The federal government’s latest spending bill, the Consolidated Appropriations Act (Act), included $284 billion of renewed funding for the Paycheck Protection Program (PPP) and a newly established $15 billion grant program for “Shuttered Venue Operators” (described below). Congress also modified the PPP in numerous ways that should benefit businesses who receive PPP funding.
Under the Act, the allowable uses for PPP funds that will be forgiven was broadened to include, among other expenses, costs associated with protecting workers in compliance with federal health and safety guidelines and property damages caused during public disturbances in 2020 that were not covered by insurance. Additionally, the Act created a simplified loan forgiveness process for PPP loans under $150,000. Lastly, Congress clarified its original intent to allow taxpayers to deduct expenses paid with tax-free, forgiven PPP funds.
The new PPP funds will be available both to first-time PPP borrowers—whose deadline to apply has been extended to March 31, 2021—and to businesses who have already received a PPP loan. However, Congress limited the eligibility for a second PPP loan to businesses who, (1) have 300 or fewer employees, (2) have used (or will use) the full amount of their first PPP loan, and (3) can show a 25% revenue decline in any 2020 quarter compared to the same quarter in 2019.
For more information regarding the newly expanded and updated PPP, please refer to our broader alert here.
The Act also provides more specific relief for the live performance sector of the entertainment business, including relief for managers and agents representing live performers, through a new Shuttered Venue Operators (SVO) grant program. With the pandemic devastating live entertainment, the SVO program should provide a vital boost.
Businesses eligible for SVO grants—subject to numerous limitations and qualifications—include motion picture theatre operators, comedy clubs, live venue operators or promoters, theatrical producers, museums, and live performing arts organization operators. Additionally, talent agents and managers are also eligible, provided (1) 70% or more of their operations involve representing or managing artists and entertainers, (2) they book or represent musicians, comedians, actors, or similar performers at live events in venues or festivals, and (3) represent eligible live performers that are paid in an amount based on the number of tickets sold (or a similar basis). Eligible talent agents and managers include those that operate as corporations, limited liability companies, partnerships or sole proprietorships. However, businesses eligible for both a new PPP loan and an SVO grant can only receive funds from one program.
Notably, SVO initial grants can be used to cover expenses from March 30, 2020 through December 31, 2021. Accordingly, and unlike under the PPP, businesses may receive SVO grants to cover qualifying expenses already paid during the pandemic. Qualifying expenses include payroll, rent, interest and principal on pre-February 15, 2020 debt, utilities, covered worker protection expenses, maintenance, administrative expenses, and state and local taxes, among other expenditures. Capital expenditures related to live productions also qualify, as long as the entity does not primarily use the SVO grant on such expenses. Similar to the PPP, the receipt of an SVO grant will be tax-free and businesses can still deduct qualifying expenses paid using SVO grants. While these funds are labeled as “grants” not “loans,” SVO grants not used on qualifying expenses must be returned.
To qualify for an initial SVO grant, the business entity must have been operational on or before February 29, 2020, seen a 25% or more reduction in revenue in any quarter in 2020 when compared to the same quarter in 2019, and intend to resume (or already have resumed) operations as of the SVO grant date.
For entities that qualify, the initial grant will equal 45% of the entity’s 2019 gross revenue, up to a maximum of $10 million. Each entity of a business is treated as a separate entity for purposes of receiving SVO grants, but no more than five entities within an affiliated business group can receive a grant. Initial grants will be distributed by priority: first to businesses who saw a 90% or more decline in revenue from April 1, 2020 through December 31, 2020 compared to the same period in 2019, second to businesses who saw a 70% or more decline during such comparison periods, and third to any other eligible entity.
Entities receiving an initial grant may also apply for a supplemental grant equal to 50% of their initial grant if, by April 1, 2021, their revenue for the most recent calendar quarter is 30% or less than the revenues for the corresponding quarter in 2019; the initial and supplemental grants in total cannot exceed $10 million.
The Act does provide for several additional limitations regarding which businesses may receive SVO grants. For instance, the entity cannot be publicly traded or controlled by a publicly traded company. Additionally, a business will not be eligible for an SVO grant if it meets two or more of the following criteria: (1) employed more than 500 full-time employees on February 29, 2020, (2) has multinational ownership or operations, and (3) has multistate ownership or operations (in more than 10 states). Essentially, the SVO program aims to help independent, smaller businesses in the live entertainment sector.
The Small Business Administration has already updated its PPP application form and SVO grant applications should be released in the coming days. Venable stands ready to help businesses and their owners navigate these opportunities for relief provided by the Act.