Under Section 5003 of the ARPA, certain food service businesses are eligible to apply and receive a tax-free federal Restaurant Revitalization Fund grant (“RRF Grant”). While the amount of the grant provided to the eligible entity depends on the “pandemic-related revenue loss of eligible entity,” the amount cannot exceed $10 million and is limited to $5 million per physical location of the eligible entity. Generally, the revenue loss is calculated based on gross receipts during 2020 subtracted from gross receipts in 2019.
The following food services businesses are eligible to apply for an RRF Grant: a restaurant, food stand, food truck, food cart, caterer, saloon, inn, tavern, bar, lounge, brewpub, tasting room, and taproom.
A restaurant may be eligible if the following applies:
- Applicant is not a publicly traded company and does not own or operate, together with any affiliated business, more than twenty locations as of March 13, 2020.
- An affiliated business has an equity or right to profit distribution of 50% or more, or has contractual authority to control the direction of the business, established as of March 13, 2020;
- A good faith certification asserting the grant will support the ongoing operations due to the uncertainty of the economic conditions; and
- Applicant has not applied for or received a “Shuttered Venues Operators” grant.
The food service business may use the funds for payroll costs, payments of principal and interest, rent payments and utilities, maintenance, supplies, food and beverages within the scope of the business, covered supplier costs, operational expenses. Funds may also be used for paid sick leave and other expenses that may be eligible. Funds shall be returned to the Treasury if funds are not used for the allowable expenses as stated above or the business ceases operations on or before December 31, 2021.
Under ARPA, priority is being given to small businesses controlled by women and veterans, or socially disadvantaged businesses. To establish such priority, the applicant must submit a self-certification of eligibility for priority.
Tax Treatment of Restaurant Revitalization Grants
Any amount received as a grant under Section 5003 of ARPA should not be included in the “gross income of the person that receives such amount.” Based on this information, no deduction or base increase shall be denied, and no tax attribute should be reduced.
If a partnership or an S Corporation receives a grant, the amount of the grant is tax exempt income for the purposes of sections 705 and 1366 of the Internal Revenue Code.
Your business might be eligible for a grant, and time is of the essence. If you believe your business is eligible, should be provided priority, or your business is a partnership or an S corporation, consider contacting an attorney or your tax advisor for more information. If you have additional questions, please contact Rosenblatt Law Firm.