New COVID-19 Relief Bill Promises More PPP for Restaurants

    Some tax wins could aid the industry as well.

    Legal | December 2020 | Danny Klein
    Restaurant goers sit at stools in front of a counter.
    Unsplash/Tetiana Shevereva
    The Bureau of Labor Statistics' November employment report showed that food and drinking places lost 17,400 jobs in November.

    Sunday’s news lawmakers reached a final deal to distribute a fresh $900 billion COVID-19 relief package was met with trepidation by at least one corner of the restaurant industry. The Independent Restaurant Coalition, formed by chefs and independent restaurant owners, said in a statement the bill “falls woefully short of giving 11 million independent restaurant workers the job security they need before the holidays.”

    “Congress understands that dining restrictions, a surging pandemic, and winter weather are a perfect storm for a restaurant employment crisis that is disproportionately impacting single mothers, people of color, immigrants, the formerly incarcerated, and young people,” the IRC said. “When we've been asked by the government to change the way we do business, our elected officials need to help us stay in business. It’s clear Congress wants to help us and we gave them a plan to do that. This legislation isn’t it.”

    The bill does appear to answer some of restaurants’ requests. Roughly $280 billion is expected to go toward another round of the Paycheck Protection Program, which makes up most of the $325 billion slated for small businesses. However, there’s no direct restaurant aid. Theater operators and owners of small performance venues are eligible for $15 billion in grants, while airline payroll support can access another $15 billion. Schools are set to receive $82 billion; child care $19 billion.

    READ MORE: What’s in the $900 Billion Stimulus for Restaurants?

    With the PPP in particular, provisions, per early reports, will allow loan recipients to deduct certain payments made with funds from taxable incomes. In the previous PPP, restaurants lamented a ruling that left operators liable for tax charges.

    Because of an Internal Revenue Service decision made weeks after restaurants started accepting PPP loans, normally deductible business expenses were no longer deductible if the business paid the expense with a PPP loan that was subsequently forgiven. Here’s more on that previous dilemma.

    Also to note, an August report from the U.S. Small Business Administration showed the “Accommodation and Food Services” sector received just 8.1 percent of PPP dollars. 

    "The small changes to PPP funding for independent restaurants will buy time for Congress to negotiate a more robust plan, and we are grateful to many champions in the House and Senate who fought for those changes,” the IRC said. “But make no mistake: independent restaurants and bars will continue to close without additional relief this winter, leaving millions more out of work.”

    Some other key elements to consider:

    President Donald Trump and the White House appear to have won a tax break where businesses can deduct restaurant meals. Some lawmakers previously pushed back against the notion, saying it would encourage in-restaurant dining and help spread COVID-19. Full write-offs inside of the current 50 percent limit will now be allowed. Sen. Tim Scott (R., S.C.) said the deductions would lead to more spending in restaurants.

    It’s expected to extend other tax breaks set to expire at by January, including five-year extensions of tax credits for investing in low-income areas and hiring workers from disadvantaged groups.

    Sunday's agreement would continue a tax credit for retaining employees and make it available to PPP recipients.

    Beer, wine, and spirits makers are looking at tax relief, too. They were prepared for excise tax increases starting in 2021 but will now see the lower tax rates in place since 2018 extended indefinitely

    The deal is expected to provide $300 a week in enhanced federal unemployment benefits for 11 weeks and extend two other unemployment programs until mid-March and early April. The latter expand the pool of people eligible for unemployment benefits and extend their duration.

    The $300 figure is half the $600 benefit in the CARES Act. This proved both a boon and a challenge for operators the last time around.

    Up until July 31, between 25–30 million Americans received the Federal Pandemic Unemployment Compensation boost as part of the CARES Act. According to The NPD Group, this translated to $15–$18 billion per week put into consumers’ bank accounts. For context, total restaurant industry sales at that point were a bit less than $8 billion per week, David Portalatin, NPD food industry advisor and author of Eating Patterns in America, said.

    Yet it also challenged the hiring process given restaurant workers were likely making more not working. UI benefits under the structure came in at a minimum 160 percent of typical wage for minimum workers, and as much as 270 percent in some states.

