Washington, Please Help! Awaiting the Passage of the RESTAURANTS Act
By: Jessica Strom, CPA
The restaurant industry has been among the most drastically impacted by COVID-19. In late spring, the availability of outdoor dining and certain eased restrictions served as some reprieve to the hard-hit industry after months of stringent stay at home and social distancing orders. However, the second wave of COVID-19 appears to be sweeping across the nation. With the cold weather approaching and new government curfews and regulations on the rise, without assistance, many restaurants may not survive to ring in the New Year. Paycheck Protection Program (PPP) funding served as a temporary bridge for the industry, however, it proved difficult for restaurateurs to meet its requirements with only a fraction of their staff needed for various new limited and dine-out concepts. Further, that money has quickly run dry as the country enters its ninth month of various dining constraints on in an industry that, even in pre-pandemic times, operates on thin margins. Unable to operate at full capacity, restaurants have seen drastic decreases to revenue, constant overhead costs and increases to other expenses, including those to meet PPE and health and safety guidelines.
New assistance could potentially come in the form of the Real Economic Support That Acknowledges Unique Restaurant Assistance Needed to Survive (RESTAURANTS) Act of 2020, which would provide $120 billion in relief through a program administered by the Department of Treasury. In October, the House of Representatives passed the RESTAURANTS Act as part of the larger revised HEROES Act. It is now up to the Senate to pass this critical lifeline for the industry.
The RESTAURANTS Act would be available to those food service or drinking establishments, including caterers, that are not publicly traded or part of a chain with 20 or more locations doing business under the same name. The grant would cover the difference between 2019 and 2020 (projected) revenues, subtracting out any funding received from PPP or Economic Injury Disaster Loans (EIDL). The grant funds could be used for payroll costs, rent, utilities and for other allowable expenses. The funds would not have to be paid back except for any unused portion after June 30, 2021, at which time it would be converted to a loan with 1% interest and a maturity date of 10 years.
This prospective program also has measures in place to avoid some of the grievances that previously arose with the PPP loan funding, particularly by prioritizing awarding grants to local small restaurants. The bill allows for an initial 14-day period where priority would be given to marginalized and underrepresented communities, as well as restaurants with annual revenue under $1.5 million.
Many of Marks Paneth’s restaurant clients have been advocating for government aid and remain steadfast in their effort to push Congress to move forward on the RESTAURANTS Act. The Independent Restaurant Coalition, a leading national organization formed to protect the livelihood of so many restaurants now at risk, encourages industry professionals and those who support federal restaurant relief to reach out to your Senators and encourage them to act on this important piece of legislation. More information on how you can take action is available at saverestaurants.com.
Marks Paneth’s Restaurant Group will continue monitoring the situation in order to keep our clients and contacts in the industry informed of these critical developments as they unfold.