Blog / April 1, 2020
What Restaurants Need to Know About the Coronavirus Stimulus CARES Act
On Friday, March 27th, President Trump signed the largest stimulus bill in American history. Over the next few weeks, this package will begin pouring more than $2 trillion into the pockets of American citizens and businesses. Even then, it will offset only some of the damage done by the coronavirus.
No industry has felt the pain of social distancing more than hospitality. Luckily, the sector was represented well during the bill’s negotiation. Professional lobbyists, as well as thousands of hospitality workers taking direct action themselves, ensured that the stimulus bill included some relief for restaurants, hotels, and their employees. It’s not enough, but it’s a start.
Here are the key aspects of the Coronavirus Aid, Relief, and Economic Security (CARES) Act that you should know about.
This article does not offer legal, tax, or HR advice. Please consult with a professional before taking any action for your business.
Restaurants can effectively obtain short-term grants for payroll, rent, and utilities
$349 billion has been set aside for interest-free loans to businesses with fewer than 500 employees. According to the New York Times, a special exception in the bill extends this offer specifically to large hotel and restaurant groups, so long as individual locations apply for loans as “small businesses.” (One franchisee can get a loan, but the national chain cannot.)
Businesses can apply for Small Business Administration-backed loans worth up to 2.5 times their monthly payroll. Better yet, any funds that are used within two months to pay expenses like payroll, mortgage interest, rent, or utilities do not have to be paid back. Effectively, “the loans would convert into grants,” according to the Wall Street Journal. “The loans would be capped at $10 million and cover wages up to $100,000 a year.”
Get our Paycheck Protection Program Loan Forgiveness Calculator.
Individuals making less than $99k will get stimulus payments
Any individual who made less than $99,000 last year will receive a one-time stimulus payment from the government.
Individuals who reported any income less than $75,000 last year will receive $1,200. (That income level is $150,000 for married couples, who will receive up to $2,400, and $112,000 for a “head of household.” You can find your income on line 8b of 2019’s form 1040.) The coronavirus stimulus amount reduces by 5% for any income beyond $75,000, until it hits zero at $99,000.
Here’s how the math shakes out:
2019 Gross Income (Individuals)
March 2020 COVID-19 Stimulus Payment
In addition to this payment, the government will disburse $500 for every taxpayer’s child. This cash is expected to be paid via direct deposit or mailed check by April 16.
One thing this formula doesn’t take into account is the earner who will make less in 2020 than they did in 2019. In other words, the formula excludes people affected by the economic calamity that necessitated this bill in the first place.
Unemployment benefits temporarily increase by $600/week
Last week, the National Restaurant Association predicted the industry would suffer between 5 and 7 million job losses by mid-June. Sure enough, this week the government reported 3 million new unemployment claims — the largest increase in American history by far.
To match that need, the CARES Act includes extra funding for jobless people that Senator Chuck Schumer calls “unemployment on steroids.”
This bill will add $600 to every weekly payment of unemployment assistance, on top of what claimants get from state benefits. This increase will last for 4 months. According to Vox, “this benefit extends to gig economy workers, freelancers, and furloughed workers who are still getting health insurance from their employers, but are not receiving a paycheck.”
Physical renovations can be written off from taxes
In late 2017, Congress passed the Tax Cuts and Jobs Act. One aspect of this law was supposed to encourage businesses to pay for improvements to their physical locations, by changing the timeline of depreciation and letting them write off the full amount of some improvements all at once.
Unfortunately, that didn’t happen. Writing the bill quickly, Congress made a mistake and “forgot” to include the new timeline, according to Forbes. That meant that for the last two years, businesses have been paying more for renovations than they were under the previous law. Tax experts have clamored for this mistake to be fixed.
The correction finally arrives in the CARES Act. The timeline mistake is now corrected, which means that restaurants and other businesses can immediately file an amended tax return and recoup the benefits of the accelerated depreciation that was originally promised.
Utilities can still be shut off
The CARES Act did not include any language making it illegal for providers to shut off electric service, water, or any other utility. However, Comcast has said it won’t disconnect any customers’ internet, and ConEdison won’t shut off power due to missed payments and are waiving new late-payment fees. Verizon has also announced it is getting rid of late fees for 60 days and will not suspend services for those affected.
Employers can receive a payroll tax credit for paying employees
The employee retention tax credit (ERTC) provides a refundable payroll tax credit for 50% of all wages paid to employees between March 13, 2020 and December 31, 2020 (while businesses are closed). This credit is available if employers meet the following criteria:
(1) business operations were fully or partially suspended due to mandated closures
(2) gross receipts decline by more than 50% compared to the same quarter in 2019
We will continue to update this page as more information becomes available related to how the CARES act will provide much-needed relief to restaurants. For more information, reach out to your local association or visit the Treasury Department’s CARES Act page.