Given the size and scope of the latest COVID-19 relief legislation, it could be easy to miss the Shuttered Venue Grant (SVG) program. This program, to which $15 billion is allocated, is targeted specifically at organizations involved in public performances of live theatre, concerts, shows, movies, and museums. In this article, we summarize the primary elements to consider regarding this grant program:
1. Mutually Exclusive Options.
An eligible organization cannot have both a 2nd Round Paycheck Protection Program Loan (PPP2) and an SVG. This is an important consideration because most organizations that qualify for an SVG will also qualify for a PPP2. (See separate article here regarding PPP2.)
How to decide between the two options? There are a lot of differences between the two programs, and there is no single correct answer for all organizations. Here are five factors we believe are most relevant to this decision:
a. Covered time period – SVG covers eligible expenses incurred from March 1, 2020, through December 31, 2021. PPP2 covers a maximum of 24 weeks starting on the date the loan is received. The notably longer timeframe for use of the SVG provides additional flexibility as compared to the PPP2. This longer timeframe also creates additional risk associated with “double dipping” (see below).
b. Allowable expenditures – SVG funds are allowed to be used for a broader list of expenditures than PPP2 loans, even considering the newly expanded list of eligible PPP expenses included in the new relief bill. A summary of allowable expenditures is included later in this article.
c. Available amount – SVG allows grants of up to 45% of 2019 gross earned revenue or $10,000,000, whichever is lower. PPP2 allows for forgivable amounts up to 2 ½ months of payroll costs from 2019 or the most recent 12 months, or $2,000,000, whichever is lower.
- The term “gross earned revenue” is not defined in the legislation. A regulatory definition is expected as part of the roll-out of the application for SVG. For planning purposes, it is reasonable to consider “gross earned revenue” to include revenue earned from operating activities. This might exclude non-operating items such as investment income and contribution income of a not-for-profit organization, but we won’t be sure until additional clarifying guidance is issued.
d. Supplemental grants – SVG allows for a second round of supplemental grants to the extent funds remain available and the COVID-19 disruption extends beyond March 31, 2021. Supplemental grants would be available for up to 50% of the initial SVG amount received.
e. Timelines – The timelines for the application process for SVG and PPP2 have not been defined at this time. This could lead to a situation where an organization that is eligible for either program is forced to “pass” on one program while waiting for the other program to open for applications. Theoretically, this could mean watching other organizations receive PPP2 funds while you wait for the SVG application process to start.
Careful consideration of these factors and others that are specific to your organization is critical. Discussion of your organization’s considerations should be conducted and documented prior to moving forward on a specific course of action.
2. Interaction with Other COVID-19 Relief Funds.
Many organizations have already received relief funds associated with the COVID-19 disruption. This may include an Original Paycheck Protection Loan (OPPP), various forms of payroll tax credits, EIDL grants, and loans, or other items. Strategizing around how to maximize the benefit of these various relief sources without “double dipping” is even more important in light of the additional options made available by this new legislation.
This concept of double-dipping refers to the prohibition on claiming a single dollar of expenditure as support for the use of more than one funding source dollar. Because many expenditures, such as payroll, for example, are allowable to support the use of numerous funding sources, an organization receiving or even considering multiple funding sources must exercise care to avoid double-dipping. Strategy around which expenditures should be claimed against which funding source is critical to (1) avoid double dipping, (2) document that double-dipping was avoided, and (3) maximize the overall benefit of available funding sources.
Because SVG covers a relatively long period of time (March 1, 2020, through December 31, 2021), and that time period overlaps with virtually every other possible COVID-19 relief funding source, the risk of a double dip is real and must be considered.
For example, an organization which received an OPPP loan in the Spring of 2020 has probably already considered its payroll and other expenditures during the OPPP 24-week period as claimable against the OPPP loan for forgiveness. Expenses claimed as support for OPPP cannot be claimed as support for SVG because they are already utilized as support for a federal aid program, even though they might be technically eligible under the rules of multiple programs. Careful consideration of which expenditures to claim against which funding source is critical.
