Financial Management and Disaster Relief
A New Grant Opportunity for Shuttered Venue Operators
Update: This article was originally published on January 15, 2021. It has been updated to reference to additional guidance released on January, 27, 2021. At this time, no additional information is available on the program, including the application process or when they will begin to accept applications.
- As part of the Consolidated Appropriations Act, 2021, the end of the year welcomed $15 billion worth of relief for several classes of venue operators that have suffered due to COVID-19.
- Grants max out at $10 million and can be used to pay for various and specific costs, from payroll and leases to utilities and taxes.
- If eligible, funding from these grants may exceed those from other relief packages.
- Priority is initially given based on loss of revenue as compared to the previous year.
Need help navigating the new grant program?
The Consolidated Appropriations Act, 2021 — signed into law on December 27, 2020 — includes a new $15 billion grant program designed to provide financial assistance to shuttered venue operators (SVOs). These grants can offer relief to live venue operators and related businesses, including performing arts venues, movie theaters, and museums that have struggled due to COVID-19. Importantly, SVO grants substantially differ from the Paycheck Protection Program (PPP) by offering grants of up to $10 million to eligible organizations, rather than the PPP’s loan structure.
Determine whether your organization qualifies as an SVO and review the provisions of this grant program before proceeding with other potential funding (i.e., tax credits or PPP loans), as the benefits for an SVO grant — due to its $10 million cap and expanded list of allowable uses — may exceed those from other funding avenues, including PPP.
Am I eligible for an SVO grant?
An entity or individual may be eligible for an SVO grant if they are a talent representative, movie theatre, relevant museum, live venue operator or promoter, theatrical producer, or live performing arts organization operator. Thankfully, these categories are specifically defined to help us determine whether an organization or individual fits each category.
Live venue operators or promotors, theatrical producers or live performing arts organization operators may be organized as for-profit, nonprofit, or government-owned entities. Read more about the qualifications for individuals and entities in the recent legislation.
Relevant museum operators are eligible if they operate a public, tribal, or private nonprofit agency or institution organized on a permanent basis for education, cultural heritage, or aesthetic purposes.
Motion picture theatre operators may be organized as a for-profit, nonprofit, or government-owned entity. The principal business activity must be the ownership or operation of at least one place of business with a purpose of showing movies to the public for a fee.
Talent representatives may be for-profit, nonprofit, or government owned. To qualify as a talent representative, it must book or represent musicians, comedians, actors, or similar performing artists primarily at live events, 70% of operations must involve representing or managing artists and entertainers, and performers must be paid based on the number of tickets sold, or a similar basis.
Further eligibility requirements
If a person or entity meets the above categorical requirements, they may be eligible for an SVO grant if they have:
- Been fully operational as of February 29, 2020;
- Experienced a reduction of at least 25% in gross earned revenue during at least one quarter of 2020 compared to the same quarter in 2019; and
- Resumed or intend to resume operations as of the date of the SVO grant.
Potential live venue grant recipients must meet specific venue-specific requirements, which include defined performance spaces; “fair” payment of artists (i.e., not performing for free or tips); marketing of performances; most performances being ticketed (or subject to a cover charge). Venue-specific requirements vary based on category and should be closely examined to determine your eligibility.
As with PPP funding, grantees must make a certification of current economic uncertainty that necessitates operational support.
Who is not eligible for an SVO grant?
While many persons and entities may seem to qualify for these grants, there are some organizations that are disqualified because they:
- Are majority owned by or controlled by public companies.
- Received (or are majority owned or controlled by another entity that received) more than 10% of its gross revenue from federal funding during 2019.
- Are owned or controlled by another entity with two or more of the following attributes:
- Owns or operates locations in more than one country.
- Owns or operates locations in more than 10 states.
- Employed more than 500 full-time employees as of February 29, 2020.
- Received a PPP loan after December 27, 2020.
- Present live performances or derive more than a “de minimis” gross revenue through the sales of products or services of a prurient sexual nature.
Size of grant awards
The total amount of SVO grants awarded to an individual applicant is limited to $10 million, which includes both initial and supplemental grants. For entities in operation on January 1, 2019, the amount of the initial grant is equal to 45% of the 2019 gross earned revenue, while those that began operations after January 1, 2019, are limited to six times the average monthly gross revenue for each full month of 2019 that the entity was in operation.
If an SVO grant recipient’s revenue for the first quarter of 2021 is 30% or less of the revenue for the first quarter of 2019, a supplemental grant of 50% of the initial grant may be received.
The Act established a 28-day priority plan, during which time up to 80% of SVO grants may be administered.
- During the first 14 days of the program, awards are prioritized for organizations with revenue for the period of April 1, 2020, through December 31, 2020, that does not exceed 10% of the revenue for the same date range in 2019.
- The grants for the next 14 days prioritize organizations with revenue for the same period of time that does not exceed 30% of the revenue for the same date range in 2019.
- After the initial 28-day period has passed, initial grants may be awarded to any eligible entity or person.
Any amounts received under the CARES Act (PPP funding) are not counted toward revenue, and the accrual method of accounting is then used to determine revenue.
There is also additional funding for the first 60 days of the program to provide grants to organizations with 50 or fewer full-time employees (defined as one working at least 30 hours per week, while anyone working 10 – 30 hours per week is counted as 0.5 toward the total number of employees).
Uses of SVO grant funds
SVO grant funding may be used for any of the following:
- Salary, wages, commissions, or similar compensation, capped at an annualized amount of $100,000 per employee (similar to PPP limitations), including vacation, parental, family, medical, and sick leave.
- Payments due to separation or dismissal.
- Health, life disability, vison, or dental insurance.
- Retirement plan benefit payments.
- State or local tax assessed on compensation of employees.
- Payments to a sole proprietor or independent contractor (a wage, commission, income, net earnings from self-employment, or similar compensation, capped at an annualized limit of $100,000).
- Rent (for a lease in effect before February 15, 2020).
- Utility payments including electricity, gas, water, transportation, telephone, or internet (for service agreements that began before February 15, 2020).
- Worker protection expenditures.
- Interest payments on mortgages/debts (incurred before February 15, 2020).
- Other ordinary and necessary business expenses including: maintenance expenses; administrative costs; state and local taxes and fees; operating leases in effect before February 15, 2020; insurance payments; and advertising, production, transportation, and capital expenditures related to producing a theatrical or live performing arts production, concert, exhibition, or comedy show (though the grant cannot be used primarily for production-related expenses).
Some prohibited expenses from an SVO grant include:
- Political contributions
- Real estate purchases
- Interest payments on loans obtained after February 15, 2020
Initial SVO grants must be used for costs incurred between March 1, 2020, and December 31, 2021, with any supplemental grant funds used for costs through June 30, 2022. Initial grant funds not spent within one year (and supplemental grant funds not spent within 18 months) of disbursement must be returned to the Small Business Administration.
On January 27, 2021, the Small Business Administration released FAQs to provide additional insight on the shuttered venue operators grant program. At this time, no additional information is available on the program, including the application process or when they will begin to accept applications.
How we can help
If your shuttered venue needs support — especially if its revenue has fallen off drastically — now is the time to take advantage of this opportunity. CLA is here to help you navigate grant compliance and the murky waters of this new legislation.