SBA to Begin Accepting Restaurant Revitalization Fund Applications on May 3rd

Blog
April 28, 2021

The U.S. Small Business Administration (SBA) announced that they will begin accepting Restaurant Revitalization Fund (RRF) applications on Monday, May 3, 2021. During the first 21 days that the RRF is opened, the SBA will prioritize awarding funds to small business that are at least 51% owned and controlled by individuals who are:

  • Women
  • Veterans and/or
  • Socially and economically disadvantaged individuals

The RRF was created as a part of the American Rescue Plan in which $28.6 billion was set aside to help aid restaurant operators negatively impacted by COVID-19. The SBA previously announced key guidelines for the RRF on April 17, 2021, including a draft of the RRF application. Below is a summary of how the RRF program will work.

Who is Eligible?

Eligible entities are businesses where the public or patrons assemble for the primary purpose of being served food or drink. This would include but is not limited to:

  • Restaurants
  • Food stands, food trucks, food carts
  • Caterers
  • Bars, saloons, lounges, taverns
  • Snack and nonalcoholic beverage bars
  • Bakeries**
  • Brewpubs, tasting rooms, taprooms**
  • Breweries**
  • Inns***

**Eligible if on-site sales comprise of at least 33% of gross receipts

***Eligible if on-site sales of food and beverage to the public comprise of at least 33% of gross receipts

To be eligible, businesses must not have permanently closed, not filed for bankruptcy and must own or operate (together with any affiliated businesses) 20 or fewer locations as of March 13, 2020.

How Much Funding is Available?

SBA may provide funding up to $5,000,000 per location (not to exceed $10,000,000 total for the applicant and any affiliated businesses).

The grant amount will be calculated in one of three ways:

1) In Business Prior to January 1, 2019

2019 Gross Receipts

Less: 2020 Gross Receipts

Less: Total Amounts of Paycheck Protection Program (PPP) First and Second Draw Loans

2) Began Operations Partially Through 2019

Annualized 2019 Gross Receipts (2019 gross receipts dividend by months in operations x 12)

Less: 2020 Gross Receipts

Less: Total Amounts of PPP First and Second Draw Loans

3) Began Operations Between January 1, 2020, and March 10, 2021, or have not yet opened but have incurred eligible expenses as of March 11, 2021

Amount Spent on Eligible Expenses****

Less: 2020 Gross Receipts

Less: Total Amounts of PPP First and Second Draw Loans

**** Eligible expenses are deemed to be the same expenses that the RRF grant can be spent on

What Are the Eligible Uses of the Funds?

  • Payroll and benefits (not including employee compensation exceeding $100,000 year)
  • Mortgage (no prepayment)
  • Utilities
  • Rent (no prepayment)
  • Repairs and maintenance
  • Construction to accommodate outdoor seating
  • Supplies (including protective equipment and cleaning materials)
  • Food and beverage expenses
  • Covered supplier costs as defined by the SBA under the PPP program
  • Sick leave
  • Other business operating expenses incurred through normal business operations

Will the Grant be Taxable?

Grants received under the RRF program will not be included in federal taxable income. The American Rescue Plan further states that “no deduction shall be denied, no tax attribute shall be reduced . . . by reason of exclusion from gross income” as it relates to expenses funded by RRF grants.

A state however may be able to increase an eligible entity’s state tax liability that’s associated with its acceptance of the RRF grant.

What is the Timeframe for Using the Funds?

Awardees must use all proceeds from the RRF by March 11, 2023, on eligible expenses incurred beginning on February 15, 2020, and ending on March 11, 2023. Awardees that are unable to use all proceeds from the RRF on eligible expenses must return any unused funds to the SBA.

Will there be a “Use of Funds” Validation?

Not later than December 31, 2021, all applicants will be required to report through the SBA’s application portal how much of their grant has been used against each eligible expense category.  All applicants that do not fully expend their grant prior to December 31, 2021, will be required to complete annual reporting submissions until they fully expend the grant or the period expenditure expires.

How do you Apply?

The RRF will be administered directly by the SBA. There are three ways to apply:

  1. Through a recognized SBA Restaurant partners
  2. Through the SBA’s application platform at restaurants.sba.gov
  3. Telephonically at (844) 279-8898

What Documents Do I Need in Order to Apply?

  • Application- SBA Form 3172
  • 3 months of bank statements
  • IRS Form 4506-T
  • Documentation of gross receipts for 2019 and 2020 and if applicable eligible operating expenses (e.g. business tax returns, point of sales reports, IRS Form 1099-K, profit, and loss statements)

For more information on the Restaurants Revitalization Fund, and/or any other COVID-19 related economic relief, please visit Aronson’s COVID-19 Resources Hub. Our tax specialists are also available for consultation on this for restaurants, hotels, distributors, and retail businesses. Please contact Aaron Boker or one of our hospitality tax advisors at 202.770.4018 for more information.