After considerable negotiation, lawmakers in Washington have passed a $1.5 trillion spending bill designed to fund the government until September, but two COVID relief programs for businesses didn’t make the cut.
Employee Retention Tax Credit
Congress failed to restore the Employee Retention Credit or ERC. The ERC provides employers up to $7,000 per employee per quarter in refundable tax relief for the first three quarters of 2021 (and a reduced benefit for 2020).
A broad range of businesses and non-profits were good candidates for the ERC – including restaurants, manufacturing, construction, food industry, healthcare, churches, museums, food kitchens, and schools, are just the start of the list.
But the ERC turned out to be a misunderstood tax benefit – with small and medium business owners and managers of charities either not knowing about the ERC or being wrong about what they do know.
In addition, many employers didn’t appreciate that there are two ways you can qualify for the ERC: 1) reduction in revenues; and 2) if your business/charity has had a more than negligible impact due to federal, state, local government, or regulatory COVID orders (easy example, think of occupancy, spacing, cleaning requirements as just a start of a long list).
The IRS anticipated that approximately 70%-80% of small and medium businesses (as well as tens of thousands of charities) were good candidates for receiving funds from the ERC. Yet hundreds of thousands of companies and charities across the country failed to take advantage of the program, and billions of dollars for businesses and non-profits to retain employees and hire new ones were left on the table.
Restaurant Revitalization Fund
Initially, Congress viewed the Restaurant Revitalization Fund (RRF) as a means of encouraging businesses to hire and retain employees – helping to weather the economic hardships and costs brought on by COVID 19.
Now news that Congress is walking away from the RRF is a “gut punch to the 177,000 restaurants who now have difficult decisions to make,” according to Sean Kennedy, EVP, Public Affairs for the National Restaurant Association. “The pandemic is over for much of the economy, but small business restaurant owners have taken two steps back with every variant,” said Kennedy. “We will continue to pursue an all-of-the-above agenda to rebuild and advance the nation’s second-largest private-sector employer.”
Data show that the RRF worked. The first round alone saved 900,000 jobs. The Association’s 10th COVID-19 Operator Survey found that 94% of restaurant operators that applied for an RRF grant but did not receive funding said a future grant would enable them to retain or hire back employees that would otherwise have been temporarily or permanently laid off. The Association estimates that a second round would have saved 1.6 million jobs.
If you or your merchants have a business that depended on help from the ERC and RRF programs, Quikstone Capital is here to help. Over the past 17 years, we’ve funded thousands of merchants with working capital for their business needs. Contact us to learn more.