Again, discussion of potential double dip considerations should be conducted and documented prior to application and during the use period for any COVID-19 relief funding received. Employers who have not yet applied for OPPP forgiveness are advised to take the time to consider the implications of multiple COVID-19 aid programs prior to submitting a forgiveness application.
3. Eligible Organizations.
To receive an SVG, an organization must fit into one of four defined categories:
a. Live venue operator or promoter, theatrical producer, or live performing arts organization operator. An organization can meet this definition in one of three ways:
- Your principal business activity is to organize, promote, produce, manage, or host live concerts, comedy shows, theatrical productions, or other events by live performing artists for which a paid ticket or front door entrance fee is required and for which performers are paid based on a written agreement.
- Not less than 70% of your earned revenue is generated through cover charges or ticket sales, production fees or production reimbursements, non-profit educational initiatives, or the sale of event food, beverages, or merchandise.
- Your organization, as its principal business activity, makes available for purchase by the public an average of not less than 60 days before the date of the event tickets to events described above.
b. Relevant museum operator. The term “relevant museum” is defined the same as the term “museum” from the Museum and Library Services Act:
- “A public, tribal, or private nonprofit agency or institution organized on a permanent basis for essentially educational, cultural heritage, or aesthetic purposes, that utilizes a professional staff, owns or utilizes tangible objects, cares for the tangible objects and exhibits the tangible objects to the public on a regular basis.”
c. Motion picture theatre operator.
d. Talent representative, defined as:
- An agent or manager for whom not less than 70% of operations is engaged in representing or managing artists and entertainers.
- Books or represents musicians, comedians, actors, or similar performing artists at live events in venues or at festivals.
- Represents performers described above who are paid in an amount that is based on a number of tickets sold or a similar basis.
Note that within these categories, an organization can be for-profit, not-for-profit, or government-operated, except for relevant museums which must be not-for-profit.
We’ve had some questions about minor league sports teams and sports venue operators. At present, these organizations are not specifically identified as eligible for SVG. It remains to be seen if sports organizations are clarified in the regulatory guidance as eligible as “live venue operators.”
4. Eligibility Criteria.
Eligible organizations must meet specific eligibility criteria to receive SVG, as follows:
a. Must have been fully operational on February 29, 2020.
b. Must have gross earned revenue in one or more of the calendar quarters of 2020 that demonstrates a not less than 25% reduction as compared to the same calendar quarter in 2019. There are separate rules for organizations that started operations after January 1, 2019.
c. Must have reopened or have the intent to reopen and resume activities as of the date of the grant application.
d. Must have no more than 500 employees on a full-time equivalent basis that is calculated in the following manner that is specific to this SVG program:
- Any employee working not fewer than 30 hours per week shall be considered a full-time employee.
- Any employee working not fewer than 10 hours and fewer than 30 hours per week shall be counted as one-half full-time employee.
e. For organizations qualifying as an eligible live venue operator, theatrical producer, or live performing arts organization, these specific eligibility criteria must be met:
- Must have a defined performance and audience space.
- Must have operations that involve mixing equipment, a public address system, and a lighting rig.
- Operating activities must engage one or more individuals to perform not less than two of the following roles: sound engineer, booker, promoter, stage manager, security personnel, and box office manager.
- Must have a paid ticket or cover charge to attend most performances and artists are paid fairly and do not play for free or solely for tips, except for fundraising events.
- For venues operated by a non-profit entity, the events are produced and managed primarily by paid employees, not volunteers.
f. For organizations qualifying as a motion picture operator, the venue(s) at which a motion picture theatre operator operates must include the following characteristics:
- At least 1 auditorium that includes a motion picture screen and fixed audience seating.
- A projection booth or space containing not less than 1 motion picture projector.
- A paid ticket charge to attend an exhibition of motion pictures.
