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Focus on Taxation: New Grant Program for Shuttered Venue Operators

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Live venue operators impacted by the pandemic may find significant help in the form of a new grant made available by the December COVID-19 stimulus package.
January 20, 2021

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Live venue operators impacted by the pandemic may find significant help in the form of a new grant made available by the December COVID-19 stimulus package. The Consolidated Appropriations Act, 2021 (CAA) provided $15 billion in grants for shuttered venue operators (SVO) that will be administered by the Small Business Administration (SBA).

Eligible businesses may receive an SVO grant equaling up to a maximum of $10 million. To qualify for an SVO grant, a business must be engaged in one of the following types of activity:

  • Live venue operator or promoter, theatrical producer, or live performing arts organization operator (includes ticket sellers);
  • Relevant museum, zoo, or aquarium;
  • Motion picture theater operator; or
  • Talent representative.

If the business is engaged in a permitted activity, the next step is to ensure the venue involved with the activity qualifies. The rules to meet both the business type and venue requirements are fairly specific, so be sure to review necessary guidelines to determine eligibility. For example, a live venue operator must have a defined performance and audience space, with certain specified equipment and employees involved, among numerous other stipulations.

After determining a business has a qualifying activity and venue, businesses must also meet the following requirements:

  • Have been fully operational on February 29, 2020;
  • Had a revenue reduction of 25% or greater during the 1st, 2nd, 3rd, or 4th quarter of 2020 when compared to the same quarter in 2019;
  • Have a business that is open or intends to reopen (talent representatives must currently be operational);
  • Is not publicly traded or received more than 10% of its revenue during 2019 from federal funding. Also, the business cannot be majority owned by or controlled by an entity with either of those characteristics;
  • Does not have more than two of the following characteristics:
    • Locations in more than one country,
    • Locations in more than 10 states, or
    • More than 500 employees as of February 29, 2020;
  • Does not present live performances of prurient sexual nature; and
  • Does not receive a First Draw or Second Draw PPP loan after December 27, 2020.

The size of the grant depends on if the business was in operation on January 1, 2019. If so, the amount is generally equal to the lesser of 45% of 2019 gross earned revenue, or $10 million. For businesses that began after January 1, 2019, the calculation will be the lesser of average monthly gross revenue for each full month the business was in operation during 2019, multiplied by six, or $10 million.

Once a grant has been received, funds must be used for expenses incurred from March 1, 2020 through December 31, 2021, with additional time available if a second grant is received. Unused amounts must be returned if not spent on or by the date that is one year after the grant was disbursed, or 18 months for supplemental grants.

The SVO grant requires specific use of grant proceeds. The funds must be spent on the eligible expenses that include the following:

  • Payroll costs;
  • Mortgage interest;
  • Rent and utilities;
  • Worker protection expenses (as defined in the paycheck protection program);
  • Independent contractors;
  • Maintenance costs;
  • Administrative costs;
  • State and local taxes:
  • Operating leases;
  • Insurance premiums;
  • Advertising;
  • Production transportation; and
  • Certain capital expenditures related to producing a theatrical or live performing arts production.

Funds may not be used for buying real estate, lobbying, investing, re-lending, or paying for loans originating after February 15, 2020.

The CAA ensured favorable tax treatment of SVO grant proceeds and related expenses. Grants awarded are not included into taxable income, but instead are treated as tax-exempt income, with any expenses paid for with grant proceeds fully tax deductible.

The SBA was mandated by the CAA to first open the program to small businesses who have suffered the greatest economic loss. During the first two weeks, grants will be provided to businesses who saw a 90% or greater revenue loss between April through December of 2020 (when compared to 2019). The following two weeks are open to include businesses suffering a 70% or greater revenue loss, and finally, in the last 28 days after first and second priority grants are made, businesses who suffered at least a 25% revenue loss will be eligible to submit applications. The program opens for all eligible businesses after 60 days of priority funding.

A supplemental grant is also available if, as of April 1, 2021, the revenues of the business for the most recent calendar quarter are at least 70% less than the revenues for the same quarter in 2019. With limited funding available, it is wise to consider if your business qualifies for the SVO grant as soon as possible and be ready to submit an application when applicable.

Please contact your RubinBrown advisor or visit the SBA’s SVO Grant dedicated webpage for additional information.

By: Tony Nitti, CPA, MST
Partner-In-Charge
National Tax
609.658.9593
tony.nitti@rubinbrown.com

By: Amie Kuntz, CPA, MA
National Tax
amie.kuntz@rubinbrown.com

 

Readers should not act upon information presented without individual professional consultation.

Any federal tax advice contained in this communication (including any attachments): (i) is intended for your use only; (ii) is based on the accuracy and completeness of the facts you have provided us; and (iii) may not be relied upon to avoid penalties.

 

 

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