Financing

The coronavirus relief bill: What’s in it for restaurants?

The largest public assistance measure in American history is an imposing tome of legalese and technical language. Here are the parts with particular relevance for foodservice.
Photograph by Jonathan Maze

The historic $2 trillion aid bill passed late Wednesday by the Senate is a tome packed with extraordinary measures to keep the economy from breaking down amid the COVID-19 pandemic and its expected aftermath. Below are the provisions most likely to be of assistance to the restaurant industry, which is widely regarded as one of the industries hit hardest by the economic crisis.

The bill moves on to the House of Representatives, where it is expected to pass quickly and land on President Trump’s desk later today. The president has indicated that he is sure to sign it. 

Because the bill was in such a fluid state prior to passage, operators are encouraged to check with tax, finance or personnel authorities to verify the listed benefits made it into the final version. We'll also list any corrections at the end of the story that resulted from the bill changing in final negotiations,.

Business continuity and payroll assistance loans: Restaurants and other businesses with more than one location and fewer than 500 employees can borrow up to 2.5  times their monthly payroll, based on figures from the prior year, or $10 million, whichever is lower. A different formula is available for seasonal businesses.

The 500-employee threshold is apparently based on the headcount per location, not across a multi-unit location,

In a concession to independent restaurants, chain affiliations will not be a factor in determining eligibility.

Nor will eligibility be based on the applicant’s ability to repay at the current time or near future. Rather, the criteria have been narrowed to the business being in operation as of Feb. 15 and having a payroll with applicable payroll taxes.

The funds can be used for payroll, paid sick and family leave, insurance premiums, mortgage payments, rent and utility charges.

The bill calls for appropriating about $349 billion in backing for small business loans.

The bill also enables the U.S. Treasury to approve lenders for a Paycheck Protection Program (PPP), a new relief channel separate from the Small Business Administration’s loan program. The PPP funds are available to businesses that have been affected by the pandemic, and can be used  for maintaining payrolls and paying lease and utility payments not covered through other government loans. Interest rates are capped at 4%. Borrowers’ fees are waived.

Loan forgiveness: Small business borrowers will be forgiven for the portions of their loans that are used for employee compensation and certain other business maintenance costs. Specifically, the forgiven amount is what the borrower spent on payroll, mortgage and rent obligations, and utility costs.  

The forgiveness amount will be prorated in accordance with how the payroll changed from a year ago. Employees who are rehired after being furloughed will be regarded as workers who never left the payroll.

The waived amounts will not count as income in computing the borrower’s taxes.

Special concessions for tipped employees:  Because table service has been discontinued in most states, servers are no longer able to earn tips. The bill allows full-service establishments to base their payroll and forgiveness computations on the wages the waitstaffers are currently being paid, instead of the wages plus gratuities they collected waiting tables prior to the COVID-19 pandemic.

A bump in unemployment payments: Restaurant employees and other workers who qualify for unemployment insurance after being laid off will be entitled to an additional payment of $600 per week for four months.  

More help for employees: As expected, the bill calls for a direct  payment of $1,200 to restaurant employees and other citizens earning less than an annual rate of $75,000. The amount is trimmed on a sliding scale—$5 less for every $100 exceeding the $75,000 threshold—for employees who earn more, up to an eligibility cap of $99,000 per year.

Technically, it’s a tax credit for the individual. But citizens in need can request it as an advanced tax refund that can be paid electronically by the Internal Revenue Service. Nonresident alien residents are not eligible.

Deferred payroll taxes: Restaurants and other businesses that have continued to pay employees during the COVID-19 crisis will be refunded the payroll taxes paid on 50% of the wages. Eligibility is limited to enterprises that have been forced to close or have suffered a 50% drop in revenues from a year ago. Businesses with 100 or more employees get the break just on wages paid while they were shut. Small operations get the credit on all wages paid.  

Social Security taxes will be deferred. Half will be due on Dec. 31, 2021, and the remaining half will be due a year later.

Other labor breaks: Employers’ fees for paid sick leave are capped at $200 per day and $10,000 in the aggregate for each employee. Outlays for paid family leave are capped at $200 a day or $2,000 in the aggregate for employees attending to a quarantined child or family member.

Assistance for big businesses: A sum of $500 billion hasbeen made available to the U.S. Treasury for loans, loan guarantees and direct investments in ailing industries and large businesses. About $29 billion has been earmarked for the airline and air cargo industries, and another $17 billion is intended for businesses involved in national security.

The remaining $454 billion will be used to stabilize government and private-sector parties that have been wounded by the pandemic. Eligible companies are prohibited from using the funds for stock buybacks and cutting their current workforces before Sept. 30, with no more than a 10% cutback as of that date.

In addition, executives earning at least $425,000 annually would not be eligible for raises during the span of the loan, and they can receive no more than 2 times their annual pay as severance.

CORRECTION: An earlier version of this story misstated the formula for computing maximum loan amounts. The Senate changed the cap to 2.5 times a business' monthly payroll, instead of four times an enterprise's monthly expenses. 

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