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NY Budget Bill Includes COVID-19 Pandemic Small Business Recovery Grant Program

Aimed at Assisting Socially and Economically Disadvantaged Business Owners

As part of the New York Budget Bill presented to Governor Andrew Cuomo that is awaiting execution, New York has included the COVID-19 pandemic small business recovery grant program (the “Program”), the corresponding code section for which will be inserted to the New York State Urban Development Corporation Act (to be titled section 16-ff). The Program is set to provide $800 million in grant funding to small businesses and for-profit independent arts and cultural organizations who have experienced economic hardship during the COVID-19 pandemic, and will be administered by the Empire State Development Corporation (“ESDC”).

The fiscal year 2022 Budget also includes a new $40 million fund that will provide general operating support to assist nonprofit arts and cultural organizations as they recover from the impact of the COVID-19 pandemic, as well as an additional $20 million for new capital grants to help arts and cultural organizations comply with COVID-19 health regulations (including outdoor performance space projects, flexible seating, HVAC and filtration upgrades).

The draft of the New York Bill budget bill (A03009C/ S2509C) includes the below information pertaining to the Program, but supporting guidance from the ESDC should be released in the coming weeks.

Purpose of the Program

Grants awarded from this program shall be available to eligible micro-businesses, small businesses, and for-profit independent arts and cultural organizations that do not qualify for business assistance grant programs under the federal American Rescue Plan Act of 2021 or any other available federal COVID-19 economic recovery or business assistance grant programs, including loans forgiven under the federal Paycheck Protection Program, or are unable to obtain sufficient business assistance from such federal programs, with priority given to socially and economically disadvantaged business owners including, but not limited to, minority and women-owned business enterprises, service-disabled veteran-owned businesses, and veteran-owned businesses, or businesses located in communities that were economically distressed prior to March 1, 2020, as determined by the most recent census data.

Defined Terms

As provided in the draft of the Budget Bill, definitions for the following terms have been provided:

  • “Small business” shall mean a business which is resident in this state, independently owned and operated, not dominant in its field, and employs one hundred or less persons.
  • “Micro-business” shall mean a business which is a resident in this state, independently owned and operated, not dominant in its field, and employs ten or less persons.
  • “Applicant” shall mean a small business or for-profit independent arts and cultural organization submitting an application for a grant award to the program.
  • “COVID-19 health and safety protocols” means any restrictions imposed on the operation of businesses by executive order 202 of 2020 issued by the governor, or any extension or subsequent executive order issued in response to the novel coronavirus (COVID-19) pandemic, or any other statute, rule, or regulation imposing restrictions on the operation of businesses in response to the novel coronavirus (COVID-19) pandemic.
  • “For-profit independent arts and cultural organization” shall mean a small or medium sized private for-profit, independently operated live-performance venue, promoter, production company, or performance related business located in New York state negatively impacted by COVID-19 health and safety protocols, and having one hundred or less full-time employees, excluding seasonal employees. The qualifying organizations under this definition may include businesses engaged in a field including, but not limited to, architecture, dance, design, film, music, theater, opera, media, literature, museum activities, visual arts, folk arts and casting.

Eligibility for the Program

In order to be eligible for a grant or additional form of support under the program, an eligible small business or for-profit independent arts and cultural organization shall:

  • Be incorporated in New York state or licensed or registered to do business in New York state;
  • Be a currently viable small business or for-profit independent arts and cultural organization that has been in operation since before March 1, 2019;
  • Be able to demonstrate lost revenue or other economic hardship due to the COVID-19 pandemic or compliance with COVID-19 health and safety protocols which resulted in business modifications, interruptions, or closures. To demonstrate lost revenue or other economic hardship, the applicant shall show a loss in year-to-date revenue as of December 31, 2020, compared with the same period in 2019;
  • Be in substantial compliance with applicable federal, state and local laws, regulations, codes and requirements; and
  • Not owe any federal, state or local taxes prior to July 15, 2020, or have an approved repayment, deferral plan, or agreement with appropriate