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Gizmo Brew Works, a Raleigh, N.C.-based brewery with taprooms across the Triangle, has filed for chapter 11 bankruptcy, according to court documents, Axios.com reported. Founded in 2013, Gizmo expanded significantly in the past few years — going from one location in Raleigh to opening taprooms on Chapel Hill's Franklin Street and in Durham's University Hill development. Gizmo — known for beers like the Raleigh Red red ale and Carolina Pine India pale ale — reported assets between $100,000 to $500,000 and debts between $1 million and $10 million. The brewery's largest debt was nearly $1 million to Wilmington-based Live Oak Bank. It's been a rough stretch for breweries that have tried to expand coming out of the COVID-19 pandemic. Gizmo opened a significant remodel of Chapel Hill's old Rathskeller in February 2020, right before bars were closed by the spread of the disease. Gizmo's management said business after the pandemic has not recovered to a level to balance its debt from expansion.

Time is running out for small businesses and nonprofits that took out roughly one million government loans during the pandemic, the Wall Street Journal reported. The Small Business Administration this week began referring as much as $20 billion in delinquent COVID disaster loans with balances of $100,000 or less to the Treasury Department for collection. Another 10,000 delinquent COVID loans involving larger sums have already been sent to the Treasury. The referrals highlight the continued challenges for the COVID loan program, which provided financing to nearly four million small businesses and nonprofits. The SBA says it has charged off roughly 20% of its $390 billion COVID disaster loan portfolio, an accounting figure that includes Treasury referrals and other circumstances such as bankruptcy, fraud or the death of the borrower. Borrowers in default whose loans haven’t been sent to the Treasury Department can avoid the collection process by immediately requesting hardship assistance, according to the SBA. The SBA says the charge-off rate for the portfolio is in line with projections. Some of the troubled loans went to borrowers who never intended to repay the debts. More than $136 billion of COVID disaster loans, or about one-third of the total, showed signs of potential fraud, according to the SBA’s Office of Inspector General. The SBA says that it believes the amount of fraud is lower. Other borrowers were in weak financial condition at the time they sought financing, are still struggling to recover from the pandemic, or have closed their doors. Some borrowers and advisers say poor communication, repeated changes in government policies and limited options for relief have created additional challenges. (Subscription required.)

Madison’s Karben4 Brewing has filed for bankruptcy, but the filing won’t result in the closure of the business or employee layoffs or loss of pay, the brewery’s attorney said on Wednesday, the Wisconsin State Journal reported. The brewery is still recovering from COVID-related financial losses and filed for chapter 11 bankruptcy on Monday, attorney Jerry Kerkman said. “Part of the difficulty is that the sales mix has changed,” Kerkman said. “The company is changing the mix of the type of products they have to regain profitability, but their margins aren’t there yet.” Karben4 Brewing co-owner Zak Koga said that since COVID hit in 2020 that the brewery has pivoted every few months to adjust its business focus. “As pandemic aid dried up and inflation ramped up, we have been running out of room to pivot," Koga said.

Fells Point Tavern is no longer serving customers, and the Thames Street restaurant’s ownership agreed to vacate the premises by Feb. 15 as it endures lengthy bankruptcy litigation, the Baltimore Sun reported. The business’s attorney in U.S. Bankruptcy Court, Robert Scarlett, said yesterday that he and his client, tavern owner Vasilios Keramidas, voluntarily decided to give up the premises after they couldn’t agree with the restaurant’s landlord. According to court documents, Keramidas has not made any of his $21,000 monthly rent payments since October and owes property owners Thames Property LLC over $395,000 in unpaid rent, late fees and utilities since the lease started in June 2021. Doing business as Kali’s Court LLC, Keramidas filed for bankruptcy in the spring of 2023, stating that the restaurant owed hundreds of thousands of dollars to the IRS and the Maryland Office of the Comptroller as well as the U.S. Small Business Administration. Keramidas’ attorney said the business was one of “an array of” restaurants in Baltimore that suffered from the coronavirus pandemic, which started in March 2020, struggles he said led to the restaurant filing for bankruptcy in May. Their application noted that $160,000 in rent was past due, and their monthly payment needed to be renegotiated and is still pending nearly seven months later. The business’s landlord filed a motion in November asking a bankruptcy court judge to order the restaurant to turn over the property, alleging that the restaurant had paid only $25,400 against nearly $198,000 that had come due in the months since filing the petition.

