The Side Dish

Finance to Table Education for Operating Your Restaurant

Restaurants eligible for tax free pandemic loss grants

Tucked into the American Rescue Plan Act signed into law March 11, 2021 is a $25 billion Restaurant Revitalization Fund (RRF) administered by the U.S. Small Business Administration (SBA). The RRF establishes tax free pandemic grants for eligible businesses suffering from COVID-19 related revenue loss.

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To qualify for an RRF grant, your restaurant business must show loss of revenue by subtracting 2020 gross receipts from 2019 gross receipts. Restaurant businesses not operating for all of 2019 should multiply average monthly gross receipts for 2019 times 12 and then subtract 2020 gross receipts. If you opened in 2020, you’re eligible for a grant equaling the amount of eligible expenses subtracted from your gross receipts. If you haven’t opened by your application date but you have incurred eligible expenses, the grant is equal to what your eligible expenses are.

Eligible expenses are payroll, principal or interest on mortgages, rent, utilities, maintenance, renovation to accommodate outdoor seating, protective equipment and cleaning material, your restaurant’s normal food and beverage stock, covered supplier costs, operational expenses, paid sick leave and other expenses relating to operations to be determined by the SBA later. Covered eligible expenses are those incurred from February 15, 2020 to December 31, 2021. The SBA reserves the right to change those dates.

Your restaurant business is eligible if you have 20 or fewer locations (including affiliated businesses) in business as of March 13, 2020. Eligible entities include restaurants, food stands, food trucks, food carts, caterers, saloons, inns, taverns, bars, lounges, brewpubs, tasting rooms, taprooms, any licensed facility or premise where the public may taste, sample, or purchase products, or other similar place of business in which the public or patrons assemble for the primary purpose of being served food or drink.

Grant amounts are capped at $10 million for any eligible business and its affiliated businesses. It’s also limited to $5 million per physical location.

You can apply with your tax identification number and must certify in good faith that your business has been adversely affected by the pandemic and you have not received a Shuttered Venue Operators grant.

Be aware that publicly traded companies are ineligible and if you’ve received a Paycheck Protection Program (PPP) loan, your RRF grant is reduced by the amount of your first and second draw loans. If your business closes after you receive the grant or you don’t spend all the funds before the covered dates expire, you must return the unspent funds to the SBA.

To ensure fairness to all, the SBA has broad discretion in who it awards the grants to and how much money is awarded. For the first 21 days, priority is being given to women owned and operated businesses, veterans and disadvantaged small businesses. It is anticipated that the priority application process, will start mid to late April and all non-priority applications will open in May.

If you have questions on how to go about applying for pandemic grants and/or what to do to prepare documentation in advance, do not hesitate to reach out to one of our restaurant professionals who can guide you through this process. For more information and resources on COVID-19, see our coronavirus page.

Beth Hawley