While attention on the latest stimulus bill has focused on the personal stimulus checks and benefits, the bill specifically targets the hospitality, restaurant and entertainment industry sectors with a generous rescue package. With tax credit extension and application periods for some programs already open, restaurants, hotels and entertainment venues seeking additional support should carefully review their eligibility for these new options in the American Rescue Plan Act (ARPA).
“Restaurant owners and operators, hotels and entertainment venues have been hit as hard as any businesses by the effects of COVID-19,” said Alex Rhodes, Grant Thornton’s national managing partner for Hospitality & Restaurants. “Hospitality and restaurant organizations may wish to take a close look at ARPA and other recent bills to determine if they qualify for relief.”
Major features of these legislative efforts impacting these industry sectors include:
New restaurant/bar funding
- Creation of the Restaurant Revitalization Fund (RRF) program
- Extension of the employee retention credit and voluntary paid leave tax credits
- Administration of the Shuttered Venue Operators grants program
- Exclusion from income for CARES Act’s Economic Injury Loan Disaster (EIDL) and restaurant revitalization grants
- Increased funding for COVID-19 tests, creating greater consumer confidence in returning to dining out and business and leisure travel
The new $25 billion RRF program set up by ARPA will be administered by the Small Business Administration. Registration for the SBA application portal began at 9 a.m. ET April 30, and applications will open at noon ET May 3. Information about the program plus a link to a pre-application form can be found here
. Restaurants that demonstrate lost revenue in 2020 compared to 2019 will be eligible. A restaurant or bar that is owned by a publicly-traded company, owned by state or local governments, or which operates more than 20 locations is ineligible.
The maximum grant award is $5 million for a single location and $10 million for a restaurant group. The grant can be used on a multitude of defined expenses, including payroll, principal or interest payments on mortgages, lease agreement payments, utilities, supplies and supplier costs, operational expenses and sick leave. The grants are not included in taxable income, and restaurants do not need to reduce their tax deductions for any expenses paid out of grant funds. Details on how the program will be administered and the launch date are forthcoming as of our publication date.
The infusion of RRF grant money should have beneficial effects outside the restaurant industry, particularly in the commercial real estate market. Numerous leaseholders have cut deals with restaurant tenants delaying or reducing rent payment in an effort to keep their tenants viable.
“Many banks and landlords have been more than patient with their restaurant lease and mortgage holders,” said Greg Ross, Grant Thornton national managing partner of Real Estate & Construction. “The RRF allows grant money to cover rent and mortgage payments, and that will positively impact the commercial real estate market overall.”
Funding for entertainment venues
The Shuttered Venue Operators Grant program
was created at the end of 2020 in the Economic Aid the Hard-Hit Small Businesses, Nonprofits and Venues Act, and amended in the ARPA. The $16 billion program provides relief for entertainment venues harmed by the COVID-19 pandemic. Eligible applicants include live venue operators, performing arts operators, theater producers, museums, zoos and aquariums, motion picture operators and talent representatives. Eligible applicants can qualify for a grant equal to 45% of their gross earned revenue, up to a total of $10 million. This program is also being administered by the SBA and applicants should register with the System of Award Management. The SBA opened applications for the grant program April 8, but technical difficulties forced the agency to temporarily suspend its application portal. Applicants can continue to register for an account until the portal reopens.
Employee Retention Credit and Paid Leave Credit provisions
As discussed in our recent article covering
tax credit extensions, two important tax credits that many employers haven’t taken advantage of have been extended. The employee retention credit was established by last year’s CARES Act and offers a valuable refundable incentive to many in the hospitality and restaurants industries. ARPA extends the credit through Dec. 31. Paid leave credits, created by the Families First Coronavirus Response Act, will be extended through Sept. 30.
Paycheck Protection Program deadline extension
In addition, a new bill approved recently extends the Paycheck Protection Program
, the program that provides loans as a direct incentive for small businesses to keep their employees on payroll, for two months from March 31 to May 31.
National Managing Partner,
Hospitality & Restaurants
+1 954 331 1188
Leader, Tax Services,
Hospitality & Restaurants
+1 407 481 5120
National Managing Partner,
Real Estate & Construction
+1 704 632 6817
Washington National Tax Office
+1 202 861 4144