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Shuttered Venues Get Federal Assistance

January 4, 2021

On December 27, President Trump signed the bipartisan Consolidated Appropriations Act 2021, which modifies existing laws including the CARES Act and expiring tax provisions, and includes several new programs. One such new provision is grants for shuttered venue operators.

The Consolidated Appropriations Act authorizes $15 billion for the Small Business Administration (SBA) to make grants to shuttered live venues, theaters, museums, and zoos that demonstrate a 25-percent reduction in revenues due to the pandemic. Grants shall be used for specified expenses such as payroll costs, rent, utilities, and personal protective equipment.

Some Venues Overlooked in Prior Relief

Hundreds of music clubs, performing arts spaces, and other venues are operating at significantly reduced capacity or shuttered altogether due to locally implemented Covid-prevention measures. With no timeline for reopening, many of these venues were not eligible for the first Payroll Protection Program passed by Congress in March 2020.

This prompted a group of over 3,000 independent venues to form the National Independent Venue Association to lobby Congress for relief under the banner “Save Our Stages.”

Who is Eligible?

The new grant program provides a total of $15 billion in support for “a live venue operator or promoter, theatrical producer, or live performing arts organization operator, a relevant museum operator, a motion picture theatre operator or a talent representative” who was fully operational on February 29, 2020, and who intends to reopen. Applicants need to be able to demonstrate a reduction in revenues of at least 25 percent as compared with the previous year, calculated on a quarterly basis.

Applicants who accept the grant funds will be required to maintain four years of employment records after receiving the funds and three years of all business records. Each applicant can apply for five grants covering five “business entities,” including multiple music venues.

The venues where a live venue operator operates, or a promoter, producer, performing arts organization or talent representative perform or where their clients perform need to have the following characteristics:

  • A defined performance and audience space
  • Mixing equipment, a public address system, and a lighting rig
  • Engages one or more individuals to carry out not less than two of the following roles: sound engineer, booker, promoter, stage manager, security personnel or box office manager
  • There is 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 fundraisers or similar charitable events
  • For a venue owned and operated by a nonprofit entity that produces free events, the events are produced and managed primarily by paid employees, not by volunteers
  • Performances are marketed through listings in printed or electronic publications, on websites, by mass email, or on social media

Operators of venues that offer performances of “prurient sexual nature” are not eligible for the program.

Motion picture theaters or motion picture theaters operated by the motion theater operation must have the following characteristics:

  • At least one auditorium that includes a motion picture screen and fixed audience seating
  • A projection booth or space containing not less than one motion picture projector
  • A paid ticket charge to attend exhibition of motion pictures
  • Motion picture exhibitions are marketed through showtime listings in printed or electronic publications, on websites by mass mail, or on social media

Museum or relevant museums for which the relevant museum operator is seeking a grant under this section must have the following characteristics, according to the Association of Science and Technology Centers:

  • “Serving as a relevant museum as its 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 one auditorium, theater, or performance or lecture hall with fixed audience seating and regular performing

Relevant museums have the meaning given the term ‘‘museum’’ in section 273 of the Museum and Library Services Act (20 U.S.C. 9172); and shall not include any entity that is organized as a for-profit entity.”

To qualify, applicants meeting the criteria listed above cannot be publicly traded on a national stock exchange, nor can they have received more than ten percent of their 2019 funding from the federal government, exclusive of amounts received under the Robert T. Stafford Disaster Relief and Emergency Assistance Act; and they cannot have received a Paycheck Protection loan on or after December 27, 2020. Additionally, the applicant cannot be majority owned, or controlled by an entity with, more than two of the following characteristics:

  • Owning or operating venues, relevant museums, motion picture theatres, or talent agencies or talent management companies in more than one country.
  • Owning or operating venues, relevant museums, motion picture theatres, or talent agencies or talent management companies in more than 10 states.
  • Employing more than 500 employees as of February 29, 2020, determined on a full-time equivalent basis

In instances where an entity is owned by a state or political subdivision of a state, the above criteria are applied at the part of the entity that meets the above stated qualifications of a “live venue operator or promoter, theatrical producer, or live performing arts organization operator, a relevant museum operator, a motion picture theatre operator or a talent representative.” The characteristics would not be applied to other entities of the state or political subdivision of the state.

Grant Distribution

The SBA may make an initial grant of the lesser of 45% of average monthly income for 2019 or $10 million dollars to an eligible person or entity, and a supplemental grant that is equal to 50 percent of the initial grant. In the initial 14-day period of implementation of the program, grants shall only be awarded to eligible entities that have faced 90 percent or greater revenue loss. In the 14-day period following the initial 14-day period, grants shall only be awarded to eligible entities that have faced 70 percent or greater revenue loss. After these two periods, grants shall be awarded to all other eligible entities.

A minimum of $2 billion must be allocated by the Shuttered Venues grant program to venues with less than 50 full time employees.

Defining Revenue

For purposes of first and second priority in awarding grants, any amounts received by an eligible person or entity under the CARES Act or an amendment made by the CARES Act is not counted as revenue; the accrual method of accounting will be used for determining revenue; and the applicant may use alternative methods to establish revenue losses for an eligible person or entity that is a seasonal employer and that would be adversely impacted if January, February, and March are excluded from the calculation of year-over-year revenues.

Usage of Funds

Grants from this program may be used on expenses incurred during the period beginning March 1, 2020, and ending December 31, 2021. The funds can be used for payroll costs, rent, utilities, interest or principal on mortgage obligations, payments to independent contractors and operating expenses which include maintenance, insurance, advertising, operating leases and state and local taxes.  The following expenditures are prohibited: the purchase of real estate, mortgage payments on debt originating after February 15, 2020, investments, and expenditures which are of a political nature.

We will keep clients apprised of developments as they occur. If you believe you may qualify for a grant under this section of the Consolidated Appropriations Act of 2021, and you have questions, please reach out to your Clark Schaefer Hackett representative.

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a Clark Schaefer Hackett professional. Clark Schaefer Hackett will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.

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