SBA Grant Program for Shuttered Venue Operators

The Consolidated Appropriations Act, 2021 (the “CAA”), which supplies $900 billion in new COVID-19 reduction funding, was signed into regulation on December 27, 2020.  Part 324 of Title III of the CAA, the Financial Support to Arduous-Hit Small Companies, Nonprofits and Venues Act (the “Arduous Hit Act”), introduces a brand new $15 billion grant program by way of which the U.S. Small Enterprise Administration (the “SBA”) will present assist to struggling reside venue operators and associated companies.  This program provides a essential lifeline from the Federal authorities for the nation’s performing arts venues, film theatres and museums.  Grants made beneath such program are referred to on this publication as “SOS Grants”.

This text particulars the important thing phrases of the SOS Grant program.  For details about the adjustments carried out to the Paycheck Safety Program (the “PPP”) beneath the Arduous Hit Act, see our article [Where Are We Now? — Paycheck Protection Program Redux].

I. What Individuals, Entities or Organizations are Eligible for a SOS Grant?

To be eligible to obtain a SOS Grant, an entity or a person have to be (i) a reside venue operator or promoter, theatrical producer or reside performing arts group operator, (ii) a expertise consultant, (iii) a film theatre, or (iv) a “related” museum.  There are particular necessities for whether or not a person or entity matches inside considered one of these classes:

• Stay venue operator or promoter, theatrical producer or reside performing arts group operator – For a person or an entity, which can be for-profit, nonprofit, or government-owned, to qualify as a reside venue operator or promoter, theatrical producer or reside performing arts group operator, it should both:

  • (i) have a principal enterprise exercise of organizing, selling, producing, managing or internet hosting reside live shows, comedy exhibits, or theatrical productions or different occasions by performing artists for which (1) a canopy cost is utilized (by way of ticketing or entrance door entrance payment) and (2) performers are paid in an quantity that’s primarily based on a share of gross sales, a assure or one other mutually useful formal settlement, and (ii) generate not less than 70% of income by way of ticket gross sales, manufacturing charges/reimbursements, nonprofit instructional initiatives or the sale of occasion meals, drinks or merchandise; or

  • have a principal enterprise exercise of creating tickets out there for buy by the general public not less than 60 days upfront of reside live shows, comedy exhibits, theatrical productions, or different qualifying occasions for which performers are paid in an quantity that’s primarily based on a share of gross sales, a assure or one other mutually useful formal settlement.

• Movement Image Theatre Operator – For a person or entity, which can be for-profit, nonprofit, or government-owned, to qualify as a movement image theatre operator, it will need to have as its principal enterprise exercise the possession or operation of not less than one place of public lodging for the aim of displaying motion pictures for a payment. Further venue necessities apply to the areas that qualify as a movement image theatre (described beneath).

• Related Museums Operator – For a person or entity to qualify as a related museum operator, it should function a public, tribal or non-public nonprofit company or establishment organized on a everlasting foundation for basically instructional, cultural heritage, or aesthetic functions. Further venue necessities apply to the areas that qualify as a related museum (described beneath).

• Expertise Consultant – For an individual or entity that’s an agent or supervisor, which can be for-profit, nonprofit or government-owned, to qualify as a expertise consultant: (i) 70% of its operations should contain representing or managing artists and entertainers; (ii) it should guide or signify musicians, comedians, actors or comparable performing artists primarily at reside occasions in venues or at festivals; and (iii) such performers have to be paid in an quantity that’s primarily based on the variety of tickets bought, or an analogous foundation (e.g., entrance charges).

Individuals or entities that may in any other case fulfill the above standards could nonetheless be ineligible (see Ineligible Entities and Individuals beneath).  Be aware that any entity that could be a federally tax exempt group beneath Part 501(a) of the Inner Income Code qualifies as a nonprofit for functions of the SOS Grant program.

