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COVID-19 relief bill: the facts

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The $900bn COVID-19 Relief Package includes some benefits for restaurants and other foodservice businesses, reports Amelia Levin

The U.S. House of Representative-approved $908 billion COVID-19 relief bill, passed by the Senate on December 21 after many weeks of deliberation, does not include any direct aid for restaurants. However, it offers a second round of access to the Payment Protection Plan (PPP) as well as other benefits of which small businesses, including restaurants, can take advantage.

The National Restaurant Association and allies had pressed Congress to adopt the bipartisan RESTAURANTS Act, which would have provided direct financial support to the foodservice industry. That Act was not included in this bill, which was meant to be a short-term solution.

Instead, the package, part of Congress’ $1.4 trillion spending bill, in addition to stimulus checks for Americans, unemployment assistance and funds for vaccine distribution and contact tracing, does include $284 billion in PPP funding, which will provide businesses with a forgivable loan based on 2.5 times its monthly payroll costs.

Benefits for small businesses

The National Restaurant association pointed out that restaurants and foodservice, hotels/lodging and bars can seek forgivable loans based on 3.5 times monthly payroll costs under NAICS code 72. They also don’t have to abide by the 300 or less combined total of employees rule, but rather, they can apply for PPP as long as they don’t employ more than 300 per location.

Another benefit for small businesses is that the forgiveness application has been made simpler for borrowers of $150,000 or less. In more good news, businesses are allowed to take into count their average monthly payroll in 2019 or in the early months of 2020 before the pandemic as long as they demonstrate at least a 25% revenue loss for any calendar quarter in 2020 compared to the year prior. And, the new round of PPP can cover cleaning products and some food costs and expenses for social distancing reconfiguration, in addition to just payroll expenses, and business meal deduction has been expanded to 100 percent.

In addition, according to the National Restaurant Association, businesses can deduct allowable business expenses paid with PPP loans, including payroll, rent, mortgage interest, utilities and other allowable expenses. Employee Retention Tax Credits (ERTC) will be available for the first two quarters of 2021 and will allow certain employers to take up to $7,000 per eligible employee. Employers who received a PPP loan may still quality for ERTC on wages not paid for with forgiven PPP funds.

Work Opportunity Tax Credit (WOTC) will be extended by five years, which grants support for restaurants that hire, train and retain employees from target groups.

Unique enhancements

The bill features some temporary enhancements to Small Business Association (non-PPP) lending programs, including reduced or no fees for certain loans. For loans taken prior to the CARES Act, the National Restaurant Association pointed out that restaurants are allowed to take five months beyond the three offered for other businesses for principal and interest paid by the government.

“The action taken by Congress today will keep tens of thousands of restaurants from closing in the coming months,” said Tom Bené, president and CEO of the National Restaurant Association. “A second round of PPP, combined with unique enhancements for the restaurant sector, will provide critical access to capital. Restaurant operators and their employees are dedicated to serving their communities, and today’s bipartisan agreement will give them the opportunity to do that through the holidays.

“However, the long-term economic challenges facing independent, franchise, and chain restaurants will not end with the new year, and we will continue to press federal and state leaders for the support that will put us on the road to recovery.”

Sean Kennedy, executive vice president of public affairs for the Association added:  “Restaurants have waited months for a comprehensive relief bill that reflects the magnitude of this crisis. Today’s bipartisan action is a ‘down payment’ that recognizes the unique damage the pandemic is inflicting on our industry. Congress heard from us and hundreds of thousands of our restaurant members about basic steps to improve PPP for our industry—and they listened. \

“We appreciate Senate and House Leadership, key committee chairs and ranking members, and the group of moderates, each of whom played a critical role in this process. There is much more to be accomplished, and we will continue to press in 2021 at the federal, state, and local level on behalf of the industry, our employees, and our customers.”

Arresting the down-turn

Earlier in December, the National Restaurant Association shared a survey that reported a down-turn for the industry. The survey of 6,000 restaurant operators and 250 supply chain businesses, conducted in November, found that 87% of full-service restaurants (independent, chain, and franchise) report an average 36% drop in sales revenue, and 83% of such operators expect sales to be even worse over the next three months.

59% of operators also reported that their total labor costs (as a percentage of sales) are higher than they were pre-pandemic, and 58% of chain and independent full-service operators expect continued furloughs and layoffs for at least the next three months. As of December, 17% of restaurants—more than 110,000 establishments—are closed permanently or long-term.

The entertainment industry and other segments received direct funding; $15 billion will go to live venues, cultural institutions and movie theatres as part of the Save Our Stages Act. $82 billion will go to schools, with elementary and secondary schools getting $54.3 billion of that cut; higher education will get $22.7 billion. These funds were intended mostly for investments in technology for remote learning and nutritional services as well as for emergency financial aid.

Amelia Levin