Seven years ago, there was no Italian restaurant in Scottsbluff. Area diners craving lasagna or chicken Parmesan were out of luck unless they wanted to put in the effort in their own kitchens.
But then Melissa Schneider, a Scottsbluff native with a background in agricultural marketing, decided to try selling a different product.
On a visit to Sidney, Nebraska, Melissa learned about Sam & Louie’s, a restaurant franchise selling pizza, pasta, and wings that caters to smaller cities like Sidney, Alliance, and Sterling, Colorado.
Melissa decided the Sam & Louie’s business model fit her hometown and her desire to build a small business.
“I thought pizza would be a lot more fun than trying to do some of the other stuff I was doing,” Melissa said.
After leading the Scottsbluff Sam & Louie’s franchise through its first five years, and growing to include a team 11 of staff members, Melissa felt the restaurant’s future looked bright.
“I’m not getting super rich off it—I hope I do someday—but it’s worth doing,” Melissa said.
Melissa is still paying down the mortgage on her restaurant property and hasn’t turned a profit in most of the early years, which is typical for new food and hospitality businesses.
“I’ve built a good reputation in our community, one of my kids works here, and I have really great employees,” Melissa said.
But even with all of the local momentum the restaurant had built, the COVID-19 pandemic cut the business’ March sales in half. And once Scott Bluff County’s first COVID-19 case was reported on March 29, there were no longer enough customers or available staff to justify keeping Sam & Louie’s doors open.
“If you don’t know what your income is going to be, it’s really hard to manage what your inputs are and get your arms around the [rules],” for operating a restaurant under social distancing guidelines, Melissa said.
That’s when Melissa looked into the federal Paycheck Protection Program (PPP). The small business loan program is part of the CARES Act relief legislation passed in March.
With financial assistance from PPP and careful safety planning with her team, Sam & Louie’s reopened one month later to provide take-out service. Initially, 6 employees came back to work.
Later, as directed health measures enabled a more complete reopening, the full Sam & Louie’s team was back at work, with the entire staff agreeing to wear face coverings on site.
As the Nebraska Legislature also returns to business in Lincoln, senators will debate tax provisions that will impact PPP recipients like Melissa. Federal tax changes in the CARES Act allow businesses like Sam & Louie’s to deduct a greater amount of net operating losses from past years, potentially resulting in a tax refund from previous years that employers can use to maintain their cash flow.
Under current state law, Nebraska includes the federal changes in its own tax code.
However, some state lawmakers are considering decoupling from those tax policies. That would mean employers like Melissa would be unable to make the deduction allowed under the CARES Act on her state taxes, which could result in her paying higher taxes than she would have otherwise.
Sales are still down 15% from pre-COVID levels at Sam & Louie’s, but Melissa counts her business as “Super lucky,” attributing most of the reduction to fewer event catering orders, particularly from the nearby hospital.
And while her employees’ hours in the restaurant have been slightly reduced under the current guidelines, she’s “been able to keep [her] employees with regular paychecks,” and provide additional training for responding to the crisis and her team’s career development.
“The PPP is what I’m using to make sure my employees are taken care of,” Melissa said.
The program also provides a sense of confidence as continued spikes in the COVID-19 case count remain a threat to economic recovery and normalcy.
“If the PPP has paid my people, it’s a lot easier for me to pay my mortgage, the property taxes, and liquor license fees,” Melissa said.
With more than 42,000 PPP loan recipients across Nebraska, Melissa’s story is not unique. In Nebraska, 90% of PPP loans were for less than $150,000, and 72% went to businesses that file their taxes as individuals, not under the corporate income tax.
Just like other temporary relief measures included in the CARES Act, its tax provisions were created to help those hard-hit by COVID-19. The restaurant and hospitality industry has been particularly impacted in this uncertain time, with its workforce shrinking by 28%. If Nebraska decouples from the CARES Act’s tax relief provisions, it will mostly be small business owners like Melissa who will be impacted.
Fortunately, no action is needed by the Nebraska Legislature for employers like Melissa to benefit from the CARES Act’s tax provisions. Lawmakers in Lincoln merely need to avoid adding yet another disruptive change in a year that has been full of unwelcome changes.
Adam Weinberg is the communications and outreach director at the Platte Institute. Sarah Curry is the policy director at the Platte Institute.
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