On Sunday, December 29, 2020, the president signed into law a second COVID-19 stimulus package. While we await specific guidance from the Federal agencies administering the various programs, here is a summary of provisions of particular interest to artists, arts workers, nonprofit organizations and small businesses.
- Extension of unemployment benefits
- Extension of employee retention tax credit
- $284 billion for additional loans from the Paycheck Protection Program
- Expanded eligibility for 501(c)3 organizations
- Dedicated funding for minority-owned and other underserved small businesses and nonprofits, very small businesses or nonprofits with
- 10 or fewer employees, and organizations located in distressed areas.
- Expanded loan forgiveness options
- $15 billion for shuttered venues
Economic Impact Payments
Economic Impact Payments of $600 for individuals making up to $75,000 per year and $1,200 for couples making up to $150,000 per year, as well as a $600 payment for each child dependent. According to early reports, these payments are already appearing in bank accounts.
- Eligibility is expanded to mixed-status families where one spouse has a Social Security Number (SSN).
- These families are eligible for the economic impact payment amount for each family member with an SSN and can also retroactively claim their CARES Act payment when filing 2020 taxes.
Extention of Unemployment Insurance
The bill would extend several support programs for unemployed workers.
- Extends through March 14, 2021 a provision in the CARES Act to provide federal support to cover 50% of the cost of unemployment benefits for employees of state and local governments and nonprofit organizations. Nonprofit advocates continue to request an increase in federal support to cover 100% of the cost.
- Provides enhanced unemployment insurance benefits through the Federal Pandemic Unemployment Compensation (FPUC) program of an additional $300 per week to supplement all state and federal unemployment benefits, starting after December 26, 2020 and ending March 14, 2021.
- Extends the Pandemic Unemployment Assistance (PUA) program, which provides continued unemployment assistance to the self-employed, freelancers, gig workers, parttime workers and other individuals in non-traditional employment. It also increases the number of weeks of PUA benefits an individual may claim, from 39 to 50.
- Extends the Pandemic Emergency Unemployment Compensation (PEUC) program, providing additional weeks of federally-funded benefits to workers who have exhausted their regular state unemployment benefits and increases the weeks of PEUC benefits an individual may claim, from 13 to 24.
Supplemental Nutrition Assistance Program (SNAP)
- Increases the monthly SNAP benefit level by 15% and provides $100 million for state administrative costs through fiscal year 2021.
Unemployment Insurance & Self- Insured Employers
- Extends until March 14, 2021 the 50% federal coverage of the costs of self-insured “reimbursable” employers. (Section 202, page 1933)
- Provides full federal financing of state Shared Work programs, allowing employers to avoid layoffs during the downturn by connecting their employees who are working reduced hours with partial unemployment compensation, through March 14, 2021.
Charitable Giving Incentives
- Reestablishes the $300 above-the-line deduction for 2021 and permits a $600 deduction for couples filing jointly in 2021; imposes a penalty for overstating contributions. (Section 212, page 2481 [p. 4948])
- The bill also extends for one year the increased limits on deductible charitable contributions for individuals who itemize and for corporations. (Section 213, Page 2483 [p. 4951])
Employee Retention Tax Credit (ERTC)
- Extends the Employee Retention Tax Credit through 7/1/2021.
- It also improves the refundable payroll tax credit by reducing the amount of required year-over-year decline in gross receipts from 50% to 20%, while increasing the credit from 50% to 70% of workers’ “creditable wages” of up to $10,000 for each of two quarters, for a maximum per worker benefit of $14,000.
- Expands full benefit to all employees of employers with 500 or fewer employees; larger employers can apply the credit only to workers who are paid but are not working.
