Restaurant Return-To-Work Tax Credit Program

New York small business restaurants impacted by the pandemic will soon be eligible for a New York refundable income tax credit of up to $50,000 under the Restaurant Return-To-Work Tax Credit Program Act (the “Act”). An eligible small business is one that meets each of the following requirements:

• Has fewer than 100 full-time job equivalents in New York as of April 1, 2021(1).
• Operates a business that is primarily organized to accept payment for meals and/or beverages from in-person customers.
• Is located in New York City, or in an area outside of New York City but within New York State that was designated an Orange or Red Zone for at least thirty consecutive days.
• Experienced economic harm due to COVID-19 as evidenced by a year-to-year decrease of at least 40% in gross receipts and/or 40% of average full-time employment between:
  
  • Q2 2019 and Q2 2020; and/or
  • Q3 2019 and Q3 2020.
• Be in substantial compliance with any public health or emergency orders.
• Be current with respect to all state or local taxes and licenses.
• Has applied and received approval for a tax credit certificate from the Empire State Development (ESD).

Businesses meeting these requirements are eligible to receive an income tax credit of $5,000 for each net new full-time equivalent employee, up to $50,000. Net new full-time equivalent employment is calculated as the difference between the average starting full-time employment and average ending full-time employment. The starting full-time employment is the business’s average full-time equivalent positions between January 1, 2021 and March 31, 2021. Businesses have two options of ending periods, based upon application date:

1. April 1, 2021 to August 31, 2021
   
   Businesses that use this ending period may apply for the credit between September 1, 2021 and November 15, 2021 using the Fast Track Option. This enables businesses to receive a program tax credit for new hires prior to filing its 2021 tax return. Businesses that apply for the advanced payment cannot also apply for tax credits for any hires made after August 31, 2021.
   
   
2. April 1, 2021 to December 31, 2021
   
   If funds remain after the advance payment are made, businesses will have until January 14, 2022 to submit employment data for the April 1, 2021 to December 31, 2021 period and may take the credit on their 2021 NYS tax return.

The Act provides that the total credits issued shall be capped at $35,000,000 (reduced from an initial proposal of $50,000,000). Given the number of restaurant businesses impacted by the pandemic, and the limited funds available, eligible businesses should apply early.

Restaurant and hospitality businesses should also consider securing recently extended federal income tax incentives, including the Empowerment Zone Tax Credit and the Work Opportunity Tax Credit (WOTC). Under these programs, businesses that hire and/or employ qualified individuals may receive a credit of up to $9,600 per qualified individual. Empowerment Zone incentives may be especially lucrative for businesses located in certain targeted zones across the country, including New Haven (Connecticut), Camden (New Jersey), Cumberland County (New Jersey), New York (New York), Yonkers (New York), and Syracuse (New York).

For additional questions or assistance applying, please contact Citrin Cooperman Restaurant and Hospitality Practice state tax advisors, Thomas Walsh at twalsh@citrincooperman.com or Rena Genauer at rgenauer@citrincooperman.com.

(1) “Full-time equivalent” is not defined within the bill but is listed in the FAQs as “one or more employees working at least 35 hours a week.” FTEs will be calculated based upon the number of full-time positions, part-time positions, the total hours, and the total wages a business reports in its application.”