For the past nine months, restaurants—arguably the hardest-hit industry during the pandemic—have pleaded with Congress to provide assistance.
Recently, the National Restaurant Association announced that 10,000 more restaurants have closed since it updated legislators three months ago. In total, more than 110,000 are shuttered permanently or long-term.
And with winter months ahead and COVID restrictions tightening, a future without governmental aid appears bleak. In November, the food and beverage industry lost more than 17,000 jobs, which is the first decrease since April and March.
The struggles of operators across the country hits home with “Bar Rescue” star Jon Taffer, who has tried to decipher what the government has planned. About a week before Election Day, he interviewed President Donald Trump and both agreed that stimulus would likely happen after the election but before Inauguration Day, which now seems to be the case. Taffer says he requested an interview with President-elect Joe Biden, as well, but the team didn’t grant the same level of access.
Currently, the stimulus plan receiving the most attention is a $908 billion package brought forth by a bipartisan group of legislators from both the House of Representatives and Senate. Lawmakers are feverishly working on provisions to create a bill that would have a chance of being approved by both parties.
Whatever the end result is, Taffer says, it must include four main aspects to help the restaurant industry—extension of the Paycheck Protection Program, expansion of the employee retention tax credit, a domestic travel incentive, and meal expense tax deductions.
The latest stimulus deal checks the first box of Taffer’s plan in the form of $300 billion to the Small Business Administration. Some businesses around the country, including restaurants, would be eligible for a second round of forgivable loans. The parameters are more specific to ensure it goes to the hardest-hit operators.
To be eligible, businesses must have 300 or fewer employees and have experienced a 30 percent revenue loss in any quarter of 2020. Small 501(c)(6) organizations, excluding lobbying firms, that have fewer than 150 workers—tourism offices, chambers of commerce, economic development organizations—would become eligible. Additionally, businesses may use forgivable expenses on supplier costs, investments in modifying stores, and PPE. Any expenses paid for with the PPP money would be tax deductible.
To decrease barriers to approval, the process would be simplified for those borrowing less than $150,000. There would also be loan programs specifically for businesses with 10 or fewer workers and minority business owners.
This is on the right track, according to Taffer.
“What is the PPP plan that has some type of debt forgiveness program to it, meaning not only would the PPP be forgiven as debt from the restaurant operator, but it could be used for debt going six months back,” Taffer says. “This is big. So if I as a restaurateur could get a PPP chunk of money, satisfy my landlord debt, satisfy my utilities debt, and dig myself out of the hole, that’s a biggie.”
The next element of Taffer’s plan involves expansion of the employee retention tax credit to include more types of restaurants. As it’s currently configured, the refundable tax credit equals to 50 percent of qualified wages up to $10,000 per employee paid between March 12 and January 1. To qualify, a business must have fully or partially suspended operations during any point of 2020 due to government regulations or show a decline of 50 percent or more in gross receipts in any given quarter. Businesses that receive a PPP loan aren’t eligible for the tax credit, and employers also can’t double claim workers and their wages under the Family and Medical Leave Act and the Work Opportunity Tax Credit.
“If those four things happen, the expanded PPP with debt, the expanded employee retention tax, the domestic travel incentive, and a reinstatement of the employee meal deduction, that would dig us out and set us up for revenue going forward,” Taffer says.
The third piece of Taffer’s plan is to include a domestic travel incentive to boost the tourism industry. During the summer, the American Tax Rebate and Incentive Program Act, or the American TRIP Act, was introduced. The bill would give a yearly tax credit of $8,000 for joint filers and $4,000 for individual filers and an additional $500 for dependents for the 2020, 2021, and 2022 tax years. The legislation—which didn’t gain traction—was introduced by former Sen. Martha McSally, who lost her seat to Sen. Mark Kelly in the November election.
“Consumer incentives for domestic travel would be really important for places like Las Vegas, Miami, New York, Los Angeles that have heavy tourism industry that feed the restaurant industry so much,” Taffer says.
The final part, which Taffer says he’s most excited about, is the potential re-implementation of the meal expense tax reduction. The law in question is the Tax Cuts and Jobs Act, which was passed in 2017. According to guidance from the IRS, the law prohibits a deduction for any item related to entertainment, amusement, or recreation. Companies are allowed to deduct 50 percent of food and beverage expenses “associated with operating their trade or business, including meals consumed by employees on work travel.”
Trump, along with some Republican lawmakers, have suggested the food and beverage deduction move up to 100 percent. Taffer says the change would be vital for lunch and business oriented restaurants. At the beginning of December, Senate Majority Leader Mitch McConnell circulated a slimmer bill that would include the proposed rise in deduction, also known as the “three martini deduction.”
“If those four things happen, The expanded PPP with debt, the expanded employee retention tax, the domestic travel incentive, and a reinstatement of the employee meal deduction, that would dig us out and set us up for revenue going forward,” Taffer says. “So I really think those four things are critical.”
Overall, talks between Democrats and Republicans over a potential stimulus don’t appear too optimistic. As CNN reported, House Speaker Nancy Pelosi and McConnell are “bitterly trading blame as the leadership remains at sharp odds about what can even pass, meaning there’s no guarantee any deal reached by a bipartisan group of lawmakers will even get through Congress.”
The tense negotiations leave Taffer, restaurant operators, and the rest of the country waiting for a much-needed resolution.