- Provides that employers who receive Paycheck Protection Program (PPP) loans may still qualify for the ERTC with respect to wages that are not paid for with forgiven PPP proceeds. (Sections 206 & 207, pages 2460-2476 [p. 4927-4944])
Paid Sick Leave
- Extends the refundable payroll tax credits for paid sick and family leave that were established in the Families First Coronavirus Response Act, through March 31, 2021. (Section 286, pages 110- 114 [2033-2037]
- Extends through 2025 the 12.5% tax credit for paid family and medical leave originally enacted in the 2017 tax law. (Sec. 119, Page 2438)
Paycheck Protection Program
This bill includes $284 billion for additional loans from the Paycheck Protection Program (PPP) and extends PPP through March 31, 2021. Changes to the program include the following:
- Eligibility and Dedicated Funding
- Expands to include qualified 501(c)(6) orgs. (Section 318, page 177- 182 [2100-2105])
- Creates a dedicated $15 billion set-aside for lending through community financial institutions, including Community Development Financial Institutions and Minority Depository Institutions to increase access for minority-owned and other underserved small businesses and nonprofits;
- Creates a set-aside for very small businesses or nonprofits with 10 or fewer employees and for organizations located in distressed areas.
- Expands PPP eligibility for more critical access hospitals, local newspapers and TV and radio broadcasters, housing cooperatives, and 501(c)(6) nonprofits, including tourism promotion organizations and local chambers of commerce.
- Loan Forgiveness
- Expands forgivable expenses to include personal protective equipment, covered supplier costs, facilities modifications, covered worker protection expenditures. (Section 304, pages 120-129 [p. 2043-2052]])
- Simplifies the forgiveness application process for smaller loans up to $150,000 by allowing them to attest on a one-page form that they complied with the terms of the CARES Act PPP provisions. (Section 307, pages 132-138 [p. 2055-2061])
- Improved coordination with ERTC. (page 2462 [p. 4929])
- Second Draw
- Provides a second PPP forgivable loan (up to $2 million) for small businesses and nonprofits that
- Employ 300 or fewer employees, and
- can demonstrate a loss of 25% of gross receipts (based on gross receipts under section 6033 for nonprofits) in any quarter during 2020 when compared to the same quarter in 2019.(Section 311, pages 141-160 [2064-2083])
- Provides a second PPP forgivable loan (up to $2 million) for small businesses and nonprofits that
- Increases the ability for PPP borrowers who did not apply for their maximum eligible loan to reapply or to adjust current loans to meet their new maximum based on current calculations.
Shuttered Venue Operator Grants
The legislation authorizes $15 billion for the Small Business Association to make grants to eligible live venue operators or promoters, theatrical producers, live performing arts organization operators, museum operators, motion picture theatre operators, or talent representatives who demonstrate a 25 percent reduction in revenues.
- Allows an initial grant of up to $10 million dollars to support specified expenses such as payroll costs, rent, utilities, and PPE for an eligible person or entity and a supplemental grant that is equal to 50 percent of the initial grant;
- Sets aside $2 billion for 60 days for eligible entities that employ not more than 50 full-time employees;
- Creates initial priority periods of 14 days for entities that have faced 90 percent and then 70 percent revenue loss. Reserves at least 20 percent of available funds for non-priority applicants, and;
- Prohibits recipients of these grants from receiving a PPP second draw loan.
Additional information provided in the “Save Our Stages” section below.
Economic Injury Disaster Loan (EIDL)
The bill includes $20 billion for EIDL Advance grants. Small businesses and nonprofits in low-income communities are eligible to receive $10,000 grants.
- Targets a new round of EIDL advances for small employers located in low-income communities, have suffered economic loss of greater than 30%, and employ 300 of fewer employees. (Section 331, pages 261-266 [2184-2190])
- Extends emergency EIDL Grants through 12/31/2021. (Section 332, pages 267-270 [p. 2191-2193])
- Repeals EIDL Advance Reduction that occurred when borrowers sought PPP loan forgiveness. (Section 333, pages 270-271 [2193- 2194]
As part of the provisions of the the Economic Aid to Hard Hit Small Businesses, Nonprofits, and Venues Act, the Small Business Administration will implement a new $15 billion grant program dedicated to providing support for “shuttered venue operators” and will write the rules for how to administer the program within 10 days after the bill is signed into law. $2 billion is specifically designated for organizations with less than 50 FTE employees. The program will provide grants of up to $10 million for eligible organizations.
