RRF Taxability, RRF Update and ERC taxability
RRF Taxability and recent news about Wisconsin
The American Rescue Plan Act (ARPA) established the Restaurant Revitalization Fund (RRF) to provide funding to help restaurants and other eligible businesses keep their doors open. Recipients are not required to repay the funding as long as funds are used for eligible uses no later than March 11, 2023. These grants were tax free for Federal reporting and expenditures paid with these funds are tax deductible.
This week in Wisconsin, Governor Evers signed into law the Restaurant Revitalization Fund Tax Treatment Bill to conform with the Federal Tax code. Thanks to the Wisconsin Restaurant Association for their efforts with our Wisconsin leaders in helping to get this passed.
Not all states are conforming with the federal law, it is important to check with your state’s department of revenue to determine if your RRF grant will be taxable at the state level.
RRF Update
I have written about lobbying efforts that the National Restaurant Association has been leading over the past months to refund the RRF to cover the previously approved and unfunded 177,000 applications for $43.6 billion. It looks like recent efforts over the past month have not resulted in including this request in the omnibus bill currently getting finalized in Congress. The National Restaurant Association has stated that they will continue the good fight as many restaurants since 2021 that did not receive RRF funding have had to take on more debt, layoff employees, don’t have sales that have returned to pre-pandemic levels and some currently even face evictions from landlords. However, one good thing is the RRF grants did not have to be included when determining gross receipts for the ERC program, so that allowed for higher RRF grant awards for the ones that got them.
ERC Taxability
If the RRF update wasn’t bad enough, restaurants that applied for Employee Retention Tax credits for 2021, are now having to report those as a reduction in payroll expense and are not free of tax. These programs could potentially result in a tax paying position in 2021, when the IRS has not yet disbursed the ERC $ to many companies that have applied months ago due to a lack of resources and backlogs at the IRS.
So, as they say, “The Devil is in the Details”, so make sure to check on your state’s RRF taxability status, make sure to claim your ERC credits on your tax returns, and continue to follow this blog for more insights on the restaurant industry.
Karen is a Principal in the CLA Bizops practice specializing in serving restaurant clients as a CFO. She has 25 years of experience in the retail and restaurant industry with senior management positions at Wilsons Leather, Famous Dave's, and a division of Hallmark Cards. She is based out of Minneapolis, MN
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