American Rescue Plan and the Restaurant Revitalization Fund

On March 11, the American Rescue Plan Act (ARPA or the Act) became law. Among its many programs is one intended to provide support for businesses in the food service industry suffering from a “pandemic-related revenue loss” (or revenue loss).   

The Restaurant Revitalization Fund (RRF) will provide up to $28.6 billion in federal grants to eligible entities to offset their revenue losses. Eligible entities, as defined in the Act, include restaurants, food stands, food trucks, food carts, caterers, saloons, inns, taverns, bars, lounges, brewpubs, tasting rooms, taprooms, and other similar places of businesses in which the public or patrons assemble for the primary purpose of being served food or drink. There are some limitations that will disqualify otherwise eligible businesses, including those operated by state or local governments, publicly traded companies, larger businesses owning or operating more than 20 locations, or a business that has received or applied for a shuttered venue operators grant.  

Importantly, ARPA also provides that these grants shall not be included in the gross income of the recipient and that expenses paid for with the proceeds of the grant will be deductible in full.  

The amount of an RRF grant that an eligible entity is entitled to receive is equal to its revenue loss (as further limited).  This loss is measured in several ways, depending generally upon when the entity was formed:  

  • For an eligible entity in existence before 2019, revenue loss means its 2019 gross receipts less its 2020 gross receipts.  
  • For an eligible entity not in operation for the entirety of 2019, revenue loss is calculated by taking 12 times its average monthly gross receipts in 2019, minus 12 times its average monthly gross receipts in 2020;
  • For an eligible entity that opened between January 1, 2020 and March 10, 2021, revenue loss means its payroll costs (generally as defined for PPP) minus its gross receipts; or
  • For an eligible entity that has not yet opened as of the date of application for an RRF grant but has incurred payroll costs (generally as defined for PPP) as of March 10, 2021, the amount of those payroll costs.  

The SBA can also establish a formula to determine the revenue loss for the items above except for those businesses in existence prior to 2019. Further, the amount determined by the above formulas is reduced by any amounts received from the First and Second Draw PPP loans. However, the maximum amount of grant to any eligible entity shall not exceed $10,000,000 and $5,000,000 per physical location.  

Grants can be used against the following expenses during the period beginning February 15, 2020 and ending December 31, 2021 (or as later established by the SBA):   

  1. Payroll costs (as defined)
  2. Mortgage principal and interest (excluding prepayment of principal)
  3. Rent (excluding prepaid rent)
  4. Utilities
  5. Maintenance including:
    1. Construction to accommodate outdoor seating, and

    2. Walls, floors, deck surfaces, furniture, fixtures and equipment

  6. Supplies (including protective equipment and cleaning supplies)
  7. Food and beverage expenses within the scope of normal business practices
  8. Covered supplier costs as defined under Section 7A of the Small Business Act
  9. Operational expenses
  10. Paid sick leave
  11. (Any other expenses that the administrator determines are essential
     

In addition, an eligible entity will need to certify in good faith that (i) the uncertainty of current economic conditions makes necessary the grant request to support its ongoing operations; and (ii) it has not applied for or received a grant under SBA’s Shuttered Venue Operators Grant Program.

The grants are generally awarded in the order applications are received (with priority given to business concerns owned and controlled by women, owned and controlled by veterans, or to socially and economically disadvantaged small businesses during the initial 21-day application period). Further, The SBA will “prioritize the ability of each applicant to use their existing business identifiers over requiring others forms of registration or identification that may not be common to their industry and imposing additional burdens on applicants.” 

Unfortunately, two weeks after ARPA’s enactment, the industry is still awaiting specific guidance on the application process. It is imperative, though, that an entity be in a position to apply as soon as the application process is ready. The National Restaurant Association is advising eligible entities to:

  • Sign up for a Data Universal Number System number from Dun and Bradstreet;
  • Register with the U.S. Federal Government’s System for Award Management (SAM) via www.SAM.gov;
  • Send a SAM-notarized letter to the Federal Service Desk; and
  • Gather documents to support the extent of gross revenue decline from 2019 to 2020.

If you have any questions while you are preparing for this program, please don’t hesitate to contact Kristyn Stang or Zackary Davis with any questions.  

You’ve heard our thoughts… We’d like to hear yours

The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at [email protected].

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2021 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

our thoughts on
OMB Releases 2021 Compliance Supplement
IRS Provides Taxpayer-Friendly Guidance for the Employee Retention Credit
COVID-19 Scams Surge with New Variants
Ohio Update on the Unemployment Benefits Exclusion for Taxpayers Who Filed Prior to the Enactment of the American Rescue Plan Act
LIFO Liquidation Relief for Automotive Dealers
Will We See Charitable Gift Breaks Post 2021?
Register to receive our weekly newsletter with our most recent columns and insights.
Have a question? Ask us!

We’d love to hear from you. Drop us a note, and we’ll respond to you as quickly as possible.

Ask us
contact us

This site uses cookies to ensure that we give you the best user experience. Cookies assist in navigation, analyzing traffic and in our marketing efforts as described in our Privacy Policy.

×