The American Rescue Plan Act of 2021 Passes, Providing Relief for Restaurants

30-second summary:

• $28.6 billion in relief funding for restaurants – President Biden signed the American Rescue Plan Act of 2021 (ARPA) to support restaurants
• The Restaurant Revitalization Fund (RRF) grants – will become available 60 days after the signing of the ARPA by President Joe Biden which occurred on March 11.
• Learn if your restaurant is eligible – Watch Aprio’s webinar, to learn more about the RRF. Click here to watch now.

On March 11 2021, the American Rescue Plan Act of 2021 (ARPA) was signed into law. The ARPA includes a much-anticipated program to support restaurants impacted by the pandemic: the Restaurant Revitalization Fund (RRF). The RRF, which will be administered by the U.S. Small Business Administration (SBA), provides for $28.6 billion in grants for eligible entities, $5 billion of which will be set aside for entities with 2019 gross receipts of $500,000 or less.

The RRF grants are nontaxable and the associated expenses are deductible.  Much like the Paycheck Protection Program (PPP) loans, the exemption from income tax on the funds received shall not deny an increase in basis.

Let’s take a closer look at the key criteria of the RRF.

Who is eligible?

The ARPA has defined an eligible entity as a business that:

1. Is a restaurant, food stand, food truck, food cart, caterer, saloon, inn, tavern, bar, lounge, brewpub, tasting room, taproom-licensed facility or the premise of a beverage alcohol producer 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; and
2. Owned or operated less than 20 locations, together with its affiliates, as of March 13, 2020.

An eligible entity, as defined above, that wishes to apply for a grant will be required to certify, in good faith, that:

1. The uncertainty of the current economic conditions makes it necessary for the grant request to support the ongoing operations of the eligible entity; and
2. The eligible entity has not applied for or received a Shuttered Venues Operators Grant described in Section 324 of The Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act.

How is the RRF grant amount calculated?

The RRF grant will be equal to the pandemic-related revenue loss of the eligible entity reduced by any PPP loans obtained in either 2020 or 2021. Generally, pandemic-related revenue loss means 2019 gross receipts less 2020 gross receipts. The ARPA provides additional provisions for an eligible entity that was not in operation for any or all of 2019.

Individual RRF grants cannot exceed more than $5 million, or in the case of an affiliated group, $10 million in the aggregate.

What is the permissible use of RRF grant funds?  

The RRF grant must be used on eligible costs during the covered period, defined as the period beginning on February 15, 2020, and ending on December 31, 2021, or on a date established by the SBA that will not exceed two years after the signing of the ARA.

Eligible expenses include:

• Payroll and benefit costs
• Payments of principal or interest on any mortgage obligation (which shall not include any prepayment of principal on a mortgage obligation)
• Rent payments, including rent under a lease agreement (which shall not include any prepayment of rent)
• Utilities
• Maintenance expenses, including 1) construction to accommodate outdoor seating, and 2) walls, floors, deck surfaces, furniture, fixtures and equipment
• Supplies, including protective equipment and cleaning materials
• Food and beverage expenses that are within the scope of the normal business practice of the eligible entity before the covered period
• Covered supplier costs, as defined in Section 7A(a) of the Small Business Act, as redesignated, transferred and amended by Section 304(b) of The Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Public Law 116-260)
• Operational expenses
• Paid sick leave
• Any other expenses that the SBA determines to be essential to maintaining the eligible entity

If an eligible entity receives a RRF grant and is unable to use all the grant funds or permanently cease operations before the end of the covered period, the eligible entity must return to the U.S. Department of the Treasury any funds that it did not use for the allowable expenses described above.

The bottom line

The RRF grants become available 60 days after the signing of the ARPA by President Joe Biden which occurred on March 11. As part of the SBA’s continued effort to promote access to capital to underserved groups , the SBA shall prioritize awarding grants to eligible entities owned or controlled by women and veterans during the initial 21-day period.

While further information on how to apply for a RRF grant is forthcoming, including required documentation, we recommend that businesses evaluate their eligibility and gather the financial information to support their calculation of pandemic-related revenue loss.

At Aprio, we are continuously monitoring new guidance from the SBA, as well as the Treasury, Congress and the IRS, to ensure we have the latest information when advising our clients and helping them claim much-needed COVID-19 relief funds.

To learn more about the RRF and find out whether your restaurant is eligible to receive funding, watch Aprio’s webinar. For further clarification and questions, contact Aprio’s Revitalization Fund team to schedule a consultation.

Disclaimer for services provided relative to SBA programs and the CARES Act

Aprio’s goal is to provide the most up-to-date information, along with our insights and current understanding of these programs and regulations to help you navigate your business response to COVID-19.

The rules regarding SBA programs are constantly being refined and clarified by the SBA and other agencies In certain instances, the guidance being provided by the agencies and/or the financial institutions is in direct conflict with other competing guidance, regulations and/or existing laws.

Due to the evolving nature of the situation and the lack of final published rules, Aprio cannot guarantee that additional changes or updates won’t be needed or forthcoming and the original advice given by Aprio may be affected by the evolving nature of the situation.

You need to evaluate and draw your own conclusions and determine your Company’s best approach relative to participation within these programs based on your Company’s specific circumstances, cash flow forecast and business strategy.

In situations where resources are provided by third parties, those services should be covered under a separate agreement directly with that service provider. Aprio is not responsible for the actions of any other third party.

Aprio encourages you to contact your legal counsel to address the legal implications of the impact of the CARES Act and specifically your participation in any of the SBA programs