Restaurant Revitalization Grants
Under the American Rescue Plan Act (ARPA), eligible restaurants and similar businesses may receive restaurant revitalization grants from the Small Business Administration (SBA) (ARPA Sec. 5003).
Eligible Entities
Restaurant, food stand, food truck, food cart, caterer, saloon, inn, tavern, bar, lounge, brewpub, tasting room, taproom, licensed facility or premise of an alcoholic beverage producer where the public may taste, sample, or purchase products, or another similar place.
| ALL AVAILABLE FUNDING SPOKEN FOR IN FIRST 10 DAYS |
| The SBA announced the closure of the Restaurant Revitalization Fund (RRF) in less than 10 days after awarding the program’s full $28.6 billion appropriation to more than 100,000 restaurants, bars, and other businesses that provide on-site food and drink. |
| The program was to give priority during the first 21-day award period to businesses owned and controlled by women, veterans and socially and economically disadvantaged small business. However, the SBA, after losing lawsuits in Texas and Tennessee in May and June 2021, notified nearly 3,000 previously approved RRF prioritized applicants that it will be unable to pay their claims since the courts’ rulings barred the SBA from distributing the grants based on race and sex. |
| A bill introduced in Congress in 2022 that would have included another $40 billion to replenish the RRF was not passed. |
Eligible entities do not include:
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A state or local government-operated business.
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An entity that owned or operated more than 20 locations on March 13, 2020, regardless of whether those locations do business under the same or multiple names.
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An entity with a pending application for or that has received a grant under Sec 324 of the Economic Aid to Hard-Hit Small Businesses Act (PL 116-260).
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Publicly traded companies.
Tax Issues -
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These grants are tax-free for federal. (Sec. 9673(1))
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No deduction or basis increase is denied, and no tax attribute is reduced by reason of the gross income exclusion in ARPA Sec. 9673(1). (ARPA Sec. 9673(2)).
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Since the restaurant revitalization grants are treated as tax-exempt income, they will be allocated to partners or shareholders and increase their bases in their partnership interests.
Covered Period – Feb 15, 2020, through Dec 31, 2021, or a date to be determined by the administrator that is no later than 2 years after the date of enactment of this section.
Distributions –
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$5 billion will be available for grants to businesses with gross receipts of no more the $500,000 in 2019.
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$20 billion will be available to the SBA administrator to award grants equitably to eligible entities of various sizes based on annual gross receipts.
Application Certification – An eligible entity applying for a grant under this subsection shall make a good-faith certification that:
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The uncertainty of current economic conditions makes the grant request necessary to support the ongoing operations of the eligible entity.
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The eligible entity has not applied for or received a grant under Sec 324 of the Economic Aid to Hard-Hit Small Businesses, Non-profits, and Venues Act (Title III of Division N of the Consolidated Appropriations Act, 2021).
Determination of Grant Amount
The amount of a grant made to an eligible entity under this provision shall be equal to the eligible entity’s pandemic-related revenue loss, and any amount not used for qualified expenses must be returned to the Treasury.
Return to Treasury
Any amount of a grant made based on estimated receipts that is greater than the actual gross receipts of the eligible entity in 2020 shall be returned to the Treasury.
Use of Funds
During the covered period, an entity that receives a grant may use the grant funds for the following expenses incurred as a direct result of, or during, the COVID–19 pandemic:
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Payroll costs.
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Interest payments on a mortgage obligation.
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Rent payments, including rent under a lease agreement (but not rent prepayment).
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Utilities.
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Maintenance expenses, including: Construction to accommodate outdoor seating, walls, floors, deck surfaces, furniture, fixtures, and equipment.
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Supplies, including protective equipment and cleaning materials.
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Food and beverage expenses that are within the scope of the normal business practice of the entity before the covered period.
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Covered supplier costs. o Operational expenses.
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Paid sick leave.
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Other expenses determined by the SBA to be essential to maintaining the eligible entity.
Per the SBA web site (7/3/22), all RRF recipients have until March 11, 2023 to use award funds. All recipients that do not fully expend award funds prior to December 31, 2021 will be required to complete annual reporting submissions until they fully expend the award funding or the period of performance expires.
Levy Release
The IRS has issued temporary guidance, effective from July 13 through December 31, 2021, to its employees to release levies on accounts containing Restaurant Revitalization Fund (RRF) disbursements. After the taxpayer provides documentation verifying that the levy is attached to an account containing RRF funds, the IRS employee should "release the levy on the RRF funds."
However, if an "exigent circumstance" exists to not release the levy, before communicating to the taxpayer any decision about the levy, an IRS employee must (1) elevate the issue to their Area Director or Campus Director, and (2) document the matter in the taxpayer's case history.
Exigent circumstance involves the final loss of opportunity for the IRS to collect any taxes due from the taxpayer, such as the expiration of the statute of limitations. Generally, a taxpayer saying that they may file for bankruptcy is not an exigent circumstance.
Summary of Initial Applications
In the first days of the RRF program, which opened May 3, 2021 the SBA received:
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13,114 applications from businesses with less than $50,000 in pre-pandemic revenue requesting $330 million in funds.
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100,410 applications from businesses with less than $500,000 in annual pre-pandemic revenue requesting $8.14 billion in funds; and
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61,535 applicants from businesses with between $500,000 and $1.5 million in annual pre-pandemic revenue requesting $15.1 billion in funds.
SB 113, signed into law on February 9, 2022, conforms CA to the federal treatment of RRF grants, thus making the grant income excludable for CA purposes retroactive to 2020.