The term ‘‘eligible person or entity’’ in the bill means a live venue operator or promoter, theatrical producer, or live performings arts organization operator, a relevant museum operator, a motion picture theatre operator, or a talent representative that meets the following requirements:
- Was fully operational as one of the above on February 29, 2020
- Demonstrates not less than a 25% reduction from the gross earned revenue earned in the fourth quarter (2019 vs. 2020)
- Continues or plans to continue to operate (Note: there are specific clauses by organization type that should be reviewed)
- Has an approved ownership structure, generally not a significantly federally funded entity, an organization with international operations or that operates in more than 10 states, or an organization with more than 500 FTE employees (Note: there are a number of specific rules here that should be reviewed individually and the test for these rules is that an organization not have more than two of these characteristics)
- Applicants who received a PPP forgivable loan in 2020 are eligible, but must choose whether to seek an SOS grant or apply for a second PPP loan after the new bill is signed into law.
- Organizations presenting live performances of a “prurient sexual nature” or deriving more than de minimis gross revenue through activities associated with content of a “prurient sexual nature” are ineligible.
- State owned entities must be 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.
Each of the types of eligible person or entity are defined specifically in the legislation. The following conditions apply to museums specifically:
- Be serving as a relevant museum as its principal business activity.
- Have indoor exhibition spaces that are a component of the principal business activity and which have been subjected to pandemic-related occupancy restrictions.
- Have at least 1 auditorium, theater, or performance or lecture hall with fixed audience seating and regular programming.
- Applicants will calculate their grant amount based on 45% of an entity’s earned revenue in 2019.
- Total grants received by an eligible entity are capped at $10 million per recipient.
- After receiving an initial grant, qualifying applicants that are experiencing a 70% revenue decline as of April 1, 2021 can receive a supplemental grant equal to half of their initial grant award. Supplemental grant awards will only be awarded after applications received in the first 60 days of the program have been processed.
- Grants may be used for costs incurred from March 1, 2020 through December 31, 2021 (and supplemental grants may be used from March 1, 2020 to June 30, 2022).
- Allowable expenses include payroll, including payments to independent contractors; rent; fixed costs like mortgage and debt payments; as well as maintenance expenses, administrative costs, and other expenses.
Priority period and non-priority reserve
- As noted above, $2 billion of overall funding will be reserved for grants to entities with 50 or fewer employees, using a full-time equivalent calculation.
- The program will include two priority application periods that may be difficult for some organizations to access, due to ongoing contributed revenue they may have received throughout the pandemic.
- The first 14 days will limit access to applicants that demonstrate a revenue decline of 90% or more from April 1 to December 31, 2020, compared to the same time period in 2019.
- The second 14 days will be limited to those with a revenue decline of 70% or more.
- Relief funds already accessed through the CARES act will not count as revenue for this calculation, and seasonal organizations will use an alternate time period for the comparison.
- At the request of nonprofit advocates, 20% of funds will be reserved for availability after the conclusion of the priority period.
What you should do immediately
For those intending to apply for funding, USA Today’s Rhonda Abrams suggests the following immediate actions:
- Figure out your income by quarters this year versus 2019. You’re going to have to certify at least a 25% drop in gross revenues.
- Contact potential lenders. Contact local banks, community lending institutions, credit unions. Ask whether they’re going to participate in the next round of PPP lending. Find a couple lending sources, even if you received a PPP loan before.
- Try to connect with an individual lending officer. You’ll have a better chance of getting a PPP loan if you have a relationship with a person.
- Set up business banking. If you don’t already have a business bank account, get one.
- Pay attention. Keep a close out eye for application openings and deadlines. Apply DAY ONE for everything you even potentially qualify for.