Restaurant Revitalization Fund

Restaurant Revitalization Fund

The American Rescue Plan Act of 2021 includes $28.6 billion in nontaxable grants for restaurants and restaurant-related businesses. This program will provide relief for many businesses in the restaurant industry, assisting in recovery from 2020 and to make it through the next few months, as states begin to reopen and vaccine distribution increases. Projections indicate some time in May or June of 2021 for a potential operational date.

Guidance is still limited to statutory language, and additional guidance is expected in the coming weeks. For now, this is what we know.

  • What type of entity is eligible for a restaurant revitalization grant? Eligible entities include restaurants; food stands/trucks/carts; caterers; saloons; inns; taverns; bars; lounges; brew pubs; tasting rooms; taprooms; licensed facilities or premises of beverage alcohol producers where the public may taste, sample, or purchase products; or other similar places of business in which the public or patrons assemble for the primary purpose of being served food and drink. Any of these entities located in an airport terminal or that is Tribally-owned is also eligible.
  • What type of entity is not eligible? Entities above that are state or local government-operated; entities that as of March 13, 2020, own or operate (together with any affiliated business) more than 20 locations, regardless of whether those locations do business under the same or multiple names; entities which have a pending application for or have received a Shuttered Venue Operator Grant; or any entity that is a publicly-traded company.
  • What is the definition of “affiliated business?” A business in which an eligible entity has an equity or right to profit distributions of not less than 50%, or in which an eligible entity has the contractual authority to control the direction of the business, provided that such affiliation shall be determined as of any arrangements or agreements in existence as of March 13, 2020.
  • How does an eligible entity determine the amount of the grant? The amount is equal to the pandemic-related revenue loss of the eligible entity. The total grant will not exceed $10 million and is limited to $5 million per physical location.
  • How does an eligible entity calculate its pandemic-related revenue loss? For an entity that was in operation for the entirety of 2019 and 2020, the pandemic-related revenue loss is calculated by subtracting the 2020 gross receipts of the eligible entity from the 2019 gross receipts of the eligible entity.

For an eligible entity that was not in operation for the entirety of 2019, the pandemic-related revenue loss is calculated by taking the difference between the average monthly gross receipts of the eligible entity in 2019 multiplied by 12 and the average monthly gross receipts of the eligible entity in 2020 multiplied by 12. The Administrator may issue a separate formula to determine this amount.

For an eligible entity that opened during the period beginning on Jan. 1, 2020 and ending March 10, 2020, the grant amount is the amount of eligible expenses incurred less any gross receipts. The Administrator may issue a separate formula to determine this amount.

For an eligible entity that has not yet opened as of the date of grant application, but has incurred eligible expenses, the grant amount is equal to the amount of those expenses. The Administrator may issue a separate formula to determine this amount.

For all eligible entities, the pandemic-related revenue loss is to be reduced by any amounts received from a Paycheck Protection Program (PPP) loan (2020 PPP and 2021 PPP, if applicable).

  • How does an eligible entity compute gross receipts? The SBA has not yet issued guidance on how to compute gross receipts. However, an eligible entity may wish to determine gross receipts utilizing the SBA PPP gross receipts criteria to estimate the pandemic-related revenue loss. For a for-profit business, gross receipts are defined for PPP as All revenue in whatever form received or accrued (in accordance with the entity’s accounting method, i.e., accrual or cash) from whatever source, including from the sales of products or services, interest, dividends, rents, royalties, fees, or commissions, reduced by returns and allowances but excluding net capital gains and losses. 2. These terms carry the definitions used and reported on IRS tax return forms.

Gross receipts do not include the following: 1. Taxes collected for and remitted to a taxing authority if included in gross or total income, such as sales or other taxes collected from customers (this does not include taxes levied on the concern or its employees); 2. Proceeds from transactions between a concern and its domestic or foreign affiliates; and 3. Amounts collected for another by a travel agent, real estate agent, advertising agent, conference management service provider, freight forwarder or customs broker.

All other items, such as subcontractor costs, reimbursements for purchases a contractor makes at a customer’s request, investment income, and employee-based costs such as payroll taxes, may not be excluded from gross receipts.

