For just over a year Colorado individuals, families, and businesses have been managing through the COVID-19 pandemic. Not only have businesses and organizations experienced significant disruptions arising from restrictive government orders, but so have schools, colleges, and universities. While many have faced challenging circumstances, it is the restaurant industry that has been nearly paralyzed. In fact, it was reported by the Denver Post that restaurant sales had decreased by 40% by the middle of 2020 and showed little signs of stopping. Given the difficulty of trying to stay afloat through delivery and on-site pick-up, many restaurants are in desperate need of financial support. The recently passed American Rescue Act created the Restaurant Revitalization Fund (RRF) to provide desperately needed funding to keep doors open. The RRF offers funding equal to the pandemic-related losses with a maximum of $10M per business. To help clients, prospects, and others, Hanson & Co has provided a summary of the key details below.
The RRF is a non-repayable federal grant which provides a minimum relief amount of $1,000 up to $5M per physical location and $10M per business. A physical location is defined as a permanent structure with a distinct address. For food trucks, the address would be the same as the company headquarters. Remember that only businesses in operation prior to March 10, 2021, can participate. Also, RRF applicants can have a Paycheck Protection Program (PPP) loan and state or local grants, but not be a recipient of the Shuttered Venues Operators Grant (SVOG) funding.
RRF Eligibility Rules
Only businesses that are not permanently closed and include operations where the public or patrons assemble for the primary purpose of being served food or drinks can apply. This includes restaurants, food trucks, food stands, caterers, bars, taverns, on-site producer facilities where the public may come to taste and purchase products, and snack and nonalcoholic beverage bars. Others such as bakeries, tasting rooms, taprooms, breweries, and micro-breweries must provide documentation that on-site sales to the public amounted to, at least, 33% of gross receipts in 2019. For those who opened in 2020, an alternate method must be followed. Conversely, golf clubs, places of gambling, strip clubs, and permanently closed businesses are not eligible.
RRF Calculation Methods
There are three calculation methods based on when a business commenced operations.
- In Operation on January 1, 2019 – For these applicants, take the 2019 gross receipts and subtract from the 2020 gross receipts. Then subtract the total amount of disbursed PPP1 or PPP2 loans regardless of whether received in 2020 or 2021. Finally, if the amount exceeds $5M per physical location then reduce the amount to $5M.
- Partial 2019 Sales – These applicants may use this calculation method or the one listed below. First, calculate the annualized average monthly gross receipts for 2019, then subtract 2020 gross receipts and subtract PPP loan funds regardless of whether received in 2020 or 2021. Finally, reduce the amount to $5M if it exceeds this amount per location.
- Began Operations Between January 1, 2020, and March 11, 2021 – These applicants should calculate the total amount spent on eligible expenses between February 15, 2020, and March 11, 2021. Then subtract gross receipts earned between January 1, 2020, and March 11, 2021. Finally, subtract the amount of disbursed PPP loans and adjust to $5M per location as necessary.
Eligible Fund Uses
Like other federal relief programs, RRF recipients may only spend awarded money on eligible expenses. These include payroll costs, business mortgage obligations, rent payments, utility expenses, construction of outdoor seating, supplies, costs of food and beverage, covered supplier costs, and general operating expenses.
It is important to note that all RRF funds must be used on eligible expenses by March 11, 2023. Any amounts not used on eligible expenses must be returned to the federal government.
The RRF is welcome news for Denver restaurants that have been sharply impacted by the pandemic. Since there are several rules dictating priority and how the funds are awarded, it ensures equal access to all applicants. If you have questions about the information outlined above or need assistance with another tax or accounting issue, Hanson & Co can help. For additional information call us at 303-388-1010 or click here to contact us. We look forward to speaking with you soon.