As a part of the $1.9 trillion “American Rescue Plan” recently signed into law, the Small Business Administration (the “SBA”) is highly likely to accept applications for grants within weeks under a $28.6 billion “Restaurant Revitalization Fund” program. The program is designed to assist smaller restaurants and restaurant groups.
Which Establishments May Obtain a Grant?
Restaurants (and other food and beverage businesses that serve gatherings where people join to enjoy the same) accommodate the public) eligible for the SBA grants have fewer than 20 locations (whether under the same or different names). Entities that are publicly traded, and entities that have applied for or received a Section 324 grant (aka, the “Shuttered Venue Operators Grant”, are excluded from the program. Franchisees with fewer than 20 locations are eligible.
How and When Can Eligible Entities Apply?
The Restaurant Revitalization Fund grants will be distributed by the SBA, at first via the SBA’s website, SBA.gov. The first three weeks the fund is open, grants will be prioritized for businesses owned by women, veterans, and/or socially or economically disadvantaged individuals.
Grant Amount Calculations
Here is how the grant amount calculations work for various eligible entities:
- Restaurants that were open as of January 1, 2019, restaurant grants will be calculated by subtracting 2020 revenue from 2019 revenue, and also subtracting PPP loans received in 2020.
- For restaurants that first opened in 2019, the average of 2019 monthly revenues will be multiplied by 12, and the average of 2020 monthly revenues multiplied by 12 will be subtracted from that figure; PPP loans received in 2020 will also be subtracted.
- Restaurants that opened in 2020 are eligible to receive funding equal to the “eligible expenses incurred” minus any PPP loans received.
- Restaurants that have not yet opened are also eligible and can receive funding “equal to eligible expenses incurred before the date of enactment.”
What Period of Time is Covered?
- “Eligible expenses” are those incurred from February 15, 2020 to December 31, 2020 (or a date to be announced by the SBA).
What Expenses are Included?
The following is a list of the expenses that may be included in the calculations:
- Payroll costs
- Rent payments
- Mortgage payments (principal and interest)
- PPE and cleaning materials
- Maintenance expenses
- Paid sick leave
- Food and beverage expenses within the normal scope of business
- Other costs established by the SBA
No Federal Taxation of Grants; State Taxes Unknown
Grants under the program will not be subject to Federal income tax. They are likely to be taxed by California, however, and it is possible that the grants will be taxed as income by the tax authorities of other states. Please check with your CPA or other tax advisor.
[Lee Weinberg is a Partner with the Los Angeles office of Weinberg Gonser LLP. He regularly represents hospitality clients, including restaurants and restaurant groups located in California, New York, and additional jurisdictions.]
Eligible businesses include any restaurant, coffee shop, juice bar, food stand, food truck, food cart, caterer, saloon, inn, tavern, bar, lounge, brewpub, tasting room, tap-room, licensed facility, or premises 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. (For purposes of this article, we call all of these institutions “restaurants”.)