II. What Are the Eligibility Necessities?

To obtain a SOS Grant a reside venue operator or promoter, theatrical producer, or reside performing arts group operator, related museum operator, movement image theatre operator, or a expertise consultant should fulfill sure eligibility necessities.  To be eligible, such an individual or entity searching for a SOS Grant:

• Absolutely Operational – will need to have been “absolutely operational” as of February 29, 2020;

• Gross Income Discount – will need to have a discount of not less than 25% in gross earned income throughout (not less than) one quarter of 2020 as in comparison with the corresponding quarter of 2019; and

• Resumption of Operations – as of the date of its receiving a SOS Grant, should:

  • for reside venue operators, promotors, theatrical producers or reside performing arts group operators, have resumed or intend to renew organizing, selling, managing or internet hosting future reside occasions;

  • for movement image theatre operators, have reopened or intend to reopen for the first function of publicly displaying movement photos;

  • for related museum operators, be open or intend to reopen; and

  • for expertise representatives, be representing or managing artists and entertainers.

• Venue Necessities – should fulfill (or the venue relevant to an applicant should fulfill) sure venue-specific necessities:

  • for reside venue operators, promoters, theatrical producers or reside performing arts group operators, the venues at which/for which occasions are promoted, produced, managed or hosted occasions, and for expertise representatives, the venues at which the artists/entertainers represented or managed carry out should:

    • include an outlined efficiency and viewers house, mixing gear, a public tackle system and a lighting rig;

    • rent not less than one particular person to do not less than two of the next actions: (i) sound engineer; (ii) booker; (iii) promoter; (iv) stage supervisor; (v) safety personnel; (vi) field workplace supervisor;

    • have paid tickets or cowl expenses to attend most performances;

    • pay artists “pretty” (e., artists don’t play solely without cost or for suggestions);

    • market performances (in print, on-line, mass media or on social media); and

    • solely for nonprofit venues that produce free occasions, produce occasions managed primarily by paid staff and never volunteers.

  • for movement image theatre operators, a movement image theatre should: (i) have not less than one auditorium that features a film display screen and glued viewers seating; (ii) have a projection sales space (or different house) with not less than one projector; (iii) have paid ticketing; and (iv) market motion pictures (in print, on-line, mass media or on social media).

  • for related museum operators, a related museum will need to have: (i) been serving as a related museum as its principal enterprise exercise; (ii) indoor exhibition house that could be a part of the principal enterprise exercise and which has been topic to pandemic-related occupancy restrictions; and (iii) not less than one auditorium, theatre, efficiency or lecture corridor with mounted viewers seating and common programming.

• Certification of Want – should make a certification that the uncertainty of present financial situations makes essential the SOS Grant to assist ongoing operations. An identical certification is required for PPP mortgage candidates, and the SBA has printed steering as to learn how to consider “necessity” within the context of that program.  Individuals searching for a SOS Grant ought to take care to create a considerate and detailed file demonstrating how necessity was decided and the shortage of availability (or problem in acquiring) funds from different sources. 

III. Affiliation.

Recognizing the way during which separate venues or productions could also be organized, the Arduous Hit Act particularly acknowledges that every enterprise entity of an (in any other case eligible) applicant shall be handled as an impartial, non-affiliated entity for functions of this program.  Nevertheless, no more than 5 enterprise entities of an eligible particular person or entity that might be thought-about its associates beneath the SBA’s (very broad) affiliation guidelines could obtain SOS Grants.  (See our publication Paycheck Protection Program, Where Are We Now for an outline of these affiliation guidelines).  This suggests that an eligible particular person or entity, along with 5 of its associates could obtain a complete of six SOS Grants.  It isn’t expressly said whether or not preliminary grants and supplemental grants are counted as a single “grant” for functions of such affiliation guidelines, however the construction of this system means that to be the case.

IV. Ineligible Entitles and Individuals.

The next classes of people or entities are ineligible to obtain a SOS Grant:

• Public Issuer – whether it is or is majority owned or managed by one other entity that’s an issuer, securities of that are listed on a nationwide securities change;

• 10% of Gross Income from Federal Funding – if it obtained or is majority owned or managed by one other entity that obtained greater than 10% of gross income from federal funding throughout 2019 (excluding sure catastrophe reduction funding obtained beneath the Robert T. Stafford Catastrophe Reduction and Emergency Help Act);

• Giant Operator – whether it is owned or managed by one other entity with two or extra of the next qualities:

  • owns or operates areas in multiple nation;

  • owns or operates areas in additional than ten States; and/or

  • employed greater than 500 full-time staff as of February 29, 2020.

