Despite the tax cut of ‘three martinis’, the COVID-19 bill leaves cold American restaurants

NEW YORK (Reuters) – The $ 900 billion coronavirus relief package approved by the US Congress here on Monday contains a high-level fiscal loophole for business meals, but not the most requested by independent U.S. restaurants. that were devastated by the pandemic: money.

The Republican-backed “three-martini lunch deduction” doubles the existing tax cut, allowing companies to cancel 100% of business dinner expenses by 2022. Defenders of the breach say it strongly supports the restaurant industry reached.

This is “a pro-worker, pro-restaurant and pro-small business bill,” said US Senator Tim Scott of South Carolina.

However, it was ridiculed by economists, Democrats and even the conservative Wall Street Journal published the opinion page as politically deaf, given the millions of sick and unemployed Americans. Tax cuts will cost taxpayers $ 6.3 billion by 2023, a Congressional committee review shows here.

Nor will it be able to boost the restaurant industry on a large scale, at least initially.

“When less than 10% of workers have returned to their offices in Midtown and Lower Manhattan, and indoor meals are closed and freezing outside, that deduction doesn’t do much,” said Andrew Rigie, director of the New York City Hospitality Alliance.

The coronavirus pandemic and restrictions related to dining out have divided the fortunes of the U.S. restaurant industry, which grossed $ 860 billion in 2019 and employed 12.3 million before the pandemic.

Sales have increased and expansions are taking place in some of the biggest restaurant brands, mainly chains with drive-thru and delivery, including Starbucks Corp, McDonald’s Corp, Papa John’s International Inc, Chipotle Mexican Grill Inc and Domino’s Pizza Inc.

But small independent restaurants and fine dining were beaten.

Chef and owner Amanda Cohen said her 12-year-old restaurant Dirt Candy in Lower Manhattan can barely hold back.

Dirt Candy’s recipe, known for innovative vegetarian dishes, like carrot sandwiches and a flambéed eggplant dessert, dropped from $ 12,000 a night before the pandemic to just $ 300 a night now.

“I’m not sure we will survive,” said Cohen. “Every day, we’re just trying to make the decisions to get to the next day.”

The National Restaurant Association (NRA) believes that 17% of all US restaurants – about 110,000 – have already closed permanently or for a long time. The industry has lost more than 2 million jobs since February, according to data from the U.S. Bureau of Labor.

GRAPHIC: US ​​restaurant and bar jobs have not recovered –

PPP AND TAX DEDUCTIONS

The coronavirus relief bill includes loans and tax incentives that the restaurant industry could obtain, but not the dedicated concessions that commercial groups spent months lobbying, arguing that the restaurant industry deserved similar subsidies for airlines and farms.

The Payment Check Protection Program (PPP), offered in the spring, will receive $ 284 billion in new financing. Loans, which can be forgiven under certain conditions, are available to any sector and under the new bill have more lenient terms.

The project also allows any company to fully deduct the commercial expenses paid for PPP loans, even if the loans are forgiven by the government.

“Without it, restaurants would face a huge tax liability in 2021,” said Sean Kennedy, an NRA spokesman. The bill also increases certain tax credits, including employee retention, which are widely used by restaurants, he said.

Kennedy said deductions from business meals will help in the medium term, when workers start returning to offices.

The Independent Restaurant Coalition said the new PPP financing will “buy time”, but warns that without billions in cash, more restaurants will close.

Cohen of Dirt Candy said she is not sure how she would repay a new PPP loan, let alone the $ 275,000 she made earlier this year.

“I am very disappointed,” she said. “The last thing I need is another round of PPP.”