To curb the economic impact of the ongoing COVID-19 pandemic, President Joe Biden signed the American Rescue Plan Act (ARP) into law on Thursday, March 11, 2021. The $1.9 trillion economic stimulus includes over $28.6 billion designated as direct aid to restaurants, a program known as the Restaurant Revitalization Fund (RRF). Roughly a year after restaurants first faced unprecedented COVID-19 restrictions, and just in time for spring and reopenings, revitalization has arrived for restaurants and franchisees.
The RRF and all related grants will be overseen by the Small Business Administration (SBA). The ARP earmarks $5 billion of the $28.6 billion RRF for restaurants with gross revenue of $500,000 or less. The remaining $23.6 billion in the RRF is available for the SBA to administer “in an equitable manner to eligible entities of different sizes based on annual gross receipts.” For an initial 21-day period, the SBA will prioritize awarding grants for businesses owned and controlled by women or veterans, or for socially and economically disadvantaged businesses.
The total grant amount for an eligible business is capped at $10 million and is limited to $5 million per physical location of the business. The SBA can adjust RRF grants based on demand and “relative local costs” in the markets where RRF recipients operate.
Grants may be made to restaurants, food stands, taverns, bars, brewpubs, tasting rooms, tap rooms, food trucks, food carts, caterers, saloons, inns, lounges, the “licensed facility or premises of a beverage alcohol producer where the public may taste, sample or purchase products” or other similar places of business in which the public or patrons gather for the primary purpose of serving food or drink. Eligible entities also include entities/businesses located in airport terminals or a Tribally-owned business.
However, entities with more than 20 locations as of March 13, 2020, state and local government-operated businesses, publicly traded companies and entities/businesses with an application pending under the Shuttered Venue Grant Program are excluded from receiving RRF grants. It is expressly noted that an entity/business is permitted to receive both a grant under the RRF and loan(s) under the PPP; but that the revenue losses used to calculate grants for eligible entities will be reduced by any PPP loan amounts received.
Eligible expenses for use of RRF grants include:
- Payroll costs;
- Paid sick leave;
- Mortgage (principal and interest (excluding prepayment)), rent (excluding prepayment) and utilities;
- Maintenance (including outdoor seating construction and walls, floors, deck surfaces, furniture, fixtures and equipment);
- Supplies, including protective equipment and cleaning materials;
- Food and beverage expenses within the scope of the normal business practice of the entity; and
- Operational expenses.
Entities receiving RRF grants must use or apply those funds for expenses incurred from a Covered Period of February 15, 2020 to December 31, 2021. The SBA Administrator is permitted to extend the date range of the Covered Period and to modify the varieties of eligible expenses as it sees fit. Any remaining funds not used on allowable expenses during the Covered Period must be returned to the SBA.
Calculation of Grant Amounts
The RRF grant amount for an eligible entity will be determined based on Pandemic-Related Revenue Loss. Except as provided in the below situations, Pandemic-Related Revenue Loss is defined as the gross receipts (as established by SBA approved documentation) of the eligible entity during 2020 subtracted from the gross receipts of the eligible entity in 2019, if such sum is greater than $0.
If an eligible entity was not in operation for the entirety of 2019, Pandemic-Related Revenue Loss is calculated by taking the sum obtained by multiplying the average monthly gross receipts of the eligible entity in 2019 by 12 and subtracting the sum obtained by multiplying the average monthly gross receipts of the eligible entity in 2020 by 12.
If an eligible entity opened beginning on January 1, 2020, the Pandemic-Related Revenue Loss would be equal to the eligible expenses incurred by the entity minus gross receipts received.
If an eligible entity was not yet opened as of the date of application for an RRF grant, but has incurred expenses which constitute eligible expenses as of the date of enactment of the RRF, the Pandemic-Related Revenue loss would be the amount of those expenses.
Under the American Rescue Plan Act, the SBA administrator may also create a new formula for grant relief to these businesses.
RRF Tax Treatment
The Act at Section 9673 provides that grant amounts “shall not be included in the gross income of the person that receives such amounts.”
Setting the Table
Business should consider now if they may be eligible for an RRF grant and should continue to stay informed of program changes. Additionally, if your business may be eligible for RRF grant assistance, it may be wise to begin organizing the documentation that will support your relief calculation, and to look back at (and document) eligible expenses as of February 15, 2020. Finally, add your name to the list found here: https://restaurantsact.com/ to continue to receive official information on the RRF program.