The Shuttered Venue Operators (SVO) Grant Program

The Shuttered Venue Operators (SVO) Grant program was established by The Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, signed into law on December 27, 2020. The program includes $15 billion in grants to shuttered venues, to be administered by the Small Business Administration’s Office of Disaster Assistance.

Eligible applicants may qualify for SVO Grants equal to 45% of their gross earned revenue, with the maximum amount available for a single grant award of $10 million. $2 billion is reserved for eligible applications with up to 50 full-time employees.

Eligible entities include:

• Live venue operators or promoters
• Theatrical producers
• Live performing arts organization operators
• Relevant museum operators, zoos and aquariums who meet specific criteria
• Motion picture theater operators
• Talent representatives, and
• Each business entity owned by an eligible entity that also meets the eligibility requirements

Other requirements of note:

• Must have been in operation as of Feb. 29, 2020
• Venue or promoter must not have received a PPP loan on or after Dec. 27, 2020

Awards will be either for:

An eligible entity that was in operation on Jan. 1, 2019, the lesser of an amount equal to 45% of their 2019 gross earned revenue OR $10 Million.

An eligible entity that began operation after Jan. 1, 2019, the lesser of the average monthly gross revenue for each full month you were in operation during 2019 multiplied by 6 OR $10 Million.

Small businesses who have suffered the greatest economic loss will be the first applications processed under the following schedule:

Open only to small entities with up to 50 employees:

Unrestricted; open to entities of any size:

Funds may be used for specific expenses, which include:

• Payroll costs
• Rent payments
• Utility payments
• Scheduled mortgage payments (not including prepayment of principal)
• Scheduled debt payments (not including prepayment of principal) on any indebtedness incurred in the ordinary course of business prior to 02-15-20)
• Worker protection expenditures
• Payments to independent contractors (not to exceed $100K in annual compensation per contractor)
• Other ordinary and necessary business expenses, including maintenance costs
• Administrative costs ( fees and licensing)
• State and local taxes and fees
• Operating leases in effect as of 02-15-20
• Insurance payments
• Advertising, production transportation, and capital expenditures related to producing a theatrical or live performing arts production. (May not be primary use of funds.)”

Source: https://www.forbes.com/sites/anthonynitti/2021/01/07/congress-approves-15-billion-in-grants-to-shuttered-live-venues-a-closer-look/

Qualifying Businesses

In order to receive a grant, a business must be in a certain line of work. These businesses can be a for-profit organization, a nonprofit organization, or government-owned. They can be a corporation, a limited liability company, a partnership, or operated as a sole proprietorship.

 The new law breaks qualifying recipients into four categories, with the first category containing subcategories.

Category 1: Live venue operators or promoters, theatrical producers, or live performing arts organization operators (collectively, “live venue operators”)

This category contains both businesses that organize, promote, produce, manage or hosts live performances and those that sell tickets to performances to live venues. Live performances, for these purposes, includes concerts, comedy shows, theatrical productions, or other events by performing artists. Let’s break the two subcategories down separately…

Organize/Promote/Produce/Manage/Host Life Performances

To meet this definition, the business must have three characteristics.

1. It must impose a cover charge through ticketing or a front door entrance fee.
2. Performers must be paid in an amount that is based on a percentage of sales, a guarantee (in writing or standard contract), or another mutually beneficial formal agreement, and
3. Not less than 70% of the earned revenue of the business is generated through, to the extent related to live events, cover charges or ticket sales, production fees or production reimbursements, nonprofit educational initiatives, or the sale of event beverages, food, or merchandise.

Ticket Brokers

In addition, a ‘‘live venue operator or promoter, theatrical producer, or live performing arts organization operator” includes a business that sells tickets to the public — an average of not less than 60 days before the date of the event — to live concerts, comedy shows, theatrical productions, or other events by performing artists.

Once again, to qualify, the performers for these live events must be paid in an amount that is based on a percentage of sales, a guarantee (in writing or standard contract), or another mutually beneficial formal agreement.

Category 2: Relevant Museum

A relevant museum is a ‘museum’ as defined in section 273 of the Museum and Library Services Act (20 U.S.C. 9172). I have no idea what this means, but if you’re reading this and have a vested interested in this definition, you probably do.  It does NOT include, however, any museum that is organized as a for-profit entity.

