Restaurants, certain breweries and other food and beverage businesses may have an opportunity for relief funding from the American Rescue Plan Act (ARPA), which provides up to $28.6 billion in support through Restaurant Revitalization Grants to eligible entities that experienced a revenue loss as a result of the COVID-19 pandemic. These businesses include restaurants, food trucks, stands or carts as well as premises of licensed alcohol beverage producers where patrons may taste, sample or purchase products. Entities operated by a state or local government, who own and operate more than 20 business locations or are publicly traded companies are excluded from eligibility for these grants.
Grant amounts are generally calculated based on the comparative revenue loss during 2020 when compared to 2019; however, first-draw and second-draw Paycheck Protection Program (PPP) loans can impact this calculation. Entities will be required to make a good faith certification regarding the necessity of the grant and that they have not applied for or received a grant from the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act.
The grant will be limited in total to $10,000,000 per eligible entity and no more than $5,000,000 per physical location of an eligible entity and generally must be used to cover specific types of costs incurred between Feb. 15, 2020, and Dec. 31, 2021. These costs include, among others, payroll, mortgage and rent payments, utilities, maintenance, supplies and normal operational type food and beverage expenses. Excess funds must be returned if not fully utilized for allowable expenses during the covered period.
The tax treatment of any grant received pursuant to the Restaurant Revitalization Grant program is set to mirror the tax treatment of PPP loan forgiveness proceeds. The grant will not be included in gross income – as a result, no deduction will be lost, a reduction to a tax attribute will not occur and the basis increase will still occur as a result of the grant being treated as tax-exempt income.
The application has not been officially released for these grants, so the details of the application process are not yet known. Nonetheless, DHG is prepared to help you in the application process once it becomes available for these grants, as well as answer any questions you may have. Because the grants will be administered by the SBA, updates for these grants once they become available can be found on SBA’s Coronavirus Relief Options page.
For additional information about Restaurant Revitalization Grants or ARPA, you can read our recent alert, or contact us at SBAQuestions@dhg.com.