Important Economic Aid for Restaurant Owners : Updated Economic Injury Disaster Loans and the Restaurant Return-To-Work Tax Credit

August 16, 2021

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Updates to the SBA’s Economic Injury Disaster Loans 

The COVID EIDL was created in response to the pandemic and was passed as part of the CARES Act in March of 2020. The program has dedicated funding, between $170-200 billion, and is intended exclusively for the recovery of businesses that have been in operation, or making efforts to be in operation, as of 2019. 

Several key facets of the COVID EIDL have been updated to increase aid for small business owners and make the process easier overall. 

Updates: 

  • Whereas the loan cap used to be $500,000, the SBA has now increased it to $2 million.  
  • Whereas the max loan calculation used to be based on only 6 months of working capital, it has been extended to 24 months worth of the business’ gross margin. 
  • Applicants will now be able to get up to $10 million across common ownership – a move that mirrors what the PPP and RRF programs offered as well. 
  • Most importantly, 2 changes will be implemented starting August 16th:
    • Prepayment (commercial debt, credit card debt, etc)
    • Principal and interest (debt owned by federal government) 
      • Which applicants will be able to do monthly debt service payments

The SBA has also updated its previously drowning customer service center as well as its faulty do not pay registry – both of which presented major issues for applicants in the past. 

Due to the legislative mandate, the COVID EIDL runs out on December 31st of 2021, and the SBA is urging applicants to fill out the application and receive their aid as soon as possible. 

The Restaurant Return-To-Work Tax Credit 

A $35 million Restaurant Return-to-Work Tax Credit Program has been unveiled which will incentivize pandemic-impacted restaurants to both bring staff back-to-work and increase hiring. 

Eligibility 

Eligible businesses include small, independently-owned and operated restaurants with less than 100 employees. Your business must be located in an area designated as an Orange or Red Zone for at least 30 consecutive days, according to the NYS Department of Health; this includes New York City and certain areas of Chemung, Erie, Monroe, Onondaga, Orange, Rockland and Westchester Counties. The applicant must be able to demonstrate pandemic-related losses of at least 40% in gross receipts or full-time equivalent employees. Additionally, you must hire at least 1 full-time employee. Eligible food and beverage establishments include those that predominantly support on-premises, in-person dining, such as: full-service restaurants, limited-service restaurants, bars, taverns, nightclubs, other drinking places; additionally, certain breweries, wineries, cideries, distilleries, and meaderies with a tasting room are eligible. 

To Apply

Businesses must first complete the eligibility questionnaire – https://formrouter.apps.esd.ny.gov/rrtw@ESD/restaurant_return_to_work.html. An invitation to submit an application will be returned to you via email if you are eligible. According to the program’s website, businesses must have the following documentation on hand to complete the application:

  • Copies of the documents as indicated below must be uploaded at time of application. 
    • An application will not be considered complete and approved without all the necessary supporting documentation uploaded.
  • Evidence of economic harm from Covid-19: 
    • 2019 and 2020 Business Income Tax returns
      • For partnerships – include IRS Form 1065 and Schedule K-1
      • For sole proprietors – include IRS Form 1040 Schedule C
      • For Corporations – include IRS Form 1120 or 1120-S
  • Evidence of business location and current operation: Two of the following documents demonstrating that the business is operating at the qualifying location(s):
    • Current lease; or
    • Utility bill; or
    • Current business bank statement; or
    • Current business mortgage statement; or
    • Business credit card statement; or
    • Professional insurance bill; or
    • Payment processing statement
    • NYS ST-809 or ST-100 sales tax collection documentation.
  • Schedule of ownership: Listing of names, Social Security numbers or Federal Employer Identification Number (FEIN), and percentage ownership for all owners.
  • Evidence of number of employees: 
    • NYS-45 documents for the following periods:
      • April 1, 2019 to June 30, 2019
      • July 1, 2019 to September 30, 2019
      • April 1, 2020 to June 30, 2020
      • July 1, 2020 to September 30, 2020
      • January 1, 2021 to March 31, 2021
  • Evidence for Wineries and Breweries with tasting rooms
    • Documents evidencing that onsite sales to the public comprise at least 33% of gross receipts for 2019 to include Tax and Trade Bureau (TTB) Form 5130.9 for breweries and Form 5120.17 for wineries.

Important Dates

The program will offer a Fast Track Option, which will allow businesses to claim the credit after August 31st, before the end of the tax year. To qualify, businesses must demonstrate a net employee increase of at least 1 full-time employee as measured from April 1, 2021 to August 31, 2021. Employment data for the period must be submitted by September 15th. The program has already stated that, because you would normally submit your NYS-45 for July, August and September in October, a draft NYS-45 for the 3rd quarter of 2021 will be accepted. 

Alternatively, businesses can choose to claim the tax credit on their 2021 NYS tax return. For this, businesses must demonstrate a net employee increase of at least 1 full-time employee as measured from April 1, 2021 to December 31, 2021. 

Lastly, the program will grant businesses up to January 14, 2022 to submit employment data for the April 1, 2021 to December 31, 2021 period IF funds remain after the advance payments are made. 

Resources

To submit comments on the program’s proposed regulations: email Thomas Regan, Associate Counsel at Thomas.Regan@esd.ny.us

To submit any additional questions: email ESD at NYSRestaurantTaxCredit@esd.ny.gov

To access Technical Assistance providers, who can help complete your application: https://esd.ny.gov/organizations-available-assist-businesses 

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This information is the most up to date news available as of the date posted. Please be advised that any information posted on the KI Legal Blog or Social Channels is being supplied for informational purposes only and is subject to change at any time. For more information, and clarity surrounding your individual organization or current situation, contact a member of the KI Legal team, or fill out a new client intake form.