• PPP Borrower – if it obtained after December 27, 2020, a PPP Mortgage (whether or not beneath a regular or second draw PPP mortgage); or

• Prurient Sexual Nature – if it presents reside performances of a prurient sexual nature, or derives greater than de minimis gross income by way of sale of merchandise/providers of a prurient sexual nature.

V. Measurement of SOS Grants.

The overall quantity of SOS Grants that any particular person applicant could obtain (whether or not solely within the preliminary grant or taking collectively the preliminary and any supplemental grant) is capped at $10 million.  Additional, for related museum operators particularly, a related museum operator could not obtain complete grants in extra of $10 million for all related museums operated by the operator.  Making use of the affiliation guidelines (described above), an applicant, along with its associates that obtain grants, can not collectively obtain greater than $60 million in grants.

• Preliminary Grants – Topic to a $10 million cap famous above, preliminary SOS Grants are (i) for an eligible person who was in operation on January 1, 2019 equal to 45% of the gross earned income of the entity throughout 2019 and (ii) for an eligible person who started operations after January 1, 2019 could obtain a grant equal to 6x the common month-to-month gross earned income for every full month of 2019 that the eligible particular person was in operation.

• Supplemental Grants – People or entities that obtain an preliminary SOS Grant could obtain a supplemental grant if, as of April 1, 2021, such particular person’s income for the primary quarter of 2021 shouldn’t be greater than 30% of the income for the primary quarter of 2019. A supplemental grant shall be equal to 50% of an preliminary grant (topic to the whole $10 million cap on all SOS Grants obtained by the recipient).  Supplemental grants can’t be administered till all purposes for preliminary grants submitted inside the program’s first 60 days have been processed.

The SBA is allowed to ascertain various strategies to calculate income losses for seasonal employers that might be adversely impacted if January, February and March are excluded from the calculation of year-over-year gross earned income.

VI. Precedence of Disbursement of SOS Grants.

SOS Grants are to be allotted in an order of precedence specified by the Arduous Hit Act.  As much as 80% ($12 billion) of the funds appropriated for the SOS Grant program could also be allotted to preliminary grants made to candidates eligible to obtain grants within the 28-day precedence interval described beneath. 

• First Precedence Interval – In the course of the first 14 days of this system, the SBA could solely award grants to (in any other case eligible) candidates with income for the interval from 4/1/2020 by way of 12/31/2020 that’s no more than 10% of such applicant’s income throughout the identical interval of 2019 as a result of COVID-19 pandemic.

• Second Precedence Interval – In the course of the subsequent 14 days of this system, the SBA could solely award grants to (in any other case eligible) candidates with income for the interval from 4/1/2020 by way of 12/31/2020 that’s no more than 30% of such applicant’s income throughout the identical interval of 2019 as a result of COVID-19 pandemic.

• Thereafter, preliminary grants of any remaining funds could be made to all different eligible candidates.

For functions of calculating income, an applicant’s income doesn’t embrace quantities obtained beneath the CARES Act (as amended) (i.e., PPP loans or different funding) and the SBA is to make use of the accrual methodology of accounting for figuring out income. 

Along with these precedence durations, there’s an added overlay of $2 billion of appropriated funds for the primary 60 days of this system for grants to eligible individuals or entities with 50 or fewer full-time staff.  For such functions, a “full-time” worker works not less than 30 hours per week, and any worker working 10–30 hours per week counts as one-half (0.5) of a full-time worker.

