TAX ALERT |
Authored by RSM US LLP
Throughout the past few weeks, the Small Business Administration (SBA) has conducted several town hall / webinar panels with restaurant industry groups to detail various aspect of the American Rescue Plan’s (ARP) Restaurant Revitalization Fund. While the SBA has not yet posted guidance to its website, these sessions provide valuable insights into the program and how it is to be operated.
In addition, a draft application has been posted to the Office of Management and Budget. We are not linking the draft application here as it is subject to change. For a brief overview of the program, please see our previously issued alert here.
Here are the updates since our last alert.
1. Question: Where can I apply for the RRF?
Answer: The SBA announced that applicants will be able to apply at restaurants.sba.gov (link not live yet per SBA).
2. Question: I am not listed as an entity that is eligible to receive a grant in the 21-day initial period. Does that mean I should wait to apply?
Answer: It appears not. The SBA has made comments that it will award grants in the order in which applications are received. Accordingly, applicants should be ready to be applying as soon as the program opens, even if they do not meet eligibility for the 21-day initial period.
3. Question: Has the covered period for the use of the funds been extended?
Answer: It appears so. The covered period runs from Feb. 15, 2020 to Dec. 31, 2021. However, Congress provided the authority for the SBA Administrator to extend to March 11, 2023. It appears the Administrator has preemptively extended the program before release to March 11, 2023.
4. Question: Do I need a DUNS number and/or do I need to register on SAM.gov?
Answer: No. The statute authorizing the RRF instructs the SBA Administrator to prioritize the ability of each application to use existing business identifiers. Accordingly, the SBA has indicated it will use the business tax identification number of the applicant (EIN, SSN, or ITIN) for the application.
5. Question: What documentation should I have prepared for my application?
Answer: Applicants will be required to complete IRS Form 4506-T and then need to submit documentation demonstrating gross receipts such as –
a. Business tax returns (IRS Form 1040 Schedule C, Form 1040 Schedule F, Form 1120, Form 1120-S, Form 1065 (including K-1s)
b. Bank statements
c. Externally or internally prepared financial statements such as Income Statements, or Profit and Loss Statements
d. Point of sale report(s), including IRS Form 1099-K
6. Question: Will I need to have my 2020 tax return completed before I apply?
Answer: It does not appear so, but it may be helpful to expedite the application. Per the above, the SBA may have various ways to substantiate the claimed gross receipts.
7. Question: Does my 2020 gross receipts include amounts received from the Paycheck Protection Program, SBA Section 1112 debt relief payments, or any SBA Economic Injury Disaster Loss (EIDL), EIDL advance, targeted EIDL advance, or state and local small business grants?
Answer: Per preliminary application, the answer is no, these amounts should not be included in your 2020 gross receipts. Keep alert for final guidance though, in case of any changes.
8. Question: Do any of the eligible entities have restrictions on eligibility due to gross receipts?
Answer: Yes. For applicants that are a brewpub, tasting room, taproom, brewery, winery, distillery, or bakery: In addition to the gross receipts documents, documents evidencing that onsite sales to the public comprise at least 33% of gross receipts for each of the years included in your funding calculation, which may include Tax and Trade Bureau reports filed or to be filed that cover the period for which you are reporting gross receipts, or if applicable, eligible expenses.
Also for Applicants that are an Inn: In addition to the gross receipts documents above, documents evidencing that onsite sales of food and beverage to the public comprise at least 33% of gross receipts for each of the years included in your funding calculation.
9. Question: Do I need to list my ownership information?
Answer: It appears that an applicant may be required to list all owners of more than 20% of the equity of the Applicant. Information required looks to include the owner tax identification number, ownership percentage, and the owner’s address.
10. Question: Is the RRF grant a gross receipt for Federal income tax purposes and would it be counted as part of 2021 gross receipts for Employee Retention Credit purposes?
Answer: It is likely. Generally, even tax-exempt income items are included in gross receipts calculations for purposes of the Internal Revenue Code. RRF recipients should be prepared to include the receipt of the grant as a gross receipt for ERC purposes in the month the grant is received.
We will continue to release additional updates as they becomes available. Should you have questions about the Restaurant Revitalization Fund or any other program, please contact your local RSM office.
This article was written by Mathew Talcoff, Tracy Burr, Ryan Corcoran and originally appeared on 2021-04-16.
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