  • What costs are considered eligible expenses? Eligible expenses are: Payroll costs (as defined under the PPP), except for qualified wages taken into account in determining the Employee Retention Credit or premiums taken into account in determining the continuation coverage premiums credit under the American Rescue Plan Act of 2021; 2. payments of principal or interest on any mortgage obligation (no prepayment of principal allowed); 3. rent payments, including rent under a lease agreement (no prepayment of rent allowed); 4. utilities; 5. maintenance expenses including construction to accommodate outdoor seating, and walls, floors, deck surfaces, furniture, fixtures, and equipment; 6. supplies, including protective equipment and cleaning materials; 7. food and beverage expenses that are within the scope of the normal business practice of the eligible entity; 8. covered supplier costs; 9. operational expenses; 10. paid sick leave; and 11. any other expenses provided by the SBA Administrator.
  • What is the covered period? The period beginning on Feb. 15, 2020 and ending on Dec. 31, 2021, or a date to be determined by the SBA Administrator that is not later than March 11, 2023.
  • Is there a priority in awarding grants? Yes, During the initial 21-day period in which grants are awarded, Congress instructs the SBA to prioritize grants to eligible entities that are small business concerns owned and controlled by women, small business concerns owned and control by veterans, or socially and economically disadvantaged small business concerns.
  • Is the grant taxable and/or is an eligible entity allowed deductions for covered expenses paid for with the grant funding? The grant is exempt from federal taxation and no expenses are disallowed as a result of the use of the grant funding.
  • How does an eligible entity apply? The SBA has not yet announced how to apply. Congress has instructed the SBA to prioritize the ability of each applicant to use their existing business identifiers over requiring other forms of registration or identification that may not be common to their industry.
  • What can an eligible entity do now to prepare? An eligible entity should use the SBA PPP provided gross receipts definition to compute the decline in gross receipts and then subtract from that amount any funding received from any PPP loan.
  • Does an eligible entity need to make any certifications on the application? There may be more certifications to make than this, but the statute requires an eligible entity to certify that 1. The uncertainty of current economic conditions makes necessary the grant request to support the ongoing operations of the eligible entity, and 2. the eligible entity has not applied for or received a Shuttered Venue Operator Grant.
  • Is there a forgiveness application? This is a grant program and not a loan program. However, there may be reporting required to substantiate that the grant was utilized for allowable purposes.

We will release more information once more guidance is released on this matter. If you have any questions, please contact us at 251-343-1012.

Changes To 2020 Form 1099

Changes to 2020 Form 1099

The IRS has a new Form 1099-NEC to report nonemployee compensation for tax year 2020. The IRS has also revised the Form 1099-MISC and rearranged box numbers for reporting certain income.

If your business has paid $600.00 or more in nonemployee compensation to an unincorporated entity in 2020, you will need to report the payment on Form 1099-NEC. If the payments are for legal services or for medical or health care, they must also be reported to incorporated entities.

If your business has paid $600.00 or more in rent (real property, machinery, or equipment) to an unincorporated entity in 2020, it will need to be reported on Form 1099-MISC. However, you do not have to report these payments on Form 1099-MISC if you paid them to a real estate agent or property manager.

A Form W-9 signed by the vendor should be obtained for each entity that you paid $600.00 or more and will need to report on a Form 1099-NEC or 1099-MISC. If possible, you should obtain a Form W-9 from each vendor that provides a service to your business, at the time of service. A Form W-9 can be downloaded from the IRS website at www.irs.gov.

The due date for filing 2020 Forms 1099-NEC is February 1, 2021. The due date for filing 2020 Forms 1099-MISC is March 1, 2021 for paper-filed returns and March 31, 2021 for electronically filed returns.

We will be glad to assist you with preparation and filing of your 1099s. We can also provide a spreadsheet to help input your information. If you would like for us to prepare your 1099s for you, we will need to receive your information no later than January 18, 2021. Please call us at 251-343-1012 if we can be of assistance.

Hurricane Sally Business Casualty Losses

Business Casualty Losses

For partial business losses, the deductible amount of the loss is the value of the destroyed portion or the adjusted basis of the property, whichever is less, reduced by insurance or other compensation received.

For business property that is completely destroyed, the deductible amount of the loss is the adjusted basis of the property minus any salvage value and any insurance or other compensation received or recoverable.  This is the case whether or not the fair market value (FMV) of the business property immediately preceding the total casualty is less than the adjusted basis of the property.

Two methods may be used to determine the decline in FMV of property damaged in a casualty:

  • Appraised value immediately before and immediately after the casualty to determine the amount of deductible loss.
  • Cost of repairing the damaged property to set the amount of the loss.

The IRS has announced relief related to Hurricane Sally. In summary, the filing and payment due dates for various individual and business tax returns due on or after September 14, 2020 have been extended to January 15, 2021. Please note this does not include an extension to pay your 2019 tax liability, it only extends the time to timely file the tax return. The IRS is offering this relief to any area designated by the Federal Emergency Management Agency (FEMA) as qualifying for individual assistance. Currently this includes Baldwin, Escambia and Mobile counties in Alabama, but taxpayers in localities qualifying for individual assistance added later to the disaster area, elsewhere in the state and in neighboring states, will automatically receive the same filing and payment relief. The current list of eligible localities is always available on the disaster relief page on IRS.gov. The Alabama Department of Revenue is also offering similar relief. For more information, please go to the Alabama Department of Revenue Website.

If you have any questions, please call your accountant at CSB or our main office at 251-343-1012.

