Certain entertainment and live events businesses that have been forced to close due to COVID-19 restrictions are eligible for Shuttered Venue Operator Grants under the December relief bill.

On December 22, 2020, the United States Congress passed an omnibus spending bill (the December relief bill) that included significant revisions and additions to the Paycheck Protection Program (PPP) established by the Coronavirus Aid, Relief and Economic Security Act (CARES Act), and previously amended by the Paycheck Protection Program Flexibility Act (PPP Flexibility Act). President Trump signed the bill on December 27, 2020.

This is the second Alert in our series on the December relief bill. The first Alert covers PPP loans.

The December relief bill offers numerous economic opportunities for businesses impacted by COVID-19, including Shuttered Venue Operator Grants for live venue operators, entertainment businesses, arts and cultural organizations and others listed below that have been severely impacted by COVID-19 and related government and industry restrictions. In total, the legislation provides $15 billion in funding for these grants.

The Small Business Administration (SBA) is expected to release further rules and guidance in connection with the December relief bill in the coming weeks.

Overview

Certain entertainment and live events businesses that have been forced to close due to COVID-19 restrictions are eligible for Shuttered Venue Operator Grants under the December relief bill. The SBA will be responsible for managing and distributing the grants for businesses that, generally, have suffered at least a 25% reduction in revenues due to the COVID-19 pandemic.

Eligible Entities

Entities that are eligible for Shuttered Venue Operator Grants include live venue operators and promoters, theatrical producers, live performing arts organization operators, museum operators, motion picture theater operators or talent representatives that satisfy the following criteria:

1. Such entity was fully operational on or before February 29, 2020; and
2. Such entity had gross earned revenue during the first, second or third (or, in the case of an entity that applies on or after January 1, 2021, the fourth) quarter that demonstrates a 25% reduction in gross earned revenue or more during the same quarter in 2019.

In addition, as of the date any Shuttered Venue Operator Grant is made, the entity must intend to resume operations substantially similar to those conducted prior to COVID-19. Such entity must (i) not be owned or controlled by a business that has its securities listed on a national securities exchange; (ii) have received more than 10% of its gross revenue from federal funding during 2019; (iii) does not have more than two of the following characteristics: (1) owns or operates businesses in more than one country, (2) own or operates businesses in more than 10 U.S. states or (3) employs more than 500 employees as of February 29, 2020; or (iv) that received a PPP loan on or after December 27, 2020.

The December relief bill categorizes eligible entities as follows:

Live Venue Operator

A live venue operator or promoter, theatrical producer or live performing arts organization operator means entities that (i) as a principal business activity, organize, promote, produce, manage or host live events and charge admission and pay performers and (ii) an entity for which at least 70% of its revenue is generated from live events. This also includes entities that make tickets available for purchase by the public not less than 60 days before an event or program whereby performers are paid in some manner (contractual or percentage of revenues, as two examples).

Motion Picture Operator

“Motion picture operators” are defined as entities that own as the principal business activity at least one movie theater or similar site and charge a fee for such movie viewings.

Relevant Museums

“Relevant museums” are defined according to the definition of “museums” in Section 273 of the Museum and Library Services Act and do not include for-profit entities.

Talent Representatives

“Talent representative” is defined as an agent or manager that derives 70% or more of its revenue from representing or managing artists, books entertainers at live and/or performing arts events and represents performers paid on some basis.

Excluded Entities

Certain entertainment operators are excluded from the Shuttered Venue Operator Grant program, including entities that (i) present live performances of a “prurient sexual nature” or (ii) derive, indirectly or directly, more than de minimis gross revenue through products or services of a “prurient sexual nature.”

Grant Distribution Priority

Eligible entities must submit a certification of need when applying for Shuttered Venue Operator Grants.

1. First-Priority Grants: Grants are first to be distributed during the first 14 days of the program to entities whose revenue has declined 90% or more from the period of April 1, 2020, to December 31, 2020, compared to April 1, 2019, to December 31, 2019.
2. Second-Priority Grants: During the succeeding 14-day period, grants are to be distributed to entities whose revenue has declined 70% or more from the period of April 1, 2020, to December 31, 2020, compared to April 1, 2019, to December 31, 2019.
3. General: After the second-priority grants are disbursed, Shuttered Venue Operator Grants may be distributed to any eligible entity.

Note that no more than five business entities of an eligible business or person may receive a Shuttered Venue Operator Grant.

Supplemental grants may be awarded for eligible entities that receive a grant but, by April 1, 2021, have revenue for the most recent calendar quarter that is 30% or less of the revenues for the corresponding quarter in 2019.

Grant Amounts

In general, a Shuttered Venue Operator Grant may be awarded to an eligible business in an amount equal to the lesser of:

1. (i) For a business in operation on January 1, 2019, an amount equal to 45% of the gross earned revenue during 2019, or (ii) for a business that began operations after January 1, 2019, the amount equal to the average monthly gross revenue for each full month the business was in operation during 2019, multiplied by 6; or
2. $10,000,000[1].

Supplemental grants will be for an amount equal to 50% of the prior grant received by such business.

Use of Grant Funds

The funds awarded by such grants may be used for costs incurred between March 1, 2020, and December 31, 2021; however, for any supplemental grants awarded, the period is extended until June 30, 2022. Any grant funds that are not used one year after being awarded must be returned.

Grant funds may be used for the costs and items permitted for PPP loan borrowers, including the new items and costs permitted in the December relief bill.

About Duane Morris

Duane Morris has created a COVID-19 Strategy Team to help organizations plan, respond to and address this fast-moving situation. Contact your Duane Morris attorney for more information. Prior Alerts on the topic are available on the team’s webpage. 

For More Information

If you have any questions about this Alert, please contact Nanette C. Heide, Stephen Morrissey, Mark Zhuang, any member of the COVID-19 Strategy Team or the attorney in the firm with whom you are regularly in contact.

Notes

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.