$28.6 Billion in Grant Relief Enacted to Support Bars and Restaurants Affected by COVID-19

American Rescue Plan Act
Eckhard Walter, Tax Partner, Brett Johnson, Tax Principal
March 12, 2021

President Biden signed into law the $1.9 trillion American Rescue Plan Act of 2021 (the Act) on March 11, 2021. The Act provides wide ranging support to individuals, families, and businesses who have been affected by the COVID-19 pandemic. One of the significant parts of the Act for businesses is the establishment of a $28.6 billion Restaurant Revitalization Fund to be administered by the Small Business Administration (SBA). Unlike the Paycheck Protection Program (PPP), also administered by the SBA, where PPP funding is treated as loans that can be later forgiven through a subsequent application process, the Restaurant Revitalization Fund will provide the funding as grants, meaning that eligible entities will not need to later apply for any forgiveness related to the grant funding. 


Of this grant funding, $5 billion is allocated to eligible entities whose gross receipts in 2019 were less than $500,000, with the remaining $23.6 billion available to eligible entities with higher gross receipts. During the first 21 days of the program, the SBA will prioritize applications from small businesses owned and controlled by women, veterans, and socially and economically disadvantaged small business concerns  (all such terms within the meaning of the Small Business Act).

Eligible entities include restaurants, bars, food trucks, caterers, brewpubs, tasting rooms, and other similar places of business in which the public or patrons assemble for the primary purpose of being served food or drinks. However, publicly traded companies, entities (including their affiliates) that have more than 20 locations, state or local government-operated businesses, and entities that applied for a Shuttered Venue Operator Grant don’t qualify.

Generally, grant amounts will be limited to an eligible entity’s revenue losses related to the pandemic, measured as the difference in gross receipts in 2020 compared to 2019, reduced by any amounts received through the SBA’s Paycheck Protection Program. Grant amounts will be limited to $5 million per physical location, limited to an aggregate $10 million for affiliated businesses. Grant proceeds are currently intended to cover the period from February 15, 2020 through December 31, 2021, during which the proceeds may be used to cover payroll costs, mortgage payments, rent, (excluding any prepayments of principal on a mortgage or prepayments of rent), utilities, maintenance expenses, operational expenses, paid sick leave, and supplies. Payroll costs do not include any qualified wages taken into account in computing the Employee Retention Credit established under the CARES Act. Any funds an entity receives from the Restaurant Revitalization Fund will not be treated as taxable income for federal purposes, and expenditures paid with grant funds will still be deductible on the federal income tax return.

If the grant is made based on estimated amounts for a loss in 2020 and the actual revenue loss is less than the grant amount, or if the grant recipient doesn’t use all the grant proceeds before the last day of the covered period (December 31, 2021, or a later date as determined by the SBA), the restaurant or bar must return the extra grant amount to the U.S. Department of the Treasury.

Next Steps

The application process will be established by the SBA. After the initial 21-day period in which applications for small businesses owned by women, veterans, and socially and economically disadvantaged small business concerns are prioritized, grants will be awarded to eligible restaurants and bars in the order in which the applications are received. While the SBA works to establish the application process, eligible businesses should begin to gather the information related to their pandemic losses (difference in gross receipts in 2020 compared to 2019, and any PPP loans received) in order to apply as soon as possible once the SBA opens the application period since applications will be processed on a first-come, first-served basis after the initial 21-day period that prioritizes applications from certain groups.

Application to your business

The Restaurant Revitalization Fund combined with the recently signed California Senate Bill 74 that waives license renewal fees for retail sales of alcoholic beverages until February 28, 2023 [See our Alert on COVID-19 Relief Package to Aid Small Businesses in California] provide significant economic relief to restaurants and bars within the Golden State. If you believe that these opportunities may apply to your business, please contact your HCVT professional to discuss them. 

We also recommend that you check the SBA website frequently for additional information, including the posting of the application. 


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