample or purchase products. In addition, the eligible entities may be located in an airport terminal or owned by a Tribal concern.3

Franchisees are also eligible to apply under certain conditions. The franchisee must be operating under a franchise or similar agreement that meets the Federal Trade Commission definition of a franchise in 16 CFR 436. The franchise must be listed in the SBA Franchise Directory with a franchise identifier code to ensure the franchise is eligible under SBA’s other eligibility criteria.4

While the definition of an “Eligible Entity” is broad, there are some important exclusions. An Eligible Entity, including Affiliated Businesses, cannot own or operate more than 20 locations as of March 13, 2020. Also, an Eligible Entity cannot have received or have a pending application for a Shuttered Venue Operators grant pursuant to Section 324 of the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act. Nor can an Eligible Entity be publicly traded. In regard to Paycheck Protection Program (PPP), SBA permits Eligible Entities to have a PPP loan, but the funds are subtracted from the Revitalization Award.5

In addition to exclusions, there are important limitations on some types of Eligible Entities. For a brewpub, tasting room, taproom, brewery, winery, distillery, bakery or inn, the applicant must submit documentation that the onsite sales of food and beverages to the public comprise at least 33% of its gross receipts.

How Much Is the Award?

The amount of funding for qualified applicants is determined by the “pandemic-related revenue losses”. To determine the amount of a Revitalization Award, the formula depends on when the business started operations.6

  • For businesses that were in operation prior to or on January 1, 2019, the general formula is Gross Receipts in 2019 less Gross Receipts in 2020 less the amount of PPP Loan.7
  • For businesses that started during 2019, the applicant annualizes its gross receipts for 2019 (monthly average of gross receipts during period of operation in 2019 x 12 months) less Gross Receipts for 2020 and less PPP loan.
  • For businesses that started operations between January 1, 2020 and March 10, 2021, as well as businesses that have not yet opened but have incurred eligible expenses, the award is the amount spent on eligible expenses between February 15, 2020 and March 11,2021 minus 2020 and 2021 gross receipts (through March 11, 2021) minus PPP loan amounts.  

Regardless of the above formula, the maximum amounts of a Revitalization Award are $5 million per physical location and $10 million per legal entity (which includes “affiliated businesses” as defined by SBA).8

What Are Eligible Expenses?

In keeping with the intended nature of the relief, qualified applicants may use the Revitalization Award for a broad array of uses. Eligible Uses include the following: payroll, paid sick leave, principal and interest on mortgage obligations, rent, utilities, maintenance (including construction costs for outside seating), supplies, food and beverage expenses (including raw materials for beer, wine and spirits) and operational expenses.9

How Can You Apply?

There are several venues for filing your Revitalization Fund application. An eligible business can apply through one of the SBA’s Point-of-Sale Restaurant Partners’ portal, via the SBA online portal (which should become active by May 1, 2021) or by telephone. Also, recognizing that some qualified owners were disproportionately impacted, the ARPA dedicated $5 billion to businesses with gross receipts no more than $500,000 in 2019. Additionally, $4 billion is set aside for businesses with 2019 gross receipts from $500,001 to $1,500,000, and $500 million for those with 2019 gross receipts of no more than $50,000. The ARPA also prioritized applications during the initial 21 days of the program to small businesses that are owned by women, veterans, or socially and economically disadvantaged concerns.10

How We Can Help

Like we do for so many of our clients who apply online for economic development incentives, our site selection and incentives advisory team can advise clients on “eligibility” and assist with gathering data and organizing documents before logging onto a portal. This due diligence is even more important for the Revitalization Fund as corrections may delay funding awards and the SBA will not permit corrections after an award has been paid.11By investing time to organize information before applying, our clients may ultimately save time and be able to establish a record keeping system so they can comply quickly if audited.

Sources
1.Rachel King, “More than 110,000 eating and drinking establishments closed in 2020”, Fortune (January 26, 2021) found online at https://fortune.com/2021/01/26/restaurants-bars-closed-2020-jobs-lost-how-many-have-closed-us-covid-pandemic-stimulus-unemployment/.
2.SBA Restaurant Revitalization Funding Program Guide (April 20, 2021) p.3 available at https://www.sba.gov/sites/default/files/2021-04/2021.04.20%20-%20Restaurant%20Revitalization%20Funding%20Program%20Guide%20Finalshare-508.pdf
3.ARPA Section 5003(4)(A) and (B).
4.Program Guide, pp. 5-6.
5.ARPA Section 5003(4)(C)(i)-(ii)
6.ARPA Section 5003(7)
7.The pandemic-related revenue losses shall exclude covered loans made under paragraphs 36 or 37 of section 7(a) of the SBA Act of 2020 or 2021.
8.ARPA Section 5003(c)(4)(A).
9.ARPA Section 5003(c)(5) and Program Guide p. 9.
10.ARPA Section 5003(b)(2)(B)(i) and (c)(3)(A) respectively.
11.Program Guide, p. 7.

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