Article written by:
Dustin Minton, CPA, MBA
Director, Restaurant Services
Over the last couple of weeks, I have received some questions about the Real Economic Support That Acknowledges Unique Restaurant Assistance Needed to Survive (RESTAURANTS) Act of 2020 that was introduced in the U.S. House of Representatives on June 15, 2020, with accompanying legislation introduced in the Senate with bipartisan support. Since then, there has not been any news on whether the RESTAURANTS Act will be passed or included in future legislation. Restaurant companies want to know whether they would be eligible and what the bill encompasses. Please remember, this is all proposed legislation and nothing has passed (emphasis added).
The RESTAURANTS Act is billed as a restaurant stabilization grant program focused specifically on independently owned restaurants. The Independent Restaurant Coalition formed during the pandemic is a strong proponent of such legislation to ensure independent restaurants survive the pandemic. Paycheck Protection Program (PPP) or Economic Injury Disaster Loan (EIDL) funding recipients are eligible for this grant with stipulations noted below.
Below is a summary of the proposed legislation:
- Creates a new $120 billion grant program to provide structured relief through December 31, 2020;
- The program will be administered by the Department of the Treasury and available to food service or drinking establishments, including caterers, that are not publicly traded or part of a chain with 20 or more locations doing business under the same name;
- Grant values will cover the difference between revenues from 2019, and projected revenues through 2020, based on a calendar quarter during 2020 as compared to the same calendar quarter in 2019;
- PPP or EIDL funding recipients must subtract funds received that do not need to be paid back from the maximum Restaurant Stabilization Grant value;
- Restaurant Stabilization Grants do not need to be paid back and funding is made available through 2020;
- Eligible expenses include: payroll (not including employee compensation exceeding $100,000/year), benefits, mortgage, rent, utilities, maintenance, supplies (including protective equipment and cleaning materials), food, debt obligations to suppliers, and any other expenses deemed essential by the Secretary of the Treasury;
- Recipients must certify that current economic conditions make the grant request necessary, that the funds will be used to retain workers, maintain payroll, and make other payments (as specified above), and that the recipient is only applying for, and would only receive, one grant;
- If a restaurant permanently ceases operations before the end of 2020, unspent funds must be returned. If the grant award exceeds the actual end-of-year revenues, the grant is converted to a loan with a 10-year term at 1% interest;
- The amount of a grant awarded shall be excluded from gross income of the eligible entity, no deduction shall be denied or reduced, and will not be eligible for the Employee Retention Tax Credit;
- The first 14 days of funds will only be made available to restaurants with annual revenues of $1.5 million or less to target local small restaurants, particularly those that are women-, veteran-, or minority-owned and operated eligible entities; and
- The Restaurant Stabilization Act provides $300 million to administer the program – $60 million of which is set-aside for outreach to traditionally marginalized and underrepresented communities, with a focus on women-, veteran-, and minority-owned and operated eligible entities.
Now we wait to see what happens next. Many changes were made to the PPP to allow more time for restauranteurs to properly utilize the loan proceeds and achieve full forgiveness. Many believe this is not enough and that the grants provided under the RESTAURANTS Act of 2020 would fill the gaps to ensure independent restaurants have a fighting chance to survive the pandemic.
Stay tuned as we keep abreast of the latest development. If you have any questions, please contact Dustin Minton.