The American Rescue Plan Act of 2021, signed into law on March 11, 2021, by President Biden, is a $1.9 trillion economic stimulus package enacted to assist with the United States’ recovery from the COVID-19 pandemic. While this Act addressed many key elements, including expanded unemployment benefits, additional stimulus payments, emergency paid leave for employees, COVID-19 response funding, and other tax provisions and small business grants, one key aspect of the Act is the Restaurant Revitalization Fund (RRF).
As a result of the COVID 19 pandemic, it’s no secret restaurants and bars were among some of the hardest-hit businesses. In particular, North Carolina bars were forced to close their doors for nearly 12 months as the state battled surges in case counts. Having to limit capacities, restaurants also faced tough restrictions and only serve “to-go” food in some instances. At the time of this writing, there are still restrictions in place in North Carolina for businesses in the food and beverage sector, with similar restrictions in place across the country.
The RRF was established to provide support to businesses in the food and beverage industry. The RRF appropriated $28.6 billion worth of award funds to support the cause. An eligible entity would be a business where patrons assemble for the primary purpose of being served food or beverage (at least 33% of 2019 revenue), with 20 or fewer locations. Eligible entities, as listed by the Small Business Administration (SBA), include:
- Restaurants
- Food stands, food trucks, food carts
- Caterers
- Bars, saloons, lounges, taverns
- Licensed facilities or premises of a beverage alcohol producer where the public may taste, sample, or purchase products
- Other similar places of business in which the public or patrons assemble for the primary purpose of being served food or drink
- Snack and nonalcoholic beverage bars
- *Bakeries
- *Brewpubs, tasting rooms, taprooms
- *Breweries and/or microbreweries
- *Wineries and distilleries
- *Inns
* There are additional requirements in place for these types of entities to be considered eligible.
Eligible businesses could receive up to $5,000,000 per location, not to exceed $10,000,000 total per applicant, and the funds can be used on a wide array of eligible expenditures, which include most business operating expenses. Awardees have until March 11, 2023 (the covered period) to completely utilize award funds on eligible expenses. Recipients will be required to complete an annual reporting submission until the funds have been fully expended. So long as the awarded funds are used for eligible expenses, the recipient would not be required to repay the award. Any unused funds, or funds used for ineligible expenses, would be due back to the government at the end of the covered period.
There are some caveats that exist for businesses that are considering applying for the RRF:
- Paycheck Protection Program Loans (PPP loans) received by the RRF applicant will affect the funding calculation submitted by the applicant. If the applicant has a pending PPP loan at the time of submitting the RRF application, the applicant must withdraw the PPP application.
- Entities that have a pending application for, or received, a Shuttered Venue Operators Grant are not eligible to apply.
- Applicants requesting less than $1,000 in funding will not be accepted or approved.
- Nonprofit entities are not eligible.
For calculating the potential award amount, the SBA has provided three separate calculations to be utilized, based on when the applicant began operations (the date the entity began making sales):
- For entities in operation on or before January 1, 2019 – Subtract 2020 gross receipts and any PPP loans received from 2019 gross receipts.
- For entities that began operations during 2019 – Subtract 2020 gross receipts and any PPP loans received from the average 2019 monthly gross receipts, multiplied by 12.
- For entities that began operation on operations on or between January 1, 2020, and March 10, 2021; and entities that have not yet opened for sales but as of March 11, 2021, have incurred eligible expenses – Subtract 2020 and 2021 (through March 11, 2021) gross receipts and any PPP loans received from eligible expenses incurred between February 15, 2020, and March 11, 2021.
- For applicants that operate multiple locations – Can use separate calculation methods for each location, and then aggregate the amounts together.
- Regardless of the method used, the funding amount remains limited to $5,000,000 per location and $10,000,000 total, with a minimum of $1,000.
Applications for the RRF opened on May 3, 2021, for all eligible applicants. However, the SBA will only process and fund applications from certain “priority groups” for the first 21 days. After the initial priority group application period, the SBA will accept applications from eligible applicants and process those in the order in which they are approved by the SBA. The priority groups consist of:
- A small business concern that is at least 51 percent owned by one or more individuals who are women, veterans, and/or socially and economically disadvantaged.
- Socially disadvantaged individuals include those who have been subjected to racial or ethnic prejudice or cultural bias because of their identity as a member of a group without regard to their individual qualities.
- Economically disadvantaged individuals include those socially disadvantaged individuals whose ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities as compared to others in the same business area who are not socially disadvantaged.
DMJ is happy to assist with the RRF application process, and encourages eligible applicants, or those with questions regarding eligibility, to reach out to our office at contact DMJ for additional assistance so we can best address your needs.
Mason Barringer, CPA, CFE
Mason Barringer, CPA, CFE is a Partner and Director of Assurance Services at DMJPS CPAs + Advisors in DMJPS' Greensboro office. He performs many of the firms audits, reviews, and other attestation engagements.
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