New York State has launched a $35 million Restaurant Return-to-Work Tax Credit Program which provides an incentive to COVID-19-impacted restaurants to get employees back to work and increase hiring (the “Tax Credit Program”). Qualifying businesses are eligible for a tax credit of up to $5,000 per new worker hired and up to a maximum of $50,000 per business. The Program includes a Fast Track Option which allows a business to claim the credit before the end of the tax year.
Eligibility
The Tax Credit Program is available to independently-owned food and beverage establishments that primarily support on-premises, in-person dining and that have less than 100 employees in New York City, or are otherwise located in areas that were designated as a COVID-19 Orange Zone or Red Zone for at least 30 consecutive days during the COVID-19 state of emergency.
Food and beverage establishments eligible for this tax credit include:
- Bars, taverns, nightclubs, or drinking places primarily engaged in preparing and serving alcoholic beverages for immediate consumption;
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Full-service restaurants primarily engaged in providing food services to patrons who order and are served while seated (i.e. table service) and pay after eating;
- Limited-service restaurants engaged in providing food services (except snack and nonalcoholic beverage bars) where patrons generally order or select items and pay before eating; and
- Breweries, wineries, cideries, distilleries and meaderies with a tasting room and for which on-site sales constitute at least 33% of gross receipts.
Franchises are not eligible for the Tax Credit Program.
To be eligible for the Tax Credit Program, an applicant must:
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Be able to demonstrate either a 40% decline in gross receipts or a 40% decline in employment when comparing gross receipts or employment in either the 2nd or 3rd quarter of 2019 and the same quarter of 2020;
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Achieve a net employee increase (i.e., add at least one employee) during the period April 1, 2021 to August 31, 2021 or April 1, 2021 to December 31, 2021;
- Be in substantial compliance with State health laws and directives;
- Not owe past-due state taxes or local property taxes, unless the business is making payments and complying with an approved binding agreement with the taxing authority; and
- Hold an active liquor license (if licensed by the State Liquor Authority).
To aid in determining eligibility, the State has created an eligibility questionnaire, available here. Restaurants must complete this questionnaire in order to apply.
Application Process
Because it is expected that the $35 million will be quickly exhausted, we recommend that food service businesses submit their eligibility questionnaires as soon as possible to initiate the application process.
If the State determines the business is eligible based on the information provided in the eligibility questionnaire, the business will be invited to submit an application via email. Eligible businesses can apply immediately thereafter, and will need to upload certain documents at the time of application, including tax documents that establish evidence of economic harm from COVID-19, documents demonstrating that the business is operating at a qualifying location, ownership information and payroll tax forms for specified periods to establish evidence of number of employees. Wineries and breweries with tasting rooms will also need to provide evidence that onsite sales to the public comprised at least 33% of gross receipts in 2019.
The full list of required documentation can be found in the “How to Apply” section of the state’s Tax Credit Program website. An application will not be considered complete and approved without all of the necessary supporting documentation.
Claiming the Tax Credit
If the qualifying business can demonstrate a net employee increase of at least 1 full-time employee as measured from April 1, 2021 to August 31, 2021, the qualifying business may claim the credit after August 31, 2021 using the “Fast Track Option.” Otherwise, if the qualifying business can demonstrate a net employee increase of at least 1 full-time employee as measured from April 1, 2021 to December 31, 2021, the qualifying business may claim the credit on their 2021 NYS tax return.
For businesses claiming the Fast Track Option, employment data for April 1, 2021 through August 31, 2021 will be due by September 15, 2021. Because businesses normally submit their NYS-45 for July, August and September in October, a draft NYS-45 for the 3rd quarter of 2021 will be accepted.
Other Information
The State has published Frequently Asked Questions, available here. The State has also published proposed regulations regarding the Tax Credit Program, available here. Businesses are encouraged to submit any public comment on the regulations via email to Thomas Regan, Associate Counsel at thomas.regan@esd.ny.us. before October 11, 2021 at 5 pm.
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If you have questions or would like additional information, please contact our Labor & Employment attorneys or the primary EGS attorney with whom you work.
