Tax Services New Grant Program in Development for Shuttered Venues
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In addition to important changes related to PPP loans, a second round of PPP funding, and reforming the Employee Retention Tax Credit, the Consolidated Appropriations Act of 2021 included the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Economic Aid Act). Part of the Economic Aid Act is focused on providing financial assistance to industries that were obligated to close down or greatly limit regular operations in response to the COVID-19 pandemic.

The Shuttered Venue Operators Grant (SVOG) Program, to be administered by the Small Business Administration (SBA) Office of Disaster Assistance, provides for $15 billion in grant funds to support eligible entities that have experienced at least a 25% reduction in revenues. Eligible entities may qualify for a grant equal to 45% of their gross earned revenue, with the maximum amount of $10 million available for a single grant award.

Eligibility

Eligible entities under the SVOG Program must have been in operation as of February 29, 2020 and must not have applied for or received a PPP loan on or after December 27, 2020. Types of eligible entities include:

  • Live venue operators or promoters;
  • Theatrical producers;
  • Live performing arts organization operators;
  • Relevant museum operators, zoos, and aquariums who meet specific criteria;
  • Motion picture theater operators; and
  • Talent representatives.

Any business entity owned by an eligible entity will also qualify for SVOG. The SBA is expected to provide detailed information on eligibility requirements.

How funding is determined

The amount of a grant for an eligible entity is determined as follows:

  • Entity that was in operation on January 1, 2019 – Grants will be for an amount equal to 45% of the 2019 gross earned revenue or $10 million, whichever is less.
  • Entity that began operation after January 1, 2019 – Grants will be for the average monthly gross revenue earned for each full month in operation during 2019 multiplied by six or $10 million, whichever is less.

Applying for funding

The grant program is still being organized, and the SBA is not yet accepting applications. Businesses that have experienced the greatest economic loss will be the first applications processed under the following schedule:

  • First Priority (first 14 days of grant awards) – Entities that suffered a 90% or greater revenue loss between April 2020 through December 2020 due to the COVID-19 pandemic.
  • Second Priority (Next 14 days of grant awards) – Entities that suffered a 70% or greater revenue loss between April 2020 through December 2020 due to the COVID-19 pandemic.
  • Third Priority (Beginning 28 days after the First and Second Priority awards are made) – Entities that suffered a 25% or greater revenue loss between one quarter of 2019 and the corresponding quarter of 2020.
  • Supplemental Funding (Available after all priority periods have passed) – Recipients of First, Second, and Third Priority awards who suffered a 70% or greater revenue loss for the most recent calendar quarter (as of April 1, 2021 or later)

Qualified expenses

As with other Economic Aid Act relief, the SVOG funds may only be used for specific expenses, including:

  • Payroll costs;
  • Rent payments;
  • Utility payments;
  • Scheduled mortgage payments (not including prepayment of principal);
  • Scheduled debt payments (not including prepayment of principal) on any indebtedness incurred in the ordinary course of business prior to February 15, 2020;
  • Worker protection expenditures;
  • Payments to independent contractors (not to exceed $100,000 in annual compensation per contractor);
  • Other ordinary and necessary business expenses, including maintenance costs;
  • Administrative costs, including fees and licensing;
  • State and local taxes and fees;
  • Operating leases in effect as of February 15, 2020;
  • Insurance payments; and
  • Advertising, production transportation, and capital expenditures relating to producing a theatrical or live performing arts production (but these may not be the primary use of the funds).

Further, SVOG award funds are specifically not allowed to be used for the following activities: buying real estate; making payments on loans originated after February 15, 2020; making investments or loans; making contributions or other payments to, or on behalf of, political parties, political committee, or candidates for election; or any other use prohibited by the Administrator.

Grantees must maintain documentation demonstrating their compliance with the eligibility and other requirements of the SVOG Program. Employment records must be retained for four years following the receipt of a grant and all other records must be retained for three years. The SBA has further indicated that application and additional guidelines will be posted when available.

Help is available

P&N’s dedicated professionals are committed to understanding and applying this information to help our clients. Please contact us or connect with your P&N advisor to discuss your organization’s questions, concerns, and priorities.

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