Beyond the Paycheck Protection Program (PPP) updates, healthcare provisions and renewable energy tax credits in the now-signed COVID-19 relief bill, as discussed here, here and here, US Congress has included a number of additional critical lifelines for businesses and workers in its $900 billion stimulus package.
This article briefly recaps the key provisions of the $15 billion “Save Our Stages” (SOS) venue grants program and Unemployment Insurance expansion in the now-signed COVID-19 relief bill. Nevertheless, there is much to be expected in the coming weeks and months as these funds are distributed and additional guidance is issued.
Our team will continue to monitor and report on key changes to these programs.
“Save Our Stages” Venue Grants
Background: While most sectors have been affected by the pandemic, the live entertainment venue industry has been particularly hard hit—with many theaters and music venues completely closed since March 2020. Section 324 of the legislation grants the Small Business Administration (SBA) authority to issue grants to live venue operators, promoters, theatrical producers, performing arts groups, movie theaters and talent representatives. Institutions such as nonprofit museums, botanic gardens, historic homes and zoos will also be eligible for these grants. The proposed legislation provides $15 billion to the SBA for the issuance of these grants, following the model proposed in the “Save our Stages Act” introduced in July by Senators Amy Klobuchar (D-MN) and John Cornyn (R-TX).
Eligibility: The legislation sets eligibility criteria that are independent from the criteria for PPP loan eligibility discussed here. If an entity receives a grant through Section 324, it is ineligible to receive a new PPP loan as well.
The grants apply only to certain entities and individuals who meet detailed characteristic requirements for venues and entertainers/artists, movie theaters and museums and similar institutions. Eligible entities must have been fully operational as of February 29, 2020. Entities must demonstrate that they had at least a 25% reduction in earned revenue during a quarter in 2020 compared with that same quarter in 2019 to qualify. Note: Q4 will only be considered if an application is submitted on or after 1/1/2021. As of the date of the grant, the entity must be open or intend to reopen (or producing or intend to resume producing, etc.). Eligible entities cannot have the following characteristics, or cannot be controlled/majority-owned by an entity with the following characteristics:
An issuer listed on a national securities exchange;
Receive more than 10% of gross revenue from federal funding in 2019, excluding amounts received under the Robert T. Stafford Disaster Relief and Emergency Assistance Act.
Eligible entities also cannot have more than two of the following characteristics:
Own/operate in more than one country;
Own/operate in more than 10 states;
Employ more than 500 employees (full-time equivalent/FTE) as of February 29, 2020.
Eligible entities cannot have received on or after the date of enactment of the proposed legislation loan guaranteed under Section 7(a) of the Small Business Act. Entities that present depictions/displays or performances of a prurient sexual nature are also ineligible.
Grant amounts: Grants initially issued by SBA will be the lesser of 45% of an entity’s gross revenue in 2019 or $10 million. At least $2 billion in initial grant funds would be set aside for entities with 50 or fewer employees. Grants will be prioritized for entities with significant revenue losses. Entities with recent quarterly revenue losses of at least 30% as of April 1, 2021, could qualify for supplemental grants, which would be half the amount of initial grants. They could cover costs incurred through June 30, 2022. Entities will not be able to receive more than $10 million in total grant funds.
Grant uses: Initial grants are intended to cover costs incurred from March 1, 2020, through December 31, 2021. Recipients will be able to use the funds for eligible PPP expenses, payments to independent contractors, advertising, state and local taxes and fees, production transportation, certain mortgage and debt payments, maintenance expenses and administrative costs. Recipients will not be able to use grants to purchase real estate, repay loans issued after February 15, invest or re-lend funds or donate to political parties/candidates.
Considerations for Eligible SOS Grant Recipients:
Section 324 Grants preclude new PPP loan eligibility—there are differing obligations and benefits related to each program that should be weighed on a case-by-case basis.
SBA Grant programs are ordinarily associated with compliance obligations mandated by statute and regulation that do not apply to PPP loans, including Single Audits.
Questions remain regarding the measure of revenues for qualification.
Background: The Coronavirus Aid, Relief and Economic Security (CARES) Act, enacted on March 27, 2020, included several important Unemployment Insurance expansions, including expanding eligibility to new categories of workers (including the self-employed and independent contractors) and providing an extra $600 per week in federal payments in addition to what is normally available through state unemployment insurance benefits. Our summary on the CARES Act and unemployment benefits is available here.
Provision: With CARES Act unemployment assistance provisions set to expire on December 26, 2020 (see here for FAQs regarding these benefits), the stimulus package includes an 11-week extension of a number of unemployment insurance compensation benefits, with all benefits phased out by April 5, 2021. The Federal Pandemic Unemployment Compensation program will provide weekly federal payments of $300 to supplement state unemployment insurance compensation for 11 weeks, from December 26, 2020, to March 14, 2021, with the benefit phased out by April 5, 2021. The Pandemic Unemployment Assistance (PUA) program, which extended unemployment insurance benefits to gig economy workers and independent contractors who traditionally were ineligible for such benefits, is also extended fully for 11 weeks and then phased out, as are other unemployment assistance programs. Retroactive payments of PUA benefits are limited to weeks of unemployment after December 1, 2020. The stimulus package further provides an additional federally funded $100 per week for certain workers who have at least $5,000 a year in self-employment income but are disqualified from receiving PUA because they are eligible for regular state unemployment benefits. Effective January 31, 2021, new applicants for PUA must submit documentation to substantiate their employment or self-employment within 21 days. Those individuals receiving PUA as of January 31, 2021, must submit documentation substantiating employment or self-employment within 90 days. Additionally, federal funding is extended for states that waive their “waiting week” for benefits, among other provisions. In addition, states are required to have return to work reporting requirements and identity verification procedures for PUA applicants in place.
Impact: A number of unemployment assistance programs were extended into spring 2021, with the benefits fully gradually phased out by early April. While the coronavirus relief package sought to extend financial relief to the millions of unemployed Americans who lost their unemployment benefits on December 26, the legislation was not signed into law until December 27. It is unclear if states will be able to fully provide retroactive benefits. Further, there is scant time for state information technology systems to make the necessary programming changes during the holiday season to distribute the new monies. Assistance, however, is on the way even if there will be a lapse.
Our team at McDermott has extensive experience advising clients on issues relating to Federal Grant compliance requirements, SBA affiliation rules, PPP loans, Single Audits, unemployment benefits and government investigations and audits. Please let us know if we can assist you and your business.