    The new agreement did not include a provision requested by restaurant lobbyists to protect operators from liability lawsuits related to protecting employees and guests.  

    Meanwhile, the IRC continues to push for the RESTAURANTS Act, although Sunday’s long-awaited deal, which includes $600 in direct payments to qualified citizens, suggests it could be swimming upstream at this point.

    The Act is cosponsored by 53 members of the Senate from both parties and passed the house in October. More than 34,000 people from the restaurant community signed an open letter to Congress in the last two weeks urging action.

    "We did our part, and it's time Congress does theirs,” the IRC said. “Congress must return in January with a renewed commitment to the thousands of people working in independent restaurants in their communities who will lose their jobs in 2021 without swift action on the RESTAURANTS Act.”

    The Act would establish a $120 billion Restaurant Revitalization Fund run through the U.S. Treasury, not through participating banks like PPP. Independent restaurants and bars would be eligible for grant amounts based on the difference between their revenues in 2019 and 2020. These grants can only be applied to eligible expenses including payroll, rent, supplies, PPE, and debt incurred during the pandemic.

    "Ten months into the pandemic, when countless restaurants and jobs have been lost, and indoor dining has again been shut in New York City, it’s shameful that the federal government again failed to enact the bipartisan RESTAURANTS Act, which would provide structured support to save these small businesses that have been uniquely devastated by COVID-19," said Andrew Rigie, executive director of the NYC Hospitality Alliance, in a statement. "Although the agreed upon stimulus includes the important Save Our Stages Act, another round of the Paycheck Protection Program is merely a Band-Aid on a cannon wound. It is better than nothing, yet still a disgrace. We thank Senator Schumer and the New York State Congressional Delegation for fighting hard for our industry, but clearly the crisis is far from over, and we’ll continue to advocate for comprehensive federal support to save restaurants, bars and jobs.”

    According to the Bureau of Labor Statistics’ November employment report, food and drinking places lost 17,400 jobs in November and are still down more than 2.1 million jobs from pre-pandemic levels—more than any other industry. November marked the first net loss of jobs for the industry since April, a byproduct of recent renewed restrictions stemming from increased cases. Unemployment in “leisure and hospitality” remains 134 percent higher than the national average.

    Senate Majority Leader Mitch McConnell (R., Ky.) said Sunday all outstanding issues were settled and the country “at long last” has the “bipartisan breakthrough” it’s needed. “Now we need to promptly finalize text, avoid any last-minute obstacles and cooperate to move this legislation through both chambers,” he said.

    The National Restaurant Association said in a statement Monday the package includes “unique provisions aimed to assist the restaurant industry, which continues to endure unparalleled job and revenue losses.”

    Provisions the Association sought that were included: the deductibility of business expenses paid with PPP loans, enhancement of the Employee Retention Tax Credit (ERTC), extension of the augmented Work Opportunity Tax Credit (WOTC), and increased tax deduction for business meals.

    “The action taken by Congress today will keep tens of thousands of restaurants from closing in the coming months,” Tom Bené, president and CEO of the Association, said in a statement. “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.” 

    Added Sean Kennedy, EVP of public affairs. “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.”

    Congress passed a 24-hour extension of government funding Sunday evening, meaning votes on the relief agreement and a broader spending bill should occur Monday.

    The direct checks are expected to run $600 per adult and $600 per child. In the CARES Act, the numbers were $1,200 and $500, respectively. The amounts are set to decrease for individuals with more than $75,000 in income and $150,000 for couples.

    Dependents over the age of 16 are not expected to qualify—same as the first stimulus. So households with college students or disabled adults won’t get additional payments.

    Additionally, the deal includes $25 billion in recent assistance and extends a moratorium on evictions. It also approves $13 billion for food-stamp and child-nutrition benefits.

    There’s $30 billion to help distribute the vaccine and $22 billion for COVID-19 testing and tracing as well. Businesses that provide paid leave can access $1.8 billion in tax credits, too.

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