Status of the Restaurant Revitalization Fund

The House has passed a bill that would replenish the Restaurant Revitalization Fund (RFF). Restaurant and bar owners should monitor the legislative situation so as not to miss out RRF funding of up to $5 million.

Overview of the Restaurant Revitalization Fund

Enjoying a meal at restaurants was just one of the previously common luxuries that many people temporarily gave up at the onset of the COVID-19 pandemic. For restaurants, the effect of indoor dining shutdowns was more dire: According to the National Restaurant Association, the U.S. restaurant industry lost $240 billion in revenue in 2020 compared to pre-pandemic forecasts. In response, the American Rescue Plan Act, passed in March 2021, established the Restaurant Revitalization Fund (RRF), a grant program targeting restaurants and bars.

The grant program opened for applications on May 3, 2021. By June 30, the $28.6 billion program had closed after being flooded with over 370,000 applications. Immediately, industry groups called for Congress to replenish the Fund. After about a year of inaction, on April 7, 2022, the House of Representatives passed the Relief for Restaurants and other Hard Hit Small Businesses Act of 2022 to replenish the fund with $42 billion, potentially giving a second chance to hundreds of thousands of restaurants unable to receive a grant in 2021.

Roughly two-thirds of applicants did not receive grants before the program ran out of funds. Restaurant owners who did not receive funding in the first round should monitor the evolving legislative situation so they don’t miss out again.

What is the Current Status of the Restaurant Revitalization Fund?

The bill now heads to the Senate, where it may be amended before the two different versions are reconciled, after which they must be passed again and sent to the President. It is unclear when the Senate will consider the bill or how much support the bill will receive from a Senate that has been hesitant to pass large spending items, in part because of inflation, which reached 8.5% in March 2022.

How Did the Restaurant Revitalization Fund Work in the Past?

The program, as originally enacted in 2021, paid eligible restaurants grants equal to the difference between their 2020 and 2019 gross receipts (less any PPP funds received), up to $5 million per location or $10 million total, whichever is less. (Businesses that were not open for all of 2019 and 2020 were eligible to use alternative calculations.) Awardees were required to use RRF funds by March 11, 2023, on eligible expenses incurred from February 15, 2020, and March 11, 2023.

How Would the Replenished Restaurant Revitalization Fund Work?

The new bill appears to use the same calculation and would give priority access to previous applicants who did not receive a grant. The bill would also require new recipients to certify that they are either open for business or intend to reopen. However, the bill gives the SBA the authority to reduce grant amounts to ensure that all applicants receive some funds, focusing on smaller businesses. The House version of the Act also includes a variety of other provisions, including the following:

• The SBA must provide an explanation to denied applicants.
• There must be a reconsideration process for denied applications.
• The SBA must also implement an audit and oversight plan for grant recipients.
• The bill also establishes the Hard Hit Industries Award Program, targeting small businesses that experienced revenue loss of 40% or more due to the pandemic. The program would cap grant amounts at $1 million and prioritize small businesses with larger revenue losses.

Potential for a Single Audit

Restaurant owners should note that, unlike PPP loans, RRF funding counts towards the funding threshold that can trigger a “Single Audit” (or A133 audit). Entities that expend more than $750,000 in federal funds in a fiscal year are required to undergo a Single Audit. Recipients of funds from the RRF or SVOG (Shuttered Venue Operator Grants) programs, which both count towards the $750,000 threshold, should understand whether they will need to undergo an audit to remain in compliance with government requirements.

Although Single Audit deadlines were recently extended for some businesses, they are generally due nine months after the end of the fiscal year in which the entity expends more than $750,000 in federal award funds. Since RRF recipients must use funds to reimburse eligible expenses incurred between February 15, 2020, and March 11, 2023, organizations should understand whether reporting use of funds on expenses in a given fiscal year (for example, 2020 or 2021) will trigger a Single Audit deadline that the entity may have limited time to meet.

If you think your organization may need a Single Audit or are unsure whether you will be required to undergo one, contact us here.

Conclusion

The original dispersal of RRF funds was marked by controversy, confusion, and frustration. The program ran out of money in less than two months, with only about one-third of applicants receiving funding. Thousands of RRF recipients received letters rescinding previously approved funds after three restaurants sued the SBA over the prioritization of certain businesses (such as minority-owned businesses).

Restaurants and bars that did not receive funding in the first round and believe they may be eligible should carefully monitor the evolving legislative situation and be prepared to act if a bill is passed by both houses and signed by the President.

Thank you Pete Ryan at Ryan & Wetmore, P.C. for your contribution and update regarding the Restaurant Revitalization Fund. You can contact Pete via: [email protected] or (703) 288‑4777 / RyanandWetmore.com.

*Disclaimer: In May 2022, the US Senate failed to pass the Small Business COVID Relief Act of 2022, which effectively ended the Restaurant Revitalization Fund.