United States: Front And Center: SVO Grants Through The SBA

Updated as of August 16, 2021

The Consolidated Appropriations Act, 2021 (the "CAA"), which provides $900 billion in new COVID-19 relief funding, was signed into law on December 27, 2020. Section 324 of Title III of the CAA, the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act (the "Economic Aid Act"), as amended by Title V, Section 5005 of the American Rescue Plan Act of 2021 (the "American Rescue Plan Act") signed into law on March 11, 2021, introduces a new $16.25 billion grant program through which the U.S. Small Business Administration (the "SBA") will provide aid to struggling live venue operators and certain related businesses. This program offers a critical lifeline from the Federal government for the nation's performing arts venues, movie theatres and museums. Grants made to these "shuttered venue operators" under this program are referred to by the SBA and in this publication as "SVO Grants"

This article details the key terms of the SVO Grant program and incorporates further guidance issued by the SBA in response to certain Frequently Asked Questions (the "FAQs"), which were most recently updated on July 22, 2021 (the "7/22/21 FAQs"). For information about the changes implemented to the Paycheck Protection Program (the "PPP") under the Economic Aid Act, see our article [ Where Are We Now? An Up-To-Date Guide to the Paycheck Protection Program].

[UPDATE] The SBA announced that the SVO Grant application will close on Friday, August 20, 2021 at 11:59pm Pacific Time. Please refer to the SVO Grant page on the SBA's website for the latest information about this grant program.

[UPDATE] The SBA has implemented an appeals process for applicants initially denied SVO Grants and a reconsideration process for applicants who received an award amount at least $100 less than the Proposed Grant Amount on their SVO Grant application. Please see page 36 of this alert for more information about the appeals and reconsideration processes.

The SBA releases weekly program reports detailing the number of grants awarded and the types of entities that received those grants.

I. What Persons, Entities or Organizations are Eligible for an SVO Grant?

To be eligible to receive an SVO Grant, an entity or an individual must be (i) a live venue operator or promoter, theatrical producer or live performing arts organization operator; (ii) a motion picture theatre operator; (iii) a "relevant museum operator" or (iv) a talent representative. There are specific requirements for whether an individual or entity fits within one of these categories:

• Live venue operator or promoter, theatrical producer or live performing arts organization operator - For an individual or an entity, which may be for-profit, nonprofit, or government-owned, to qualify as a live venue operator or promoter, theatrical producer or live performing arts organization operator, it must either:
  • (i) have a principal business activity of organizing, promoting, producing, managing or hosting live concerts, comedy shows or theatrical productions or other events by performing artists (1) for which a cover charge is applied; (2) for which performers are paid in an amount that is based on a percentage of sales, a guarantee or another mutually beneficial formal agreement; and (3) which generate at least 70% of earned revenue through ticket sales, production fees/reimbursements, nonprofit educational initiatives or the sale of event food, beverages or merchandise; or
    • In the FAQs [Definitions #6], the SBA defined "cover charges" to include front door entrance fees, food or beverage minimums or other similar charges required for admission whether collected via ticket sales, addition to a tab or direct payment.
    • In the FAQs [Definitions #31a], the SBA defined both "earned revenue" and "gross earned revenue" in accordance with common principles of the accrual method of accounting, with "earned revenue" as only monies that organizations receive from the sale of goods or services and "gross earned revenue" as "the total of earned revenue from various sales of goods or services, such as admission tickets, merchandise, food and beverages, advertising sales and contracted presentation income."
      • In the FAQs [Definitions #31a, Revenue #183], the SBA clarified that earned revenue does not include other sources of funds, such as donations, governmental assistance, returns on investments, foundation grants, individual gifts, in-kind gifts and other gratuitous contributions. In [Revenue #7], the SBA clarified that rental income from short-term rentals for event hosting and longer-term tenants is included in earned revenue.
      • In the FAQs [Revenue #184, 186], the SBA explained how entities should calculate gross earned revenue with respect to fundraising events and memberships. According to the SBA, the same general principles apply to tax deductions for donations to charity. The amount an individual pays in connection with a fundraising event or membership that reflects the estimated value of the goods or services received in exchange must be included in gross earned revenue. Any amount that exceeds that estimated value is considered a donation and not included in gross earned revenue.
      • In the FAQs [Revenue #196], the SBA said that if an entity is for-profit, sponsorship payments (such as naming rights) shall be considered earned revenue because the sponsorships represent payments made in exchange for a service. For a non-profit entity, sponsorship payments shall be considered part earned revenue and part gross revenue, like fundraising events and memberships. The portion of the sponsorship payment received by the non-profit that represents a fair market value for services in exchange will be deemed earned revenue, and the remainder will be deemed a contribution and thus gross revenue.