Restaurant Revitalization Grants and Employee Retention Credit Interaction

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The American Rescue Plan Act passed in March established the Restaurant Revitalization Fund (RRF) to provide funding to help restaurants, bars, and other businesses that serve food or beverages that experienced pandemic-related revenue loss. The program is similar, and in some cases complimentary, to the PPP loans. Funds can be used toward a variety of business expenses including, but not limited to, payroll costs.

The same legislation also extended the Employee Retention Credit (ERC) for the third and fourth quarters of 2021. Specifically for those final two quarters, the legislation clarifies that the ERC will not apply to qualified wages taken into account as payroll costs in connection with a restaurant revitalization grant. Therefore, as with the PPP, businesses will need to strategize the coordination between these programs.

The RRF legislation specifies that eligible entities may use grant funds during the “covered period,” which is defined as: “the period beginning on February 15, 2020; and ending on December 31, 2021, or a date to be determined by the Administrator that is not later than 2 years after the date of enactment of this section.” With this definition, Congress gave the SBA flexibility to extend the covered period until as late as March 11, 2023. While there was speculation that the SBA might indeed exercise this option, they provided some confirmation on April 17 with the publication of a sample funding application, SBA Form 3172 in which the covered period is described as extending through March 11, 2023.

The extension of the covered period provides businesses taking advantage of the ERC with flexibility to maximize both programs by delaying the use of RRF grant funds to cover payroll costs after the conclusion of their ERC eligibility period. However, since all of the changes to the ERC made in the ARP only apply to wages paid after June 30, 2021, and the RRF covered period is retroactive to February 2020, it appears that eligible businesses can in fact use RRF grant funds toward payroll costs and also receive an ERC on those same dollars for wages paid between March 13, 2020 and July 1, 2021.

Helpful links:

The SBA general information page about RRF: https://www.sba.gov/funding-programs/loans/covid-19-relief-options/restaurant-revitalization-fund

Sample application (Form 3172) as of 4/19/2021: https://www.sba.gov/sites/default/files/2021-04/SBA%20Form%203172%20RRF%20Application%204.20.21-508.pdf

Learn more about the Employee Retention Credit (ERC).

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