It can be as much as $5,000 per employee for 2020 and $7,000 per employee per quarter in 2021.
Whether or not additional federal aid is coming for restaurants is anybody’s guess at this stage. The SBA confirmed in early August it was working with the Department of Justice to distribute $180 million of Restaurant Revitalization Fund awards.
About a week later, more than 70 members of Congress, led by Sen. Catherin Cortez Masto and Rep. Earl Blumenauer, penned a letter to SBA administrator Isabel Guzman asking to immediately release the grants. “While $180 million is a small amount compared to the full amount needed to replenish the RRF, it will have an impact for the select restaurants who can now receive grants,” Sean Kennedy, EVP of Public Affairs at National Restaurant Association, said in a statement. “We hope that SBA will have answers for the local restaurants waiting for more information soon.”
This all stems from a July report titled “Restaurant Revitalization Fund: Opportunities Exist to Improve Oversight,” which was released by the Government Accountability Office. The report stated that, as of June 2022, $180 million of RRF funding was unobligated. To Kennedy’s point, it doesn’t measure to the 177,000 restaurants that applied to the original program but did not receive awards. But it is better than zero.
“We write to ask that the Small Business Administration award unobligated Restaurant Revitalization Fund funding immediately to eligible applicants and that it specifically prioritize any of the approximately 7,000 applicants that were awarded grants in 2021, but were not able to receive funding,” the letter shared.
Additionally, it urged the SBA to take action to recover funds that were awarded to ineligible applicants, were found to be accepted fraudulently, or could otherwise be returned. One example given was in the GAO report. It noted the SBA does not require recipients to report their operating status, despite the statute requiring that businesses that permanently close to return the unused funds to the SBA.
The SBA itself has identified potentially ineligible recipients, the letter said, such as clubs and hotels that failed to meet statutory eligibility criteria. “Money recovered from fraudulent and ineligible businesses can subsequently be used to help fund the many businesses who were unable to receive grants. We urge you to take action on this matter and provide us with detailed information on the amount of funding that may be recovered as well as SBA’s progress in doing so,” the letter continued.
In the meantime, Terracina Maxwell, president and co-founder of Clarus Solutions, says restaurants can still take advantage of tax credits and incentive programs. It remains an underutilized option—roughly two-thirds of business owners are not, the company estimated.
Maxwell chatted with FSR about what’s out there, namely the Employee Retention Tax Credit, and why some of the incentives at hand are too good for restaurants to pass up.
Walk us through some of the tax incentive programs out there for restaurants at this point.
Restaurants employ many entry level workers and provide jobs and a training ground that is hugely important in the U.S. economy. As such, Congress periodically directs tax incentive programs toward the industry, right now, there are three significant programs:
FIA Tip Credit: Encourages employers to report tip income to their staff as taxable. Equal to...
Work Opportunity Tax Credit (WOTC): Encourages employers to hire from nine different worker populations who have some barrier of entry into the workforce. Can be as much as 40 percent of wages paid to those employees subject to a cap
Employee Retention Tax Credit (ERTC): Part of Congress's response to COVID, this program encouraged employers to continue to pay workers even during periods when their business was significantly down or in some way impacted by government orders or to start a new trade or business. Can be as much as $5,000 per employee for 2020 and $7,000 per employee per quarter in 2021.
Let’s elaborate on the ERTC. This has come up a lot over the last couple of years, but it still feels like an underutilized resource. Why do you think that is, and how can operators make sure they don’t miss out?
Unlike the PPP, the funds allocated to this program are not limited, which I suspect allows employers to access the program at a more leisurely pace since they don't have to worry about the funds running out. It also has eligibility and computational requirements some of which can be hard to understand, we talk to restaurants all the time who aren't sure if they qualify (most clearly do).
What are some other steps restaurants can take today to navigate the current climate?
First and foremost, the statute of limitations for claiming the employee retention tax credit will start to run out on July 31, 2023, so if you haven't assessed your eligibility for the program do so well in advance of that date so you can get your claim in. Many providers have backlogs and it can take a while to get through the process. The FICA tip credit should be reviewed each year-end to see if you qualify. WOTC is a great program which has become much easier to administer with the advent of electronic screening, if you haven't assessed what this program means to you, here is a calculator that can help you assess how much it can help.
What do you think of further potential federal aid? Does that seem realistic at this point?
Given inflationary pressure I doubt that any meaningful extensions or enhancements of these employment-based tax credit programs will be forthcoming in the near future. In fact, Congress ended two or the three eligibility categories early on September 30, 2021 even though they were originally set to run through December 31, 2021.
Is there anything else operators should be aware of regarding programs and incentives?
Tax incentives used to be utilized almost exclusively by large corporate taxpayers, in today's post-COVID world they are available and important to a much broader group of employers, make sure you've assessed how much they could potentially help your business so you don't lose a competitive advantage. An easy way to find out is to use companies like ours that specialize in this.