What is the Restaurant Revitalization Tax Credit Act?
Clarifying pandemic-era restaurant aid. Understand the distinction between past grant programs, proposed legislation, and valuable tax credits still available.
The “Restaurant Revitalization Tax Credit Act” was a proposed piece of legislation that did not pass in Congress and did not become law, so no tax credit under this act is available. This proposal is often mistaken for an entirely separate program, the Restaurant Revitalization Fund (RRF). The RRF was a grant program, not a tax credit, that provided direct funds to businesses before its funding was exhausted and the program closed.
The Original Restaurant Revitalization Fund
The Restaurant Revitalization Fund was a $28.6 billion program under the American Rescue Plan Act of 2021, administered by the Small Business Administration (SBA). It provided direct grants to restaurants and other food and beverage businesses to offset pandemic-related revenue losses. The funds were structured as grants, not loans, and did not require repayment if used for eligible expenses like payroll, rent, and operational costs by a specified deadline.
Eligibility targeted establishments like restaurants, bars, food trucks, and caterers whose primary purpose was serving food or drink. To qualify, businesses could not own or operate more than 20 locations as of March 13, 2020. The grant amount for most businesses was calculated by subtracting their 2020 gross receipts from their 2019 gross receipts, and then reducing that amount by any Paycheck Protection Program (PPP) loans received.
The maximum grant was $5 million per physical location, with a total cap of $10 million for an applicant and its affiliates. For the first 21 days, the SBA prioritized applications from small businesses owned by women, veterans, and socially and economically disadvantaged individuals. The program’s funding was depleted quickly, leaving many eligible applicants without grants when it closed.
The Proposed Restaurant Revitalization Tax Credit Act
After the RRF was depleted, the Restaurant Revitalization Tax Credit Act was introduced in Congress in late 2022. The bill’s goal was to provide financial relief to the nearly 200,000 eligible restaurants and bars that applied for an RRF grant but did not receive one because the funds ran out.
The proposal centered on creating a new payroll tax credit. Eligible restaurants would have been able to claim a credit against their payroll tax liabilities of up to $25,000 per quarter for the 2023 calendar year.
Eligibility for this proposed credit was narrow. A restaurant would have needed to prove it applied for but was not awarded an RRF grant. The business also had to demonstrate a revenue loss, specifically an average reduction in gross receipts of more than 30% across 2020 and 2021, or a loss greater than 50% in either year compared to 2019.
The Employee Retention Credit for Restaurants
While the proposed tax credit never materialized, restaurants did have access to another tax relief program: the Employee Retention Credit (ERC). The ERC is a refundable payroll tax credit for businesses that retained employees during the pandemic. For restaurants, eligibility follows one of two paths: a decline in gross receipts or a full or partial suspension of operations due to a government order.
The first eligibility path is based on a decline in gross receipts. For 2020, a business qualified for a quarter if its gross receipts were less than 50% of the same quarter in 2019. For 2021, the threshold required a decline of only 20% compared to the same quarter in 2019.
The second path to eligibility involves a suspension of operations. A restaurant qualifies if its business was fully or partially suspended by a government order, such as indoor dining prohibitions or capacity restrictions. A modification to operations must be “more than nominal,” which is met if the affected part of the business accounted for at least 10% of its gross receipts in the comparable 2019 quarter.
The value of the credit differs by year. For 2020, the credit is 50% of the first $10,000 in qualified wages per employee for the year, with a maximum credit of $5,000 per employee. For 2021, the credit is 70% of the first $10,000 in qualified wages per employee, per quarter, for the first three quarters, allowing for a maximum of $21,000 per employee.
Restaurants can retroactively claim the ERC by amending payroll tax returns. The deadline to make a claim for wages paid in 2020 has passed. The deadline to file a claim for wages paid during 2021 is April 15, 2025.