On December 8, 2022, Senators Ben Cardin (D-MD), Patty Murray (D-WA) and Sherrod Brown (D-OH) introduced the Restaurant Revitalization Tax Credit Act (RRTC) to support the nearly 200,000 independent restaurants and bars that applied for a Restaurant Revitalization Fund (RRF) grant and did not receive the assistance they needed.  This bill was reintroduced in the Senate on January 24, 2023 and introduced in the House by Representatives Blumenauer (D-OR) and Phillips (D-MN) on April 13th, 2023.

If passed, the RRTC would establish a payroll tax credit of $25,000/quarter for 2023 for restaurants who:

• Were eligible and applied, but did not receive an RRF grant
• Were in operation prior to March 14, 2021
• Paid payroll taxes in at least two quarters of 2021
• Experienced an average reduction in gross receipts of either: more than 30% in 2020 and 2021 OR more than 50% in 2020 or 2021

For restaurants with 1-19 employees that have payroll tax liability of less than $25,000 per quarter, the credit is partially refundable. These restaurants may receive a refundable tax credit of up to $25,000 total for the year above their payroll tax liability. The $25,000 cap is reduced by $2,500 per employee over 10 employees for this refundable tax credit. 

All qualifying businesses, regardless of number of employees, are still eligible to receive up to $25,000 per quarter in payroll tax credits.

To fully understand the Restaurant Revitalization Tax Credit (RRTC), we have to understand the difference between a tax credit and a refundable tax credit.

• A tax credit is a dollar-for-dollar reduction in tax liability. It's applied after your taxes are tallied. For example, a tax credit of $1,000 would reduce your tax bill by $1,000.
• Refundable tax credits are called “refundable” because if you qualify for a refundable credit and the amount of the credit is larger than the tax you owe, you will receive a refund for the difference. For example, if you owe $800 in taxes and qualify for a $1,000 refundable credit, you would receive a $200 refund

Because the difference between refundable tax credits and tax credits is a bit mind boggling for those of us who don't work with taxes every day we've included a chart below and examples to help illustrate how the program would work for businesses of various sizes. Please note, these examples assume a business is otherwise eligible for the credit.

Refundable Tax Credit amounts for businesses with less than 20 employees:

Sample tax credits based on number of employees/total annual payroll taxes:

Example 1: 150 employees
$215,000 in payroll tax annually
Under this bill, this taxpayer receives a $100,000 credit in 4 quarterly installments of $25,000

Example 2: 5 employees
$20,000 in payroll tax annually
Under this bill, the taxpayer would receive the following:
Q1: $5,000 payroll tax credit PLUS $20,000 refundable credit
Q2: $5,000 payroll tax credit PLUS $5,000 refundable credit
Q3: $5,000 payroll tax credit
Q4: $5,000 payroll tax credit

Example 3: 15 employees
$40,000 in payroll tax annually
Under this bill, the taxpayer would receive the following:
Q1: $10,000 payroll tax credit PLUS $12,500 refundable credit
Q2: $10,000 payroll tax credit
Q3: $10,000 payroll tax credit
Q4: $10,000 payroll tax credit

Example 4: 22 employees
$80,000 in payroll tax annually
Under this bill, the taxpayer would receive the following:
Q1: $20,000 payroll tax credit
Q2: $20,000 payroll tax credit
Q3: $20,000 payroll tax credit
Q4: $20,000 payroll tax credit

You may find the full text of the Restaurant Revitalization Tax Act here.