BI Forum: House Bill Proposes 90% Tax Credit for Spoiled Beer; SBA to Increase Economic Injury Disaster Loans to $2M

The Beer Institute (BI) and CQ Roll Call gathered policy makers and industry advocates for an update on the state of the beer, restaurant, hospitality and travel industries Wednesday afternoon.

Here are several takeaways from the webinar, which included remarks from BI president and CEO Jim McGreevy, Rep. Darin LaHood (R-IL), and a panel consisting of U.S. Small Business Administration administrator Isabella Casillas Guzman, National Restaurant Association president and CEO Tom Bené, U.S. Travel Association president and CEO Roger Dow, and Fritz Brogan, founder and managing partner of the Washington, D.C.-based restaurant family the Mission Group.

Hospitality and Commerce Jobs Recovery Act Includes Spoiled Beer Tax Credit

A bill introduced in the U.S. House of Representatives seeks to jumpstart business travel and dining to support the hospitality industry and would offer a tax credit for unmerchantable inventory that spoiled during the pandemic, including out-of-code beer.

The Hospitality and Commerce Jobs Recovery Act (H.R. 1346), which was introduced on February 25 and referred to the House Ways and Means Committee, includes the following proposals:

  • “Allows a convention and trade show restart tax credit;
  • Extends the employee retention tax credit through 2021;
  • Suspends for taxable years 2021 through 2022, the limitation on entertainment expenses related to a trade or business;
  • Allows a restaurant and dining restart credit for businesses closed or forced to reduce services due to COVID-19 (i.e., coronavirus disease 2019);
  • Allows a 50% tax credit for travel expenditures; and
  • Allows a tax credit for unmerchantable inventory for the period between December 31, 2019, and before April 1, 2021.”

“This industry is not going to come back fully unless we help them, and so our bill looks at a number of different things,” LaHood said. “It helps out with the employee retention tax credit, which we think is very important. It also helps provide credit for businesses for the costs related to inventory in restaurants and catering facilities, and then we also help with providing a tax credit for middle class families to jumpstart the travel industry to encourage people to travel again.”

LaHood, who represents Illinois’ 18th congressional district in the center of the state, is an original co-sponsor of the bill with Rep. Jimmy Panetta (D-CA). The bill has 90 co-sponsors, split nearly evenly between Republicans and Democrats.

The measure would offer a tax credit for 90% of “unmerchantable inventory costs” that businesses held on or after March 13, 2020. For manufacturers, the inventory cost can include transportation costs. The bill defines unmerchantable inventory as “any food or beverage products which cannot be sold due to spoilage, expiration pursuant to the manufacturer code date or applicable industry freshness standards, or a change or limitation in market conditions resulting in the lack of a customary and reasonable market for such products.”

McGreevy estimated that $900 million worth of beer had to be destroyed when the on-premise channel shut down in March 2020 — a problem that did not plague the wine and spirits industries, as those products are not as perishable as beer, he added.

“The pandemic hits and closures started to happen just in time for some of the best beer occasions in the country — the beginning of March Madness, the beginning of the NHL playoffs, Cinco de Mayo, St. Patrick’s Day,” he said. “Beer distributors were loading lots of beer into restaurants and bars throughout the country when the pandemic hit, and that’s really affected obviously the restaurants, which were closed for months, and the beer industry.”

The loss of on-premise sales cost the beer industry an estimated $20 billion in sales in 2020 compared to 2019, McGreevy added.

SBA to Increase Economic Injury Disaster Loans to $2M

Several SBA programs have been credited with providing small businesses the lifelines they needed to stay afloat when the pandemic forced them to close their doors or significantly alter their operations.

“We know that there’s still a lot more work to do to bring our nation’s restaurants, bars, breweries, food trucks, the whole bit, the whole food and beverage sector back,” said Guzman, the administrator of the SBA. “At the SBA, we are trying to be as entrepreneurial as the small businesses that we serve.”

The Economic Injury Disaster Loan program (EIDL) disbursed $199.5 billion across 3.6 million disbursements through May 24, according to the SBA. The administration increased the maximum EIDL amount from $150,000 to $500,000 in April and is set to increase the maximum again this month to $2 million, Guzman said.

Although these loans can’t be forgiven, unlike loans through the popular Paycheck Protection Program (PPP), the EIDL program offers 30-year, fixed rate, low-interest loans that cover business operating expenses.

Helping borrowers have their PPP loans forgiven is also a priority for the SBA, Guzman said. As of May 24, 63% of PPP loanees have completed the forgiveness application and 54% of the PPP’s total volume has been forgiven. Of all PPP loans that have gone through the forgiveness process, 99% of funding has been forgiven.

The accommodation and food services industries have accounted for 15% of all PPP loans, more than any other business sector. The SBA reported that restaurants make up the bulk of that.

“With food and beverage businesses in particular, they anchor communities and really inspire travel and tourism, especially the breweries and can really help whole communities recover and rebuild,” Guzman said. “So we are trying to make sure that we have capital products because we know that that’s a consistent, consistent challenge.”

Restaurant and Travel Industries Lost $500B in Revenue

More than a year of lost business has added up to a loss of $500 billion for the restaurant and travel industries, according to Dow, president and CEO of the U.S. Travel Association president. National Restaurant Association president and CEO Bené estimated that restaurants accounted for $300 billion of that total.

At the height of pandemic closures, half of the industries’ 17 million employees were out of work. About 5 million workers are still unemployed, Dow said.

Customers are beginning to return and the coming weeks are shaping up to be strong. About 200 million Americans have traveled by plane since January, Dow added.

“The bright light is domestic leisure is coming back — roaring back,” Dow said. “This summer is going to be a phenomenal summer, probably as big as any other summer we’ve had, because people are just sick of being cooped up, and they’re trying to travel domestically.”

However, business travel and conferences — big drivers for the accommodations and food services industries — may lag behind leisure travel. The key to unlocking this is vaccinations, Guzman said.

“We have over 300 million doses of the COVID vaccine administered and so those are all positive, but those numbers still don’t add up to normal for our businesses,” she said. “For our marketplaces, for our main streets, which are anchored by our incredible restaurants and bars and breweries, to industrial and corporate centers and the happy hours and the lunches that they take, we all owe them to fully recover, and that means gaining our independence from COVID.”