Congress Approves $15 Billion In Grants To Shuttered Live Venues: A Closer Look

People. Need. Fun.

Yeah, yeah…that’s not exactly news, but given the current climate, it bears repeating.

In certain psychological circles, they describe the importance of the “soothe-to-rage” ratio on the human psyche. Even during the best of times, we are filled with rage, whether it be of the conscious or unconscious variety. But as long as we can consistently soothe ourselves with experiences that bring us joy, balance is maintained.

What we’re seeing in our country at the moment, however, are the consequences of a collective soothe-to-rage ratio that is dangerously out of alignment.

People are ANGRY. The pandemic has left us scared and isolated. Politics and social media have left us divided and distrustful. And John Kreese is back in the San Fernando Valley, teaching his particular brand of strike-first karate to a group of impressionable teenagers. There is a LOT to be pissed off about.

But again, in normal times, we can manage that communal rage. Our anger doesn’t bubble over, because we have ways to soothe ourselves before we lash out at a coworker, hurl an empty whiskey bottle at an umpire, or oh, I don’t know…storm the Capitol.

But at the moment, where can we go to be soothed? Much of the country has been shut down since March, and even in those parts that remain open, the very venues that people rely on to blow off steam have long been shuttered.

Think about how hard that’s been over the past year. How much you’ve missed going to a show and dancing along to your band. Or laughing along live to your favorite comedian. Or taking the kids to the movies, stuffing your face with Butterfinger Minis, and seeing what recent hijinks Kevin Hart has gotten himself into.

I know it’s been hard on me. I love live venues. And like most who do, I’ve always got a list of superlatives at the ready:

Favorite music show: Frank Turner. Boulder, Co., 2019.

Favorite play/musical: The Book of Mormon. NY, NY, 2011.

Favorite comedy show: Dave Chappelle. Denver, Co., 2002.

Favorite museum: The Museum o…OK, I don’t have one. I tend to side with Homer on this one: the best things in life never end in ‘eum.’ They end in ‘mania’ or ‘teria.’

While once routine, currently, those experiences feel forever out of reach. The very idea of packing into a theater with hundreds of strangers runs in direct contrast to the sense of self-preservation that’s dominated our every move since COVID washed ashore.

Hard as it is to imagine, however, we will do those things again. We’ll laugh and dance and clog our arteries with movie theater butter. And when that time comes, we’ll attack those experiences with a vigor unseen since the Roaring Twenties.

But…we’re going to need to make sure that when we’re ready, there are places to go. We’ve got to preserve our concert halls and movie theaters and museums, a tall task given the toll the pandemic has taken on those industries.

Fortunately, Congress has a plan. Within the 5,500 pages of the most recent spending and stimulus bill, the government has set aside $15 billion in grants to help live venues survive the pandemic. But how does it work?

Let’s take a 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 1st, 2nd, 3rd, or 4th quarter 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.

Making the Grants

Initial Grant

Once a business meets ALL the relevant requirements above, it is eligible to receive a grant. The business will be required to certify that the economic uncertainty caused by COVID-19 made the grant necessary, which shouldn’t prove difficult. The initial grant will generally be equal to the lesser of three amounts:

1.     45% of the gross earned revenue of the business during 2019,

2.     If the business started after January 1, 2019, the amount equal to the product of  6 multiplied by the average monthly gross earned revenue for each full month the business was in operation in 2019, or

3.     $10 million.

The grants will be prioritized: for the first 14 days they are available, grants will be going to a businesses that – for the period from April 1, 2020 to December 31, 2020 – has revenue that is at least 90% less than the revenue of the business during the same period in 2019. The next 14 days will prioritize those businesses who lost at least 70% of revenue when comparing the two periods.

For these purposes, receipts are determined using an accrual method of accounting and any amounts received under the CARES Act – i.e., grants permitted by that bill — are not counted as revenue. It appears the business must be able to establish that the revenue loss was attributable to COVID-19, which again, will not be a large hurdle to overcome. Finally, adjustments to the traditional revenue calculation are available for seasonal businesses.

In general, each qualifying business, even if affiliated with other businesses – is eligible for its own grant. However, no more than 5 business entities of any “affiliated group” can receive a grant. For museums, the maximum grant for any one museum operator is $10 million, regardless of the number of museums operated.

Supplemental Grant

A supplemental grant is also available if, as of April 1, 2021, the revenues of the business for the most recent calendar quarter are at least 70% less than the revenues for the same quarter in 2019. This grant will be 50% of the initial grant, but between initial and supplemental grants, the total amount received cannot exceed $10 million.

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.

As with all grants of this magnitude, businesses will need to retain documentation establishing eligibility and the use of funds. Both eligibility and use of funds can be audited, and legal action can be pursued in the event fraud is found.

What is NOT clear at the time of this writing, however, is perhaps the most important piece of information: At what point will the grants be available? After all, with the grants being prioritized as discussed above, businesses will want to get in line as early as possible.

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.

Soon enough, our country’s concert halls, theaters, and museums will reopen, and people will flood back in, eager for a taste of pleasures long withheld. It can’t happen soon enough, for only when we are reintroduced to the prop-comedy stylings of Carrot Top, can the healing of this great nation truly begin.

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