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Restating Financial Results
The food and beverage industry gained additional financial relief with President Biden’s American Rescue Plan Act (ARPA), which introduced a $28.6 billion Restaurant Revitalization Fund (RRF) through the U.S. Small Business Administration (SBA). With the registration portal opening on Fri., April 30, the SBA will begin accepting applications at noon on Mon, May 3.
Doeren Mayhew’s tax advisors highlight the new relief fund, including who is eligible, which expenses they can use with the grant, application details and more.
Eligible restaurants stand to receive a tax-free federal grant in the amount of its pandemic-related revenue loss, which is calculated by subtracting 2020 gross receipts from 2019 gross receipts. Keep in mind, when analyzing 2020 gross receipts, amounts received from any Paycheck Protection Program (PPP) loans, SBA Section 1112 payments, or from any SBA Economic Injury Disaster Loan (EIDL), EIDL advance, targeted EIDL advance, or other state and local small business grants should not be included.
Here are a few applicable calculations for unique situations:
The SBA has $23.6 billion available to be awarded to businesses of differing sizes based on their annual gross receipts, and $5 billion is available to be awarded to businesses with gross receipts less than $500,000 in 2019. The SBA can adjust the amount awarded to businesses based on demand and “relative local costs” of the markets in which RRF-eligible businesses operate. The maximum grant amount a business could be awarded is $10 million and is limited to $5 million per physical location of a business.
Eligible entities include privately owned businesses not permanently closed and include businesses where the public or patrons gather for the primary purpose of being served food or beverages. To qualify for an RRF, an entity must own or operate 20 or fewer establishments (along with any affiliated businesses), despite its ownership type of the locations, as well as if these locations do business under the same name or multiple, as of March 13, 2020. Affiliated businesses have a right to profit distribution of 50% or more, or have contractual authority to control the business’s direction, given such affiliation “shall be determined as of any arrangements or agreements in existence as of March 13, 2020.”
Qualifying businesses include:
The following businesses also qualify for the RRF; however, they must demonstrate that onsite sales to the public comprise at least 33% of gross receipts:
Grant recipients may use funds for the following expenses during their covered period:
Past-due expenses are also eligible if they were incurred between Feb. 15, 2020 and March 11, 2023.
All applicants must use their awarded funds by March 11, 2023. Applicants will be required to report how much of their award has been used against each eligible use category by Dec. 31, 2021.
If the grant has been fully expended prior to Dec. 31, 2021, the SBA will ask the applicant to certify that proceeds have been used on eligible expenses. Grant recipients who do not fully expend their award funds prior to Dec. 31, 2021, will be required to complete annual reporting submissions until the award has been fully expended or the period of performance expires.
Based on the sample application provided by the SBA, applicants will be required to disclose ownership information for all owners with 20% or more equity as well as affiliate information. If no owner has at least 20% ownership of the business, the applicant must list enough owners whose combined equity represents at least 20% of the business’s ownership. Applicants should also have all information related to their PPP loans received in 2020 or 2021, as they will be required to disclose the amount received.
Applicants should also have the following documentation prepared:
As referenced above, bakeries, breweries, brewpubs, tasting rooms, taprooms, wineries, distilleries or inns must provide documentation with their application proving that onsite sales to the public comprised of at least 33% of gross receipts in 2019. For these types of businesses that opened in 2020 or are not yet opened, the applicant’s original business model should have contemplated at least 33% of gross receipts in onsite sales to the public. Onsite sales include food and/or beverage consumed on the applicant’s premise, purchased to-go, purchased online and picked up, or delivered directly to the consumer for use.
Acceptable documentation of gross receipts and eligible expenses include:
Businesses wanting to apply for the RRF may use one of these three options:
Businesses interested in obtaining a grant via the RRF should prepare and act quickly. To obtain assistance preparing this information or to apply, contact Doeren Mayhew’s CPAs today.
This publication is distributed for informational purposes only, with the understanding that Doeren Mayhew is not rendering legal, accounting, or other professional opinions on specific facts for matters, and, accordingly, assumes no liability whatsoever in connection with its use. Should the reader have any questions regarding any of the news articles, it is recommended that a Doeren Mayhew representative be contacted.
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