Mar 15 Restaurant Revitalization Fund Established Through ARPA

The American Rescue Plan Act of 2021 established a fund to provide grants to restaurants through the Restaurant Revitalization Fund.

Here are some key facts about the Restaurant Revitalization Fund:

Program Size: $28.6 Billion

1. Small Entities: $5 billion is earmarked for entities with 2019 gross receipts of not more than $500,000.
2. All Other Entities: $23.6 billion is available for grants in an equitable manner to eligible entities of different sizes based on annual gross receipts.

Eligibility

In order to be eligible for a Restaurant Revitalization Fund grant, an applicant must have the following characteristics:

Business Type: The applicant must be one of the following:

1. a restaurant,
2. a food stand,
3. a food truck or food cart,
4. a caterer,
5. a saloon, inn, tavern, bar, lounge, brewpub, tasting room, or licensed facility or premise of a beverage alcohol producer where the public may taste, sample or purchase products, or
6. another place of business in which the public or patrons assemble for the primary purpose of being served food or drink.

Eligible entities can qualify for a grant amount of the pandemic-related revenue loss. Pandemic-related revenue loss is calculated using gross receipts, as established using such verification documentation as the SBA may require, of the eligible entity during 2020 subtracted from the gross receipts of the entity in 2019, if the sum is greater than zero. If the entity was not in operation for the entirety of 2019 then the calculation is the difference between (1) multiply the average monthly gross receipts in 2019 by 12 and (2) multiplying the average monthly gross receipts in 2020 by 12. There may be other formulas determined by the SBA. The calculated amount of the grant will be reduced by any amounts received from a covered 7(a) SBA loan (First and Second Draw PPP loans are 7(a) SBA loans) in 2020 or 2021. There will also be calculations available for eligible entities that opened anytime between January 1, 2020 and the enactment date of the bill (March 11, 2021).

Size: As of March 13, 2020, the applicant (together with any affiliated businesses) must own or operate no more than 20 locations. Note that the term “affiliated business” is defined as “a business in which an eligible entity has an equity or right to profit distributions of not less than 50 percent, or in which an eligible entity has the contractual authority to control the direction of the business, provided that such affiliation shall be determined as of any arrangements or agreements in existence as of March 13, 2020.”

Grant Size

The Act specifies that grants provided from the Restaurant Revitalization Fund will equal the pandemic-related revenue loss of the eligible entity with a cap of $10 million for each eligible entity (together with affiliated businesses—see above for a discussion on the definition of “affiliated business”) and $5 million per physical location for each eligible entity.

Award Priority

The SBA is required to provide a 21-day priority window for eligible entities that are (a) small business concerns owned and controlled by women or veterans, or (b) socially and economically disadvantaged small business concerns. Except for this priority window, and the $5 billion reserved for entities with 2019 gross receipts of not more than $500,000, the SBA Administrator is required to award grants in the order in which applications are received. Accordingly, restauranteurs are encouraged to coordinate with their advisors to prepare all application materials in advance.

Use of Proceeds

Restaurant Revitalization Fund grants can be used for the following expenditures during the covered period (currently February 15, 2020 – December 31, 2021):

1. Payroll costs;
2. Mortgage principal or interest (except for prepayment of principal);
3. Rent (excluding prepayment of rent);
4. Utilities;
5. Maintenance expenses, including construction of outdoor seating and FF&E;
6. Supplies, including protective equipment and cleaning materials;
7. Food and beverage expenses;
8. Covered supplier costs;
9. Operational expenses;
10. Paid sick leave; and
11. Other expenses that the SBA determines to be essential to maintaining the eligible entity.

If an eligible entity is not able to spend all the grant money received on these expenses, they will need to pay back the unused portion to the Treasury.

When applying for the grant the eligible entity will need to make good faith certifications that (i) the uncertainty of current economic conditions makes necessary the grant request to support ongoing operations, and (ii) the eligible entity has not applied for or received a grant under the Shuttered Venue Operators Grant.

Grants received will not be included in gross income and will not be denied deductibility of the expenses incurred by the eligible entity being covered by this grant. For partnerships and S-Corporations, the grant amount that is excluded as income will be treated as tax-exempt income.

The SBA is administering this program and we are awaiting additional guidance and applications from them and will continue to monitor updates and guidance released and provide that information to you.

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For further details and questions, please contact:

George Livanos, CPA, MST

Partner, Food & Beverage Practice

[email protected]