Prospective Legislative Relief for Food & Beverage Industry
By Aurora Eager Leavitt, Staff Accountant, Tax & Business Services
As the novel coronavirus spread around the world, the food and beverage industry sustained among the heaviest blows. When COVID-19 began to spread rapidly in March, dining establishments were forced to rethink the business model of bringing people together for a shared experience, and the effect rippled back through the supply chain. Many restaurants adapted and found ways to continue, but many could not. While the government provided aid to help hurting businesses across industries through the CARES ACT, the restaurant industry continues to wait to see if more relief is coming. Bills are circulating; however, none has been signed, leaving added ambiguity in the midst of already uncertain year-end planning.
One bill proposed is the Providing Liquidity for Uncollectible Sales (PLUS) Act. Congressional representatives Darin LaHood (R-IL) and Jimmy Panetta (D-CA) drafted this act as a bi-partisan effort. They introduced the bill on July 21, 2020, but it has yet to make it to the floor for a vote. The PLUS Act would offer a 100 percent tax credit for food and beverage distributors to take on uncollectible debt from food and beverage establishments ordered to close for at least 30 days between March 25, 2020, and July 15, 2020. Uncollectible debt is estimated at more than $12 billion for the restaurant distribution industry, according to Mark S. Allen, president and CEO of the International Food Service Distributors Association. The impact of this relief could be impactful for wholesale distributors as well as the restaurants they serve, as it could provide the liquidity distributors need to continue to extend credit to restaurants. Congressman LaHood has stated he is optimistic this legislation will be included in the next stimulus package.
The HEROES Act, on which Congress has been trying to reach an agreement for several months, includes the Restaurant Act, which provides for $120 billion in grants for non-chain independent restaurants and additional funding for the Payroll Protection Program. The Heroes Act was introduced by House Appropriations Committee Chairwoman Nita M. Lowey (D-NY) and co-sponsored by Education and Labor Committee Chairman Robert Scott (D-VA) and Energy and Commerce Committee Chairman Frank Pallone, Jr. (D-NJ). The Restaurant Act is written specifically to exclude large corporations, but the language leads to the unintended consequence of also excluding small franchises and local chains. The HEROES Act has been amended several times and finally passed the House on October 1, 2020.The HEROES Act has not been brought to a vote in the Senate.
Another relief measure already passed to help restaurants and distributors is a tax credit increase for food donations. Taxpayers, including restaurant owners and wholesalers, can now deduct food donations of up to 25 percent of their taxable income in 2020. While this will help reduce the tax burden for these companies, it does not provide immediate cash flow and is of limited future benefit.
Under the Administration of President-elect Joseph R. Biden, a new tax regime is a possibility. While Biden’s proposed tax changes are not guaranteed, they include a number of significant changes to tax law. These uncertainties add to the financial pressures being felt by business owners, making year-end tax planning in 2020particularly fraught.
Marcum’s Food & Beverage Services Group is dedicated to easing the burden of uncertainty for our clients. The Marcum team is available to assist with identifying cost-cutting measures and providing strategic guidance as businesses seek to navigate these uncertain times. Contact your Marcum professional for assistance in considering the many possibilities for the coming year.