(For an overview of the new Restaurant Revitalization Fund (RRF), please see my recent blog post.)
Today I attended an excellent zoom “roundtable” hosted by the Independent Restaurant Coalition. Erika Polmar did a great job presenting, and Devita Davison monitored chat — they covered a lot of ground and answered many questions.
It was not recorded, as it was designed for participants to ask specific questions that may have revealed personal info. But there is a second session happening tomorrow (Wednesday 4/7) that I strongly encourage you to attend. Type your question in the chat and they will address it, or email questions@restaurantcoalition.com — they also have an FAQ at saverestaurants.com/resources that you can also download here.
There are still outstanding questions — see my notes below — but my main takeaway is that as a CPA firm, we are going to be pivoting to try to prepare draft 2020 tax returns for all restaurant clients before the program opens in the next two weeks. This will be a challenge, as we are simultaneously working on Employee Retention Credit calculations, 1Q 2021 estimates, and corporate tax returns; but we’re doing everything we can to make sure our clients have both 2019 & 2020 tax returns — at least in draft format — in time to apply for this grant the day it opens.
Please remember to sign up for the session tomorrow. It will be worth your hour of attendance.
My notes from today’s session:
- They are expecting guidance at the end of this week (4/9) and a draft application at the beginning of next week (4/12).
– They think the process will open end of next week (4/16) or beginning of the following week (4/19). - There are funds set aside for 60 days for businesses with <$500k in receipts.
– Also funds set aside for women-owned, veteran-owned, and “disadvantaged” groups and first 21 days of the application period are specific for them.
– We don’t know if they will change the 51% ownership rule to 50% or not yet, but it is under consideration. - If you opened before 2019, take 2019 revenue minus 2020 revenue, minus PPP loan. That’s the grant amount.
– If you opened in 2019, take average monthly revenue from 2019 and divide by 12, then do the same as above.
– If you opened in 2020, funding amount is equal to eligible costs incurred minus revenue received. - You may use the grant for expenses incurred during the period of 2/15/2020-12/31/2021 for: payroll capped at $100k per EE, benefits, mortgage, rent, utilities, maintenance, build-out for outdoor/indoor safe dining, supplies, food & beverage inventory, operating expenses.
– May be extending it through 12/31/23 soon; hopefully before application goes live.
– Cannot double-dip and use funds for anything you paid for with PPP, EIDL or other federal funds.
– Very likely but not confirmed that Owner’s Draw will be considered an eligible operating expense. - Documents needed to prove revenue loss — must be able to show revenue loss between the two years (or alternatively as above if opened after 1/1/19):
– Preferably 2019 & 2020 tax returns – may use certified P/L statement or documentation from Point of Sale system for 2020 instead, if tax return is not done.
– Acceptable documents would be as follows (keeping in mind that if you use anything other than a tax return, a human being will have to review your application (rather than a computer) and that will slow it down:
* Business tax returns (IRS Form 1120 or IRS 1120-S);
* IRS Forms 1040 Schedule C; IRS Forms 1040 Schedule F;
* For a partnership: partnership’s IRS Form 1065 (including K-1s);
* Bank statements;
* Externally or internally prepared financial statements such as Income Statements or Profit and Loss Statements;
* Point of sale report(s), including IRS Form 1099-K. - For hybrid businesses like bowling alleys, RRF revenue replacement will only be for food/beverage portion of business (not wholesale or entertainment).
– F+B revenue has to be 33% or greater to qualify as a “restaurant”. - You may not use the RRF to pay off any other federal program, like the EIDL or PPP. (This might change.)
– You CAN use it to pay off other debt, just not federal debt. - They are looking into payments to related parties like self-rental to see whether they will qualify or not.
- If you close your doors temporarily, you can get RRF — if you closed permanently, you are not eligible. If you close permanently while using RRF money, you will have to repay it.
- This money is very likely to run out quickly. Apply the moment it goes live on Day One.
– The SBA will then hopefully go back to Congress to say “here’s how many applications for $X we have in the queue; please replenish the fund so we can continue funding the requests.” So even if you apply “too late”, there’s hope.
Questions I still have:
- Will the Employee Retention Credit (ERC) and FFCRA Emergency Leave Credits count as gross receipts? Or will they be exempted like the PPP funds? If treated like PPP funds, will they have to be subtracted from the RRF grant amount?
- Is other financial relief — local and industry grants — considered as part of revenue?
- For a restaurant that has no outdoor space to build out for safe dining; could they use RRF money to buy/outfit a food truck so they could use it in place of outdoor dining?
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