The American Rescue Plan Act (the “Act”) was passed by Congress on March 10, 2021, and signed into law by President Biden on March 11, 2021. The Act provides $1.9 trillion in economic aid to individuals and businesses. This article focuses on the Restaurant Revitalization Grants created under Section 5003 of the Act.The Act provides $28.6 billion for the creation of a Restaurant Revitalization Fund (the “Fund”). The Fund will allow the Small Business Administration (“SBA”) to administer Restaurant Revitalization Grants to eligible entities.
An eligible entity is widely defined by the Act and includes the following: a restaurant, food truck, caterer, bar, lounge, brewpub, tasting room, taproom, 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 assembles for the primary purpose of being served food or drink (collectively referred to herein as a “restaurant”).
However, if a restaurant has a pending application for or has received a grant under the Shuttered Venue Operators (SVO) Grant program as established by the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, then the restaurant is ineligible for a Restaurant Revitalization Grant.
The SBA is expected to act quickly to provide guidance on how to apply for these Restaurant Revitalization Grants. After the SBA opens this program, the Act requires the SBA to prioritize small businesses owned by women, veterans, or that are classified as socially and economically disadvantaged small business concerns for the first 21 days.
Generally, the amount of a Restaurant Revitalization Grant for a restaurant will be equal to the gross receipts of the restaurant in 2020 when compared to the gross receipts of the restaurant in 2019. Other rules apply if the restaurant was not in operation on or before February 15, 2020.
When applying, each restaurant must certify to the SBA that (1) the uncertainty of current economic conditions makes the grant request necessary to support the ongoing operations of the restaurant; and (2) that the restaurant has not applied for or received an SVO grant.
The Restaurant Revitalization Grant funds may only be used for certain expenses during the covered period of February 15, 2020, through December 31, 2021. The following are eligible expenses that a restaurant may use with any Restaurant Revitalization Grant:
- Payroll 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);
- Maintenance expenses, including construction to accommodate outdoor seating; 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 restaurant before the covered period;
- Covered supplier costs, as defined in section 7A(a) of the Small Business Act;
- Operational expenses; and
- Paid sick leave.
Amounts received from the Restaurant Revitalization Grants will not have to be included as gross income for tax purposes. Expenses paid with the grant funds that are excluded from income may still be deducted to the extent otherwise deductible, and tax basis and other tax attributes will not be reduced as a result of grant funds received being excluded from income.
If you have questions about whether you may be eligible for a Restaurant Revitalization Grant, need any assistance with the application process, or have any further questions about other aspects of the Act, please feel free to contact any of the authoring attorneys.