Crow Shields Bailey PC – SBA Disaster Assistance Loans

SBA to Provide Disaster Assistance Loans for Small Businesses Impacted by Coronavirus (COVID-19)

  • Who is eligible?
    • These loans are for small businesses, agricultural cooperatives, aquaculture enterprises, and nonprofits affected by disaster to help meet working capital needs or normal business operating expenses through the recovery period. They are available to for profit and non-profit companies.
    • Small businesses, for purposes of these loans, have 500 or fewer employees.
  • What can these loans be used for?
    • Loans may be used to pay fixed debts, payroll, accounts payable, and other operational bills that can’t be paid because of the disaster’s impact. They cannot be used to expand or refinance existing debt or cover lost profits.
  • What is the maximum loan offered?
    • $2 million
  • What is the interest rate on these loans?
    • The interest rate is 3.75% for small businesses without credit available elsewhere; businesses with credit available elsewhere are not eligible. The interest rate for non-profits is 2.75%.
  • What is the term of these loans?
    • SBA offers loans with long-term repayments up to a maximum of 30 years. Loans are determined on a case-by-case basis, based on each borrower’s capacity for making monthly loan repayments.
  • When do repayments begin?
    • The first payment isn’t due until a year after the official date of the loan. However, interest starts accruing on the loan the moment the funds are disbursed.
    • On a case by case basis, loans offered under this program may have a forgiveness clause as a feature.
  • What do I need in order to apply?
    • Your business needs to operate in a current declared disaster area.
      • States or territories are required to certify that at least five small businesses within the state/territory have suffered substantial economic injury, regardless of where in the state those businesses are located as a result of a disaster. Once an economic injury declaration has been made for a state, loans will be available statewide. This will apply to current and future disaster assistance declarations related to Coronavirus (COVID-19).
      • Certain counties in Alabama, Florida, Georgia, Mississippi, and Tennessee have been declared disaster areas relating to Coronavirus (COVID-19).
      • Current declared disaster areas can be searched at https://disasterloan.sba.gov/ela/Declarations.
    • You need to register with the Federal Emergency Management Agency by calling FEMA at 1-800-621-3362 (TTY: 1-800-462-7585) or visit DisasterAssistance.gov.
    • You need documentation justifying amounts you will need to cover each category of cash outflow. Be as thorough as possible!
  • How do I apply?

Crow Shields Bailey PC – The Families First Coronavirus Response Act

In response to the COVID-19 pandemic, Congress passed, and the President signed into law on March 18, 2020, the Families First Coronavirus Response Act.  The Act contains two sections that significantly alter the FMLA: the Emergency Paid Sick Leave Act and the Emergency Family and Medical Leave Expansion Act (“FMLA Expansion”).

For full-time employees with more than 30 days of work history, the two sections work in conjunction to mandate 12 weeks of partially paid leave due to a school or child care facility closure.  As a stand-alone section, the Paid Sick Leave Provisions mandate 10 days of paid sick leave for all employees, regardless of work history.

To offset the cost of the Act, covered employers will receive dollar for dollar tax credits against quarterly payroll taxes, subject to the requirements of forthcoming Treasury Department regulations.

For small businesses, the Act is expected to provide some flexibility with respect to workers who return to work following a COVID-19 related illness or event, including whether or not they are allowed to return to work at all.  In some cases, small businesses may be exempted from the paid leave provisions of the Act entirely.

Covered employers must be prepared to implement the provisions of the Act on or before April 2, 2020. Covered employers are businesses with up to 500 employees.  The provisions of the Act are temporary and will automatically sunset on December 31, 2020.

Emergency Paid Sick Leave Act

Under the Emergency Paid Sick Leave Act, employers with fewer than 500 employees and government employers are required to provide all employees with paid sick leave for the following Covid-19 related reasons:

  1. The employee is subject to a federal, state, or local quarantine or isolation order;
  2. A health care provider has advised the employee to self-quarantine;
  3. The employee has symptoms of COVID-19 and is seeking diagnosis;
  4. The employee is caring for an individual subject to a federal, state, or local quarantine or isolation order related to COVID-19 or who has been advised to self-quarantine by a health care provider;
  5. The employee is caring for a child whose school or place of care has been closed, or whose child care provider is unavailable due to COVID-19 precautions; or
  6. The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services.

For qualifying circumstances, employers are required to provide 10 days or 80 hours of paid sick leave at the employee’s regular rate, but not more than $511 per day or $5,110 in aggregate.  Those qualifying circumstances are:

  1. The employee is subject to federal, state, or local quarantine or isolation order.
  2. A health care provider has advised the employee to self-quarantine.
  3. The employee has symptoms of COVID-19 and is seeking diagnosis.

