Today’s excellent Restaurant Relief Town Hall was recorded and released later in the day for all to enjoy.

Erika Polmar, of the Independent Restaurant Coalition, was joined this time by two representatives of the SBA: Patrick Kelley and Julie Verratti. These two were not just talking heads who simply touted how great the program is — instead they gave real guidance, solid explanations, and answered many questions from the IRC and attendees.

I was encouraged in part because Patrick and Julie are actually crafting the program, refining it, and working with groups such as IRC to make it happen. They showed an eagerness to make this program a success, and the skills to back it up. Julie Verratti in particular was a welcome change to what we’ve seen at the SBA over the past year — she was articulate, knowledgeable, humble, and seemed to have a real comprehension of the issues at hand and what is at stake; she gets why it’s so important to get this program right. She also has a good handle on what elements of the program come from statute and where the SBA has authority to interpret and administrate. Patrick indicated appropriate deference to her knowledge, and to the process of getting the program designed and tested properly — before opening the floodgates to applications. Let’s hope these two keep up the good work and have what they need to roll this out effectively.

As usual, I took notes — they did a full overview plus deep dives into certain areas and it’s worth your hour of time to watch. These notes are just the noteworthy new items from my own perspective.

The biggest news is that the SBA Administrator has chosen to preemptively extend the final date for expending the funds all the way to 3/11/2023 — the maximum allowed by statute.

Debt service will be considered a covered expense — both principal and interest payments count! (Clarification: no debt prepayments allowed, but regular debt service of all types is permitted.)

Also on the list of covered expenses is depreciation — but not “bonus or accelerated”.

Related follow-up question: does that mean we have to recalculate depreciation from the usual MACRS to straight-line? That doesn’t seem like what he meant, but we’ll need clarification. I suspect he was only referring to bonus depreciation and Section 179 expensing.

Women-owned, veteran-owned, socially/economically disadvantaged individuals – if anyone owns 20% or more and qualifies in one of these groups, add them together, to see if they reach 51%. If so, they can use the 21-day priority period.

Related follow-up question: to clarify — a 50/50 husband-wife owned company would NOT qualify as women-owned?

They said numerous times that everybody should apply on Day One.

Related follow-up question: How will the SBA avoid the system going down if everyone is applying on Day One, like what happened with the SVOG?

Related follow-up question: is this the case even if they’re not qualified to apply during the 21-day priority period? So a white-cis-male-owned restaurant under $500k revenue should still apply on Day One?

Timing of opening the program: SBA will have a 7-day pilot period to test their system (with people randomly selected from self-identifying as veteran, women-owned from PPP applications), and only then will go live with the 21-day advance application period for those who qualify.

Related follow-up question: How much notice will we have that the RRF is opening? Do we know when it is going live? As a CPA firm we are scrambling to calculate PPP1 Forgiveness and 2020 ERC so we can get the amount of ERC-eligible wages pulled off the 2020 returns before filing them. But we don’t have IRS guidance about whether 50%+ owners are allowed to take ERC… so all those returns are on extension right now. We want to make sure we wait as long as possible to get them all filed (in case IRS comes out with guidance), but that they are all submitted before this program goes live.

They will be working on allowing many different forms of documentation to prove the revenue decline, but tax returns, as they said last time, will be the easiest, most streamlined and efficient approach. Form 4506-T will be submitted through the docusign e-signature portion of the application, which allows SBA to confirm tax information with the IRS.

That’s it for now — I encourage you to watch the webinar and to start planning for an opening that’s more likely going to be a week or two away, rather than between now and the 19th (as was suggested last week). For planning purposes we at least know we’ll have a full week from when they start testing the application portal (though I’m not sure how we’ll know when that will begin).

Julie Verratti used the phrase “working in the world of reality and not in a vacuum” to describe their relationship with IRC and why they are doing this kind of outreach — some of the most encouraging words the SBA could possibly offer to us after the past year of jumping through hoops for financial relief.

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