NY State Creates Tax Credit to Help Restaurants and Food-Service Industry

New York state is serving up a financial incentive to help one of the industries impacted most by the COVID-19 pandemic. The Restaurant Return-to-Work Tax Credit program is offering a tax credit for hiring individuals that can be taken in 2021 or in 2022.

The numbers did not favor the restaurant and food-service industry during 2020, with sales falling by $240 billion¹. New York City alone took a $10.3 billion hit from March to November 2020, not to mention the more than 122,000 jobs lost between March 2020 and January 2021.

The program aims to bring workers back to restaurants and increase hiring across the restaurant industry in New York state.

How Does the Restaurant Return-to-Work Tax Credit Work?

The Restaurant Return-to-Work Tax Credit, a $35 million program, is open to qualified businesses in New York City and those outside the city that were in designated Orange or Red zones for at least 30 consecutive days by the state health department during the pandemic.

Qualified restaurants and food-service industry businesses would be eligible for a tax credit of $5,000 per new worker hired, with a maximum of $50,000 per business (10 employees).

Recognizing the immediate financial stress some businesses might be under, the program allows a fast-track option for those who want to claim the credit before the end of the tax year. Otherwise, qualified businesses can choose to claim the credit on their 2021 New York state tax return. For the fast-track option, the credit can be claimed after Aug. 31, 2021.

What are the Eligibility Requirements for the Restaurant Return-to-Work Tax Credit?

The program describes “eligible businesses” as those food and beverage establishments that provide full-service or limited service on premises for in-person dining. For example, a full-service restaurant has waiter/waitress service, while a limited-service restaurant has food ordered at a counter. Bars, nightclubs and other drinking establishments also are eligible, including some breweries/wineries with a tasting room.

Restaurants, excluding franchises, with fewer than 100 employees who can demonstrate the following meet the eligibility requirements to claim the credit.

• COVID-19-related losses of at least 40 percent in gross receipts or full-time equivalent employees
• Hire at least one full-time employee at the business
  • For the fast-track option, applicants must have hired the employee between April 1, 2021 and Aug. 31, 2021. The due date to submit employment data for this period is Sept. 15, 2021. A draft NYS-45 for the third quarter of 2021 will be accepted for this data.
  • For those claiming the credit on their 2021 tax return, the employee must have been added between April 1, 2021 and Dec. 31, 2021. This option will only be available if funds remain after the advance payments go out. Employment data to verify this option must be submitted by Jan. 14, 2022.

Applying for the Restaurant Return-to-Work Tax Credit

Businesses must complete the online questionnaire to determine eligibility, according to a response from the state to an inquiry about the process. If they pass the questionnaire (e.g., are determined to be eligible), the business will be emailed an application link.

Eligibility requirements include a qualifying restaurant located in the New York City area or in an area designated as an Orange and/or Red zone for at least 30 consecutive days. Qualifying locations in New York include New York City and certain areas of Chemung, Erie, Monroe, Onondaga, Orange, Rockland and Westchester counties.

If a restaurant/food-service business receives an invitation to apply for the tax credit, certain documentation must be submitted with an application to be considered complete. Any application uploaded without the proper supporting documentation will not be approved.

Document requirements vary for different circumstances. The state website has a list under the document requirements section.

The documentation for breweries and wineries with tasting rooms is different. These establishments would have to provide documents that prove that onsite sales comprise at least 33% of gross receipts for 2019 and include tax Form 5130.9 for breweries and 5120.17 for wineries.

What’s Next?

With the total amount of the program currently at $35 million and many businesses in need of financial assistance, the money is expected to go quickly. According to the state, the option of claiming the credit on one’s 2021 taxes is only available if funds exist after the advance payment option is paid out. Businesses should consider prompt action.

¹National Restaurant Association, State of the Restaurant Industry Report, 2021