What the Federal COVID-19 Aid and Relief Package Means for Restaurants

When every day in the last month has felt like a week, it can be difficult for restaurant operators to keep up with each new development. We wanted to make sure you have the latest information about the Coronavirus Aid, Relief and Economic Security Act (CARES) Act, which passed the Senate and was signed by the president on Friday.

This is a summary of the key details from the bill that could benefit restaurants and other foodservices businesses and their employees. You can read a complete summary of the bill here from the Senate Finance Committee. You can also continue to check on the National Restaurant Association’s COVID-19 resource center for updates as things change.

So what’s in the CARES Act that could help you and your employees?

  • Money to offer loans and grants to small businesses, with some loan forgiveness
  • Employee retention tax credit
  • Deferred Social Security taxes
  • Increased unemployment payments

Loans for payroll assistance, building or utility payments

  • This plan provides $350 billion in cash flow assistance available to small businesses, covering February 15 to June 30, 2020.
  • Restaurants with more than one location, but fewer than 500 employees per location, can apply with no collateral required.
  • The maximum loan must be either a) two and a half months payroll or $10 million, whichever is less.
  • Funds may be used for payroll, rent or mortgage, utilities, retirement benefits, employee leave and insurance premiums.
  • Loan forgiveness is available for eight weeks following the loan origination, equal to the amount spent on the costs listed above.
  • The amount forgiven is reduced in proportion to reduction in employees and/or reduction in employee pay above 25%. Employees who are rehired after a furlough will be treated as if their employment was continuous.

Employee retention tax credit

  • Employers qualify if a) their operations were fully or partially suspended due to a COVID-19 shut-down order, or b) their gross receipts declined by more than 50% compared to the same quarter last year.
  • Restaurants that continue to pay employees during the pandemic can receive a refundable payroll tax credit for 50% of the wages paid.

Deferred Social Security taxes

  • The first half of the Social Security payroll tax will be due on the last day of 2021, and the remaining half is due the last day of 2022.

Increased unemployment payments

  • Unemployment benefits are expanded to those who would not usually qualify, including self-employed, independent contractors and those with a limited work history.
  • Furloughed workers receive whatever benefits are normally available through their state for at least four months, plus an extra $600 per week.

Other provisions

  • Businesses can immediately write off costs association with improving their facilities.
  • Modifications for net operating losses that allow losses from 2018-2020 to be carried back five years, and that temporarily allows net operating losses to fully offset income.
  • The federal excise tax is waived on any distilled spirits used for hand sanitizer.
  • The tax filing deadline has been extended to July 15.
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