Category 3: Motion Picture Theater Operator

This category includes a business that owns or operates at least one place of public accommodation for the purpose of motion picture exhibition for a fee. In simpler terms, a movie theater.

Category 4: Talent Representative

Finally, a “talent representative” is eligible for a grant. This includes an agent or manager that does the following three things:

1. As not less than 70% of its business, is engaged in representing or managing artists and entertainers;
2. Books or represents musicians, comedians, actors, or similar performing artists primarily at live events in venues or at festivals; and
3. Represents musicians, comedians, actors or similar artists that are paid in an amount that is based on the number of tickets sold or a similar basis.

Business Requirements

Once it is determined that a business is a live venue operator or promoter, theatrical producer, or live performing arts organization operator (again, collectively, a “live venue operator”), a relevant museum operator, a motion picture theatre operator, or a talent representative, the business must then meet the following SEVEN requirements:

1. It must have been fully operational on February 29, 2020;
2. Had gross revenue during the 1^st, 2^nd, 3^rd, or 4^thquarter of 2020 that was less than 75% of what it was for the same quarter in 2019;
3. As of the date of any grant:

• For “live venue operators,” the business is or intends to resume its business of organizing, promotion, producing, managing or hosting future concerts, comedy shows, theatrical productions, or other events;
• For motion picture theater operators, it is open or intends to reopen for the primary purpose of public exhibition of movies,
• For relevant museum operator, it is open or intends to reopen, or
• For talent representatives, it is CURRENTLY representing or managing artists and entertainers.

4. The business cannot have ANY of the following characteristics: it cannot be publicly traded or have received more than 10% of its revenue during 2019 from federal funding. Likewise, the business cannot be majority owned by or controlled by an entity with either of those characteristics.
5. The business cannot have MORE THAN TWO of the following characteristics:

• Locations in more than one country,
• Locations in more than 10 states, or
• More than 500 employees as of February 29, 2020.

6. NO STRIP CLUBS, and
7. Lastly, the business cannot receive a Paycheck Protection Program loan —either round 1 or the new second round — after December 27, 2020.

Venue Requirements

Next, there are requirements for the types of venues involved in the business.

For a live venue operator, the venues at which the business promotes, produces, manages or hosts events (or for a talent representative, the venues at which the artists represented perform), must have the following characteristics:

• A defined performance and audience space;
• Mixing equipment, a public address system, and a lighting rig;
• Engages one or more individual to carry out at least 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 and similar charity events;
• For a venue owned by a non-profit, the events are produced and managed by paid employees rather than volunteers; and
• Performances are marketing through listings in printed or electronic publications, on websites, by email, or on social media.

A motion picture theater must have:

• 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,
• The movies must be marketed through showtime listings in printed or electronic publications, on websites, by email, or on social media.

A museum must have:

• Indoor exhibition spaces that have been subjected to pandemic-related occupancy restrictions; and
• At least one auditorium, theater, or performance or lecture hall with fixed audience seating and regular programming.

Use of Funds

The grant dollars must be used for costs incurred from March 1, 2020 through December 31, 2021 (for initial grants, or as late as June 30, 2022 for supplemental grants). If not expended by the relevant deadline, the funds must be returned within 1 year after the date of disbursement of the grant. Thus, for businesses borrowing this month, any amount not spent by December 31, 2021 would need to be returned in January of 2022. Unused supplemental grants must be repaid within 18 months of the date of disbursement.

The grants must be used for certain expenses. Eligible expenses include payroll costs, mortgage interest, rent and utilities (on obligations that existed prior to February 15, 2020), and covered worker protection expenses as defined in the Paycheck Protection Program. In addition, the funds may be used to make payments made to independent contractors (not to exceeds $100,000 in annual compensation to any one service provider), or for maintenance expenses, administrative costs, state and local taxes, operating leases, insurance premiums, advertising, production transportation, and certain capital expenditures. The funds CANNOT be used to purchase real estate, to pay loans originating after February 15, 2020, to invest or relend funds, or for contributions to a political party.

Taxability

Finally, the latest stimulus bill makes clear that 1) receipt of the grant is not taxable; rather, the grant represents tax-exempt income, and 2) any expenses paid with the grant money is fully deductible.”

Research and blog  written by PHB employee, Binh Ngo