When IRS Commissioner Danny Werfel met privately with senators recently, the chairman of the Senate Finance Committee asked for his assessment of a startling report: A whistleblower estimated that 95% of claims now being made by businesses for a COVID-era tax break were fraudulent, the Associated Press reported. The answer explains why Congress is racing to wind down what is known as the employee retention tax credit. Congress established the program during the coronavirus pandemic as an incentive for businesses to keep workers on the payroll. Demand for the credit soared as Congress extended the tax break and made it available to more companies. Aggressive marketers dangled the prospect of enormous refunds to business owners if they would just apply. As a result, what was expected to cost the federal government $55 billion has instead ballooned to nearly five times that amount as of July. Meanwhile, new claims are still pouring into the IRS each week, ensuring a growing price tag that lawmakers are anxious to cap. Lawmakers across the political spectrum who rarely agree on little else — from Sen. Elizabeth Warren (D-Mass.) to conservative Sen. Ron Johnson (R-Wis.) — agree it's time to close down the program. “I don’t have the exact number, but it’s like almost universal fraud in the program. It should be ended,” Johnson said. “I don’t see how anybody could support it.” Warren added: “The standards were too loose and the oversight was too thin." The Joint Committee on Taxation estimates that winding down the program more quickly and increasing penalties for those companies promoting improper claims would generate about $79 billion over 10 years.

New Jersey's Supreme Court ruled Wednesday that an Atlantic City casino is not entitled to payouts from business interruption insurance for losses during the COVID-19 outbreak, determining that the presence of the virus did not constitute the kind of “direct physical loss or damage” required for such a payout, the Associated Press reported. The case involved the Ocean Casino Resort's claims against three insurance companies — AIG Specialty Insurance Co., American Guarantee & Liability Insurance Co. and Interstate Fire & Casualty Co. Those insurers largely denied payouts to the casino, saying it did not suffer direct physical loss or damage because of the virus. The casino sued and defeated an attempt by the insurers to dismiss the case. But that decision was reversed by an appellate court. The high court agreed to take the case in order to resolve the legal question of what constituted loss or damage. “Based on the plain terms of the policies, we conclude that in order to show a ‘direct physical loss’ of its property or ‘direct physical . . . damage’ to its property under the policy language at issue, (parent company AC Ocean Walk LLC) was required to demonstrate that its property was destroyed or altered in a manner that rendered it unusable or uninhabitable,” the court wrote in a unanimous decision. “At most, it has alleged that it sustained a loss of business during the COVID-19 government-mandated suspension of business operations because it was not permitted to use its property as it would otherwise have done,” the opinion read.

A small Florida wholesaler thought it was getting a $3 million tax windfall. Now, it wants to return the money, but faces a $431,000 bill. The Internal Revenue Service isn’t the problem. The issue is with the company that helped the wholesaler claim a popular pandemic-era tax break, the Wall Street Journal reported. The dispute represents the leading edge of what is likely to be a wave of lawsuits tied to the employee-retention credit, or ERC, which was created by Congress to reward employers for keeping workers on payrolls during the pandemic. In December, the IRS rolled out a program that would allow employers to return 80% of the credit and avoid most penalties if they provided details about the ERC firm they used, part of an agency effort to crack down on what it says are fraudulent and ineligible claims. Now, the reckoning has begun. Colonial Wholesale Distributing, the Florida company, is one of at least four customers that have sued ERC Specialists, which promised to help taxpayers “file lightning fast” for the tax break. The legal battles go both ways: In recent months, ERC Specialists filed lawsuits against more than 40 of its customers, seeking to collect unpaid fees. ERC Specialists said it doesn’t comment on pending litigation. “There is rarely a need for collection efforts since we only charge if our customers receive money,” said co-founder Josh Zieglowsky, adding that the company has done so for fewer than one in 1,000 customers. Filing a lawsuit “is a tool of last resort” used only after six months of collection efforts, the company said.