- Motion picture exhibitions marketed through a showtime list in printed or electronic publications.
g. For relevant museums, the museum must have the following characteristics:
- Serving as a relevant museum is the principal business activity.
- Indoor exhibition spaces that are a component of the principal business activity and which have been subjected to pandemic-related occupancy restrictions.
- At least 1 auditorium, theatre, or performance or lecture hall with fixed audience seating and regular programming.
h. Certain characteristics specifically exclude an otherwise eligible organization from consideration:
- Being an issuer of securities listed on a national securities exchange.
- Receiving more than 10 percent of gross revenue from federal funding in 2019, not including Robert T. Stafford Disaster Relief and Emergency Assistance Act funding.
- Ownership or operation of venues in more than 1 country.
- Ownership or operation of venues in more than 10 states.
- Has not received a PPP2 loan. OPPP loans received before December 27, 2020, are allowed.
- For eligible entities owned or controlled by a State, the eligible entity cannot include the State or a political subdivision of the State.
- Presentation of live performances of a prurient sexual nature.
- Deriving more than de minimis revenue from activities of a prurient sexual nature.
5. Grant-Making Priority.
Grant-making activities for SVG are prioritized into three levels:
a. First priority is to eligible organizations whose revenue for the period April 1, 2020, to December 31, 2020, is not more than 10% of that organization’s revenue for the period April 1, 2019, to December 31, 2019. Grants may be made only to such organizations for the first 14 days of grant availability.
b. Second priority is to eligible organizations whose revenue for the period April 1, 2020, to December 31, 2020, is not more than 30% of that organization’s revenue for the period April 1, 2019, to December 31, 2019. Grants may be made only to such organizations for days 15 through 28 of grant availability.
c. A maximum of 80% of the total grant funds may be awarded to these priority groups during the first 28 days.
d. After the initial 28-day period, grants may be made to any eligible organization regardless of revenue reduction calculations.
In addition, $2B of the total $15B funding for SVG is earmarked for eligible organizations with fewer than 50 employees.
6. Allowed Uses of SVG Funds.
Initial grant funds may be used for costs incurred during the period March 1, 2020, through December 31, 2021. Supplemental grants may be used for the period extending through June 30, 2022. It is expected that SVG funds will be used by recipient organizations within one year of receiving the funds.
Allowable expenditures include the following:
a. Payroll costs, as defined for PPP2 loans.
b. Payments on covered rent obligations, as defined for PPP2 loans.
c. Covered utility payments, as defined for PPP2 loans.
d. Scheduled payments of interest or principal on any covered mortgage obligation (pre-payments of principal are not allowed).
e. Scheduled payments of interest or principal on any indebtedness or debt instrument incurred in the ordinary course of business that was incurred before February 15, 2020 (pre-payments of principal are not allowed).
f. Covered worker protection expenditures, as defined for PPP2 loans.
g. Payments to independent contractors, as reported on Form 1099-MISC, not to exceed $100,000 in annual compensation to any individual employee of an independent contractor.
h. Other ordinary and necessary business expenses, including:
- Maintenance expenses.
- Administrative costs including fees and licensing.
- State and local taxes and fees.
- Operating leases in effect as of February 15, 2020.
e. Payments required for insurance on any insurance policy
f. Advertising, production transportation, capital expenditures related to producing theatrical or live performing arts production, concert, exhibition, or comedy show.
The following expenditures are prohibited:
a. Purchase of real estate
b. Payments for principal or interest on loans originated after February 15, 2020
c. Investment or re-lending of funds
e. Contributions or expenditures to or on behalf of any political party, party committee, or candidate for elective office
Shuttered Venue Grants should be considered by all eligible organizations. We are available to discuss the differences and how they apply specifically to your organization. Reach out today.
The information and advice we are providing for this matter relates to COVID-19 legislative relief measures. Because legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that could modify some of the advice and information provided to you, after the conclusion of our engagement. We, therefore, make no warranties, expressed or implied, on the services provided hereunder.