Senate Democrats reintroduce bill to provide payroll tax credit to restaurants

Three Senate Democrats have reintroduced a bill aimed at providing payroll tax relief to businesses that applied for the Small Business Administration's Restaurant Revitalization Fund, but didn't receive a grant because the program ran out of money.

The Restaurant Revitalization Tax Credit Act was first introduced last month but wasn't included in the year-end omnibus spending bill, and since it's a new congressional term, its sponsors reintroduced it Tuesday. The bill, co-sponsored by Senate Small Business Committee chair Ben Cardin, D-Maryland, and Sen. Sherrod Brown, D-Ohio, and Patty Murray, D-Washington, would create a special tax credit for restaurants that didn't receive money from the SBA's Restaurant Revitalization Fund. Nearly two out of three eligible RRF applicants, or approximately 175,000 businesses, didn't receive the funds.

The bill would establish a Restaurant Revitalization Tax Credit, which would be available to eligible employers to offset payroll taxes of up to $25,000 per quarter in 2023. For businesses with 10 or fewer employees, the credit would be refundable up to a total of $25,000 over the course of the year, with the cap on refundability gradually phased out for businesses with fewer than 20 employees.

The credit would be open only to those businesses that applied for and were eligible to receive RRF grants. They also would have needed to experience average operating losses of at least 30% in 2020 and 2021 compared to 2019, or losses of at least 50% in either 2020 or 2021 compared to 2019. The business would need to have been operating prior to March 14, 2020, and have paid payroll taxes in at least two quarters in 2021.

David Paul Morris/Bloomberg

"We have not forgotten about these restaurants," Cardin said in a statement. "They have been hurting for too long. The Restaurant Revitalization Fund was a timely program that simply did not have enough funds to cover the intense demand. I've heard from many restaurant owners who, having missed out on these funds, used their personal retirement savings or put their homes up as collateral to keep their businesses afloat. This tax credit will help ease their burden. It will support the restaurants we love while helping to boost our local economies."

The $28.6 billion Restaurant Revitalization Fund was created under the American Rescue Plan Act of 2021 with the goal of providing restaurants and similar food and beverage establishments with funding equal to their pandemic-related revenue loss up to $10 million per business and up to $5 million per location (see story). Recipients would not be required to repay the funding as long as the funds were applied to eligible uses no later than March 11, 2023. However, the program ran out of money in July 2021, only about three months after it opened following a rocky rollout, and it never reopened even though $180 million was reportedly left in the fund as of July 2022.

"As restaurants continue to deal with the fallout of the pandemic and ongoing challenges with supply chain disruptions and inflation, they need our help to keep their doors open and employees on payroll," Murray said in a statement. "While the American Rescue Plan saved thousands of restaurants, its Restaurant Revitalization Fund left too many behind. I believe we need to replenish the Fund and will keep pressing to do so. We are reintroducing the Restaurant Revitalization Tax Credit Act because we know it will help keep restaurants afloat until we are able to replenish the Fund. This tax credit would benefit every eligible restaurant that applied to the fund, but never received a grant through no fault of their own."