The National Restaurant Association and the American Institute of Certified Public Accountants (AICPA) has come out with several recommendations for tracking the spending of the funds received from the Restaurant Revitalization Fund (RRF) Grant.
The RRF grant is not an economic stimulus payment. If the funds are not used within the grants parameters, the recipient maybe required to repay the funds or they could become subject to a federal fraud investigation.
Retain Records
Retain copies of all records used to complete the application, including all supporting documents and the completed application for tax purposes. Save your Small Business Administration (SBA) account information, including the email address, SBA web portal usernames, and portal passwords in a safe location.
RRF Expense Tracker
This tool will help you track your use of funds in specific categories to ensure they’re eligible. This Excel spreadsheet tool Download a copy now, summarizes available guidance from the SBA to assist operators in keeping track of eligible expenses incurred during the covered period. This budget tool is essential for restaurants, bars, breweries, caterers, distilleries, bakeries, food trucks, and other entities to closely monitor RRF-eligible expenses.
The SBA is planning a “Use of Funds” validation assessment for recipients. This will be shared in the SBA portal and requires recipients of the grant to report how they spent the grant funds. The report is due by December 31, 2021, and will be required each year until all grant funds are spent.
TAXABILITY
- Will the RRF Grant be taxed as federal gross income?
Grants will not be included as federal taxable gross income by the IRS
- Will entities be able to deduct federal tax expenses paid with RRF Grant funds?
Yes, the law states that “no deduction shall be denied, no tax attribute shall be reduced, and no basis increase shall be denied, by reason of the exclusion from gross income.”
- Can a state tax RRF Grant funds or disallow standard and necessary tax deductions on expense paid with RRF Grant funds?
A state may be able to increase an eligible entity’s state tax liability associated with its acceptance of a federal RRF. It will be important for an entity to be aware of its state’s tax conformity with the federal code and how its state plans to treat the RRF Grant funds. Many states automatically accept changes to the federal tax code, which protect the tax status of RRF Grant.
- How are different organizations situated for RRF?
Non-taxable income on the grant is added to the basis for S Corp shareholders and the partner’s basis in a partnership.
Recipients must ensure that all funds are spent on eligible expenses within the covered time period February 15, 2020 through March 11, 2023. If you need addition assistance with tracking your RRF grant funds for tax purposes, please Contact us.
