By Jim Sammon & Kyle Stroup
It’s our American duty to patronize restaurants right now—and Congress is trying to give businesses incentive.
As lawmakers in Washington continue to negotiate the Health, Economic Assistance, Liability protection, and Schools Act (HEALS Act), one provision that should be within the Act is the Supporting America’s Restaurant Workers Act (SARW Act). The SARW Act would:
- temporarily expand the tax deduction for business meals provided at a restaurant, from a 50% deduction to a full 100% deduction; and
- modify the current Internal Revenue Code section 274(n)(2) to exclude the limiting 50% deduction for business meals purchased and paid for before Jan. 1, 2021.
If passed into law, businesses could once again deduct the full expense of a business meal. The temporary expansion is designed to drive traffic to restaurants as well as provide tax relief for businesses down the road.
As the COVID-19 pandemic continues, the restaurant industry remains one of the hardest hit. As restaurateurs continue to weather the storm, any relief is crucial. While the HEALS Act has provisions for another round of business loans and the Paycheck Protection Program (PPP) is open until Aug. 8, 2020, restaurants simply need diners in order to generate revenue.
Many restaurants that received PPP funds have already spent the loan on retaining staff and complying with reopening regulations. Additionally, the original PPP loan terms required businesses to use the funds within eight weeks of receiving the funds. At present, restaurants are running out of money to cover operating expenses. Many more will certainly close their doors as the pandemic continues and business remains stagnant.
Restaurants still cannot operate at full capacity. Even before the pandemic, restaurants operated on thin profit margins. State-mandated capacity limits further cut into those margins. However, a growing concern is the overall lack of diners. The SARW Act attempts to directly address that problem. Despite the social distancing guidelines and added precautions, restaurants are struggling to reach their new maximum capacities. Without a long-term solution, restaurants are “going to be limping along or shutting down altogether,” says Sean Kennedy, executive vice president of the National Restaurant Association.
As more and more workers migrate back from their home offices to their “normal” offices, businesses now have an added incentive to approve business lunches and drinks. The SARW Act should be a step in the right direction as it is more than a loan or financial assistance but rather a smart and necessary incentive for business people to dine at restaurants.
For assistance in navigating your restaurant through the pandemic or any questions regarding the HEALS Act, contact Jim Sammon at (216) 736-7235 or jpsammon@kjk.com or Kyle Stroup at (216) 736-7231 or kds@kjk.com.