Written by: Elizabeth Higgins, Extension Specialist Ag Business Management, CCE Eastern NY Commercial Horticulture Program
This program provides emergency assistance for eligible restaurants, bars, and other qualifying businesses impacted by COVID-19.
The Restaurant Revitalization Fund (RRF) provides qualifying businesses with funding equal to their pandemic-related revenue loss of at least $1,000 and no more than $5 million per physical location. The maximum grant is $10 million for businesses with multiple locations. Recipients are not required to repay the funding as long as funds are used for eligible uses no later than March 11, 2023. Wineries, breweries and distilleries that sell directly to the public are eligible for this program. Farms where a significant portion of the gross revenue (33%) comes from on-site sales of food and beverages to the public may also be eligible.
Funding received from the Restaurant Revitalization Fund will not be taxable as gross income by the IRS and you can still deduct the expenses paid for with Restaurant Revitalization Funds from your federal taxes.
$28.6 billion has been appropriated for this program. These appropriations remain available until expended. SBA will continue accepting applications subject to availability of funds. The program is available now (as of May 14). There are set-asides for small businesses.
You can apply through SBA’s website at: https://restaurants.sba.gov/. More detailed information about the program is available at https://www.sba.gov/funding-programs/loans/covid-19-relief-options/restaurant-revitalization-fund.
What is a qualifying business for this program?
Eligible entities who have experienced pandemic-related revenue loss include:
- Restaurants
- Food stands, food trucks, food carts
- Caterers
- Bars, saloons, lounges, taverns
- Snack and nonalcoholic beverage bars
- Bakeries (onsite sales to the public comprise at least 33% of gross receipts)
- Brewpubs, tasting rooms, taprooms (onsite sales to the public comprise at least 33% of gross receipts)
- Breweries and/or microbreweries (onsite sales to the public comprise at least 33% of gross receipts)
- Wineries and distilleries (onsite sales to the public comprise at least 33% of gross receipts)
- Inns (onsite sales of food and beverage to the public comprise at least 33% of gross receipts)
- Licensed facilities or premises of a beverage alcohol producer where the public may taste, sample, or purchase products.
As you can see from this list, farms with wineries, breweries, or distilleries or farms where prepared food sales to the public are a significant source of revenue (more than 33%) may be able to take advantage of this program.
What counts for on-site sales?
Sales of food and/or beverage that were consumed on the Applicant’s premise, were purchased at the Applicant’s premise to-go, were purchased online, and picked up from the Applicant’s premise or were delivered directly to a consumer for use. These sales must be only to consumers and no wholesale sales may be counted towards the 33% revenue number.
How are gross receipts calculated?
The amounts required to calculate gross receipts varies by the entity tax return type:
- For self-employed individuals (IRS Form 1040 Schedule C): line 3 (If you file multiple Schedule C forms on the same Form 1040, you must sum across all of them)
- For partnerships (IRS Form 1065): line 1c
- For S-Corporations (IRS Form 1120-S): line 1c
- For C-Corporations (IRS Form 1120): line 1c
- LLCs: Use one of the above
- B Corporations: Use line 1c from either IRS Form 1120 or 1120S
There are some things that should be subtracted from gross receipts. Most notably you should subtract any PPP loan or EIDL loan or advance and taxes collected and remitted to a taxing authority, like sales tax. The guidance has more information.
How much would I be eligible to receive?
The payment is based on your revenue loss during COVID, either calculated based on your pre-COVID income compared to your COVID-era income OR the difference between your gross income and your eligible expenses during the COVID-era. How it is calculated depends on whether you were making sales in 2019.
For applicants that were in operation (making sales) prior to, or on January 1, 2019 the payment is the difference in income in 2019 compared to 2020.
- Find gross receipts as reported on 2019 federal tax return
- Subtract 2020 gross receipts as reported on your 2020 federal tax return. Do not include Do not include any amounts received from any Paycheck Protection Program (PPP) loan (First Draw PPP Loan or Second Draw PPP Loan), SBA Section 1112 payments, or from any SBA Economic Injury Disaster Loan (EIDL) loan, EIDL Advance, Targeted EIDL Advance, Randolph-Sheppard Act Financial Relief and Restoration Payments (FRRP) Appropriation, or any state and local small business grants (via CARES Act or otherwise).
- Subtract any PPP loan received in 2020 or 2021, but do not include any amount you repaid on or before May 18, 2020.
- The result is the amount you are eligible for. If the total is more than $5 million (per physical location) reduce the amount to $5 million per location (and $10 million total). If the result is less than $1,000, you are not eligible.
If you started making sales after January 1, 2019 there are different calculation methods. For example, businesses that started operating in 2020 or as of March 11, 2021, during the pandemic year, would subtract gross receipts from eligible expenses to calculate their payment, but businesses that were operating in 2019 have the option to compare 2019 income to 2020 income using a different formula.
The full calculation formulas are available at this link: https://www.sba.gov/document/support-restaurant-revitalization-funding-program-guide.
What can the funding be used for?
You may use funds for the following expenses during your covered period. The Covered Period is February 15, 2020 and ending on March 11, 2023.
- Business payroll costs, including sick leave and costs related to the continuation of group health care, life, disability, vision, or dental benefits during periods of paid sick, medical, or family leave, and group health care, life, disability, vision, or dental insurance premiums;
- Payments on any business mortgage obligation (both principal and interest; note: this does not include any prepayment of principal on a mortgage obligation);
- Business rent payments, including rent under a lease agreement (note: this does not include any prepayment of rent);
- Business debt service (both principal and interest; note: this does not include any prepayment of principal or interest);
- Business utility payments for the distribution of electricity, gas, water, telephone, or internet access, or any other utility that is used in the ordinary course of business for which service began before March 11, 2021.
- Business maintenance expenses including maintenance on walls, floors, deck surfaces, furniture, fixtures, and equipment;
- Construction of outdoor seating;
- Business supplies, including protective equipment and cleaning materials;
- Business food and beverage expenses, including raw materials for beer, wine, or spirits;
- Covered supplier costs, which is an expenditure made by the eligible entity to a supplier of goods for the supply of goods that:
- Are essential to the operations of the entity at the time at which the expenditure is made; and
- Is made pursuant to a contract, order, or purchase order in effect at any time before the receipt of Restaurant Revitalization funds; or
- With respect to perishable goods, a contract, order, or purchase order in effect before or at any time during the covered period;
- Business operating expenses, which is defined as business expenses incurred through normal business operations that are necessary and mandatory for the business (e.g. rent, equipment, supplies, inventory, accounting, training, legal, marketing, insurance, licenses, fees). Business operating expenses do not include expenses that occur outside of a company’s day-to-day activities.
Note: Past-due expenses are eligible if they were incurred beginning on February 15, 2020 and ending on March 11, 2023.
Concluding thoughts
If you are an eligible business and had a decline in revenue in 2020, or are a new business trying to get off the ground during COVID-19, and have had costs that exceed your gross income, to date, this program has the potential to be extremely helpful. The fact that the funds are tax exempt and also do not affect the deductibility of expenses makes this program even more attractive.