VII. Permitted Makes use of of SOS Grant Funds.

Preliminary grants could also be used for prices incurred between March 1, 2020 and December 31, 2021, and supplemental grants could also be used for prices by way of June 30, 2022.  Any preliminary grant proceeds not spent (on allowable bills) inside one yr and any supplemental grant proceeds not spent inside 18 months of disbursement have to be returned to the SBA.  SOS Grant funds could be used for any of the next:

• payroll prices (as outlined within the PPP, restricted to the next and solely with respect to staff who’ve a principal residence in america):

  • wage, wages, commissions, or comparable compensation, and fee of money suggestions or the equal as much as a $100,000 cap per worker on an annualized foundation of money compensation (as prorated for the interval throughout which the compensation is paid or the duty to pay the compensation is incurred);

  • fee for trip, parental, household, medical, and sick go away;

  • allowance for dismissal or separation;

  • fee required for the provisions of group well being care or group life, incapacity, imaginative and prescient or dental insurance coverage advantages, together with insurance coverage premiums;

  • fee of any retirement profit;

  • fee of State or native tax assessed on the compensation of staff; and

  • the sum of funds of any compensation to or revenue of a sole proprietor or impartial contractor that could be a wage, fee, revenue, web earnings from self-employment, or comparable compensation as much as a cap of $100,000 on an annualized foundation (as prorated for the interval throughout which the funds are made or the duty to make the funds is incurred);[1]

• lined hire obligations (as outlined within the PPP, any hire obligation beneath a leasing settlement in impact earlier than February 15, 2020);

• lined utility fee (as outlined within the PPP, fee for electrical energy, fuel, water, transportation, phone, or web entry for which service started earlier than February 15, 2020);

• lined employee safety expenditures (as outlined within the PPP, working or capital expenditures to facilitate the variation of the enterprise actions of an entity to adjust to necessities established or steering issued by the Division of Well being and Human Companies, the Facilities for Illness Management, or the Occupational Security and Well being Administration, or any equal necessities established or steering issued by a State or native authorities starting on March 1, 2020, corresponding to air flow techniques, bodily boundaries, or an enlargement of indoor, out of doors or mixed enterprise house);

• curiosity funds on lined mortgages/money owed incurred previous to February 15, 2020;

• funds to impartial contractors (capped at $100,000 in annual compensation for any particular person worker of an impartial contractor); and

• different peculiar and essential enterprise bills, together with:

  • upkeep bills;

  • administrative prices, together with charges and licensing prices;

  • State and native taxes and charges;

  • working leases in impact as of February 15, 2020;

  • required insurance coverage funds; and

  • promoting, manufacturing, transportation, and capital expenditures associated to producing a theatrical or reside performing arts manufacturing, live performance, exhibition, or comedy present, besides {that a} SOS Grant can’t be primarily for such production-related expenditures.

Entities could not use funds to buy actual property, pay curiosity on loans originated after February 15, 2020, to speculate or re-lend, political contributions, or different use prohibited by this system administrator.

VIII. Authority and Oversight.

The Affiliate Administrator for the SBA Workplace of Catastrophe Help will coordinate and formulate insurance policies for the administration of those grants.  Accordingly, whereas we anticipate that the Workplace of Catastrophe Help will implement an software course of (maybe akin to the disaster loan assistance page that exists for Financial Damage Catastrophe Loans), within the interim the SBA’s catastrophe help customer support heart could be reached at 1-800-659-2955 or by e-mail at disastercustomerservice@sba.gov.

The SBA will present elevated oversight of eligible individuals/entities receiving SOS Grants.  These receiving grants should retain information that doc compliance with grant necessities for (i) 4 years for employment information and (ii) three years for all different information. Grants could also be audited, and within the case of fraud, would require compensation of misspent funds or end in authorized motion to gather. 

The SBA is required to ship to Congress by February 10, 2021, a plan for oversight and audit of the SOS Grant program.  Additional, starting on February 25, 2021,the SBA should undergo Congress month-to-month reviews that element (i) complete grants accepted and disbursed, (ii) the whole quantity of grants obtained by every eligible particular person or entity, together with any supplemental grants, (iii) the variety of energetic investigations and audits of grants, (iv) the variety of accomplished evaluations and audits of grants beneath this part, together with an outline of any findings of fraud or different materials noncompliance, and (v) any substantial adjustments to the oversight and audit plan.

Vincent Indelicato, Patrick D. Walling, Grant R. Darwin, and Lara B. Miller contributed to this text.