Title III of Division N of the Consolidated Appropriations Act (the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, or “the Act”) appropriates $15 billion in grants for “Shuttered Venue Operators,” which reflects certain provisions of the Save Our Stages Act and is designed to help keep afloat performance art organizations and museums that have been significantly impacted by COVID-19 restrictions.
Potentially Eligible Businesses
Businesses that are eligible to receive grants under this provision include:
- Live venue operators or promoters, theatrical producers, and live performing arts organization operators that (1) charge for attendance, pay performers, and generate at least 70% of earned revenue through cover charges, ticket sales, production fees, production reimbursements, nonprofit educational initiatives, or the sale of even beverages, food, or merchandise, or (2) sell tickets to the public at least 60 days before the date of such events.
- Nonprofit museum operators.
- Motion picture theatre operators.
- Talent representatives that devote at least 70% of their operations to managing "artists and entertainers," and those performers must be paid "based on the number of tickets sold or a similar basis."
Eligible entities may be for-profit, nonprofit, or government-owned, and may be a corporation, LLC, partnership, or sole proprietorship, except that a museum may not include any for-profit entities.
There are numerous fact-specific eligibility requirements, including the following:
- The applicant must have been "fully operational" on February 29, 2020.
- The applicant must demonstrate at least a 25% reduction in gross earned revenue in the first, second, or third quarter of 2020, as compared to the same quarter in 2019. (Businesses that apply for grants after January 1, 2021 have the option to compare fourth quarter 2020 revenue against fourth quarter 2019 revenue.)
- The applicant must submit a good faith certification that "the uncertainty of current economic conditions makes necessary the grant to support the ongoing operations of the eligible person or entity." (This is consistent with the PPP economic need certification.)
- The applicant must already have resumed or intend to resume operations (e.g., resume live events, exhibit motion pictures, open museum facilities, manage artists).
- Performing arts spaces must bear certain hallmarks demonstrating that they are legitimate operating venues (e.g., defined performance spaces, sound and lighting equipment, professional staff, ticketed (paid) performances, advertising). A similar requirement applies to movie theaters (e.g., at least one screen and fixed seating, projection booths, ticketed (paid) performances, and advertisements) and museums (e.g., indoor exhibition spaces impacted by COVID-19 occupancy restrictions, at least one auditorium). Venues owned or operated by a nonprofit entity that produces free events must be produced and managed primarily by paid employees, not volunteers.
- The applicant must not be publicly traded or controlled by a publicly traded company or have received more than 10% of 2019 gross revenue from federal funding (other than under the Robert T. Stafford Disaster Relief and Emergency Assistance Act).
- The applicant, or its majority owner, may meet only two of the following characteristics: (1) employ more than 500 full-time equivalent (FTE) employees as of February 29, 2020; (2) have multinational ownership or operations; or (3) have multistate ownership or operations (more than 10 states). FTEs are defined as any employee working 30 or more hours per week; employees who work between 10 and 30 hours per week should be counted as one-half of an FTE.
- The applicant must not receive a Section 36 PPP loan or Section 37 second draw loan after the Act’s date of enactment (December 27, 2020).
- The applicant must not present live performances of a "prurient sexual nature," or derive more than "de minimis gross revenue" through direct or indirect marketing or sale of such displays.
- Each business entity of an eligible applicant will be treated as an independent, non-affiliated entity. However, not more than 5 business entities of an eligible person or entity that would be considered affiliates under the SBA’s affiliation rules may receive a grant during the initial period (see below).
- A mid-sized business applicant (500-10,000 employees) must agree that it will not abrogate existing collective bargaining agreements for 2 years, and will remain neutral in any union organizing effort for the term of the grant.
Timing and Amount of Grant Awards
The grants will be awarded in phases:
- First Priority Initial Grants
- Will be awarded during an initial 14-day period.
- The only eligible applicants are entities that show a 90% or greater revenue drop, due to the COVID-19 pandemic, during the period beginning April 1, 2020 and ending December 31, 2020, as compared to the same period in 2019.
- Generally, grants shall be equal to the lesser of 45% of 2019 gross earned revenue or $10 million.
- Second Priority Initial Grants
- Will be awarded during a second 14-day period, immediately following the first 14-day period for First Priority Grants.
- The only eligible applicants are entities that show a 70% or greater revenue drop, due to the COVID-19 pandemic, during the period beginning April 1, 2020 and ending December 31, 2020, as compared to the same period in 2019.
- Generally, grants shall be equal to the lesser of 45% of 2019 gross earned revenue or $10 million.
- Supplemental Grants
- Will be awarded after the initial 28-day priority period, and only after all Initial Grant applications have been processed.
- Applicants that received an initial grant are eligible if, as of April 1, 2021, they show a 70% revenue drop, due to the COVID-19 pandemic, for the most recent calendar quarter as compared to the corresponding 2019 calendar quarter.
- Grants shall be equal to 50% of the Initial Grant.
- No entity shall receive more than $10 million in grants.
Use of Grant Funds
Grant funds may be used for costs incurred between March 1, 2020 and December 31, 2021. Funds that are not used within 1 year of disbursement must be returned to the SBA. (Extensions are available for supplemental grant recipients.) The types of costs for which the grants may be used include:
- Payroll costs, as defined under the PPP.
- Mortgage obligations, rent obligations, utility payments, and worker protection expenditures, as defined under the PPP and amended by the new Act.
- Payments of principal or interest on any debt instrument incurred prior to February 15, 2020 (but excluding pre-payment of principal).
- Payments to independent contractors that do not exceed $100,000 for any individual employee of an independent contractor.
- “Other ordinary and necessary business expenses” such as maintenance, administrative costs, licensing fees, state and local taxes, leases, insurance policy payments, advertising, and capital expenditures related to production (“except that a grant under this section may not be used primarily for such expenditures”).
Grant funds may not be used to purchase real estate or pay principal or interest on loans that post-date February 15, 2020, for investment, or for political contributions.
Recipients must retain employment records for four years and other records for three years, and the SBA reserves the right to review and audit grants (an audit plan is expected within 45 days of enactment). If the SBA finds fraud or “material noncompliance,” it may require repayment of “misspent funds” or pursue a legal collection action.
We will be monitoring for additional clarifications and guidance regarding the Shuttered Venues program.