For other qualifying circumstances, the employer is required to pay 2/3rds of the employee’s regular pay, subject to a maximum of $200 per day and $2,000 in aggregate for the first 10 days of leave. Those qualifying circumstances are:

  1. The employee is caring for an individual subject to a federal, state, or local quarantine or isolation order related to COVID-19 or who has been advised to by a health care provider to self-quarantine.
  2. The employee is caring for a child if the child’s school or place of care has been closed, or the child care provider is unavailable due to COVID-19 precautions.
  3. The employee is experiencing any other substantially similar condition specified by the Secretary.

FMLA Expansion

The FMLA Expansion requires employers having less than 500 employees to provide 12 weeks of job protected FMLA leave to eligible employees who are unable to work because their child’s school or place of care has been closed, or the child care provider is unavailable due to the COVID-19 health emergency

The first 10 days of this leave is typically unpaid; however, some employees may qualify for pay during the first 10 days of leave under the Emergency Paid Sick Leave Act.  During these first ten days, employees may use their accrued sick leave or PTO, but employers may not require that they do so.  After the first 10 days, employers are required to pay qualifying employees 2/3 of their regular compensation, but no more than $200 per day or $10,000 total, for ten weeks if there is a public health emergency related school or child care closure.

Under the FMLA Expansion, the usual FMLA requirement that an employee must have been employed for at least 12 months and have worked 1,250 hours to be eligible for leave do not apply.  Any employee is covered if the employees has been employed for at least 30 calendar days.

Job Protected Leave

Prior to the amendment, the FMLA required that an employee returning from leave be restored to the employee’s original job or to an equivalent job with equivalent pay, benefits, and other terms and conditions of employment. The Act leaves in place most of the key job protection provisions of the FMLA without any change.  However, there is one significant change affecting small businesses.  Under the FMLA Expansion, the job restoration requirements will not apply to employees who take COVID-19 related leave if they are employed by an employer with fewer than 25 employees and these conditions are met:

  1. The employee’s job no longer exists on account of economic conditions related to the outbreak of the coronavirus;
  2. The employer makes reasonable efforts to restore the employee to an equivalent position; and
  3. The employer makes reasonable efforts to contact the former employee for up to one year if a position becomes available.

Exemptions for Certain Businesses

The Secretary of Labor may choose to exempt small businesses with fewer than 50 employees if the sick leave mandate “would jeopardize the viability of the business as a going concern.”  The Secretary is expected to issue guidance and regulation with respect to this provision.  The Secretary is also expected to issue regulations that exclude certain health care providers and emergency providers from coverage if their employer chooses to opt out of the paid sick leave mandate.

Noticing Issues

By Employer: Employers falling under the provisions of the Act must post conspicuous notices of the Act in the workplace once the Secretary of Labor provides the form of the notice.

By Employee:  Under the Act, if the leave is COVID-19 related, an employee does not have to give the employer notice prior to beginning leave.  After the first workday of COVID-19 related paid sick leave, the employer can require the employee to follow reasonable notice procedures for the use of additional paid sick leave.  The employer cannot require the employee to look for a replacement worker.

Tax Credits

The Act includes a dollar-for-dollar tax credit in an amount equal to the sick and FMLA leave required to be paid under the Act, subject to the following caps:

  1. $200 per day per employee up to $10,000 for all calendar quarters for paid family leave; and
  2. $511 per day per employee up to $5,110 for all calendar quarters for paid sick leave.

The credit is applied against the employer share of FICA taxes.

In addition to the tax credit, amounts paid for sick and FMLA leave under the Act are not included in wages for purposes of the employer share of Social Security tax. Although the benefits are not excluded from wages for purposes of the employer share of Medicare taxes, the credit calculation will offset the employer share of Medicare tax due on the leave payments.

Leave payments are subject to the withholding of both federal income tax wages (and state income tax in most states) and all employee FICA taxes.

Alexandra K. Garrett is an attorney at Silver Voit & Thompson, Attorneys at Law, P.C. She was raised in Fairhope, Alabama where she currently lives with her husband and sons. She obtained her B.A. in Communications from Spring Hill College in 2004 and her JD from University of Alabama School of Law in 2007.  Alex’s practice focuses on business advising, employment law, business bankruptcy, and wealth and estate planning.  She may be reached at (251) 338-1081 or [email protected].

Matthew Butler is an attorney at Silver Voit & Thompson, Attorneys at Law, P.C.  He was born and raised in Mobile, AL.  He received a B.S. in Economics from the Wharton School of the University of Pennsylvania in 2003 and subsequently worked for Deutsche Bank Securities as an associate.  Matt obtained his JD from the University of Alabama School of Law in 2011.  His practice focuses on business advising, business bankruptcy, and wealth and estate planning.  Matt is married to Dr. Kristen M. Butler, an area surgeon, and they are the proud parents of four children. He may be reached at (251) 338-1084 or [email protected]