Saving Our Stages – Rescue Is in Sight for the Theater Industry

December 29, 2020

Saving Our Stages – Rescue Is in Sight for the Theater Industry

On Sunday, December 27, 2020, President Donald Trump signed into law a second stimulus package, officially called the Consolidated Appropriations Act of 2021. The new legislation comes as welcome relief to theater professionals, as it includes an important lifeline for the struggling industry—namely, $15 billion allocated for the Save Our Stages Act.

Save Our Stages

Section 324 of the Consolidated Appropriations Act of 2021 includes full funding for the Save Our Stages Act, a bipartisan bill which had been introduced to provide specific relief for struggling cultural institutions. The new legislation authorizes the Small Business Administration 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% reduction in revenues quarter-over-quarter comparing 2020 to 2019.” (Note that the taxpayer recipient has to be fully operational as of February 29, 2020.)

The initial grant will be 45% of gross revenue earned in 2019, up to $10 million. A supplemental grant of up to 50% of the first grant can also be made if a business had a revenue loss of 80% as of December 1, 2020, but the total of both grants cannot exceed $10 million. The grant may be used to cover six months of specified expenses, such as payroll costs, rent (under an agreement in effect before February 15, 2020) and utilities (all as defined in the PPP), personal protective equipment, and up to $100,000 to each independent contractor. Other ordinary and necessary expenses may qualify except that the funds cannot be primarily for that purpose. Although the threshold is that a business must have lost 25% of revenue to qualify, businesses that are struggling the most (those which have lost 90% of revenue) will be able to qualify in the first two weeks after the bill is signed into law, while other businesses will only be able to apply after the two-week period has passed.

The grant cannot be used to purchase real estate, pay interest or principal on debts taken out after February 15, 2020, or lobbying expenses. Importantly, individuals or companies should take care to avoid overlap with a PPP loan and are in fact are ineligible for the grant if they received a PPP loan after December 27, 2020.

Additional Relief

In addition to Save Our Stages, there are two highlights of note for the theater industry included in the Consolidated Appropriations Act of 2021:

Section 276

Section 276 establishes the deductibility of expenses paid from PPP loan funds. Why does that matter? Treasury and the IRS had previously taken the position that the expenditures paid from PPP loans were not deductible if the loan was forgiven in Notice 2020-32. Section 276 provides that “no deduction shall be denied or reduced, no tax attribute shall be reduced, and no basis increase shall be denied, by reason of the exclusion from gross income.”

Section 311

Section 311 allows for a second draw from the PPP by allocating another $35 billion for those who have not yet borrowed. For those who have already partaken, the bill makes several changes to the existing program, though a business which has already applied for forgiveness is not able to take advantage of the rule changes.

Marks Paneth has provided a full summary of the Consolidated Appropriations Act of 2021 which can be read here. The firm’s Theater, Media and Entertainment Group will continue monitoring developments related to the new legislation and will provide additional updates as they become available. Contact your Marks Paneth advisor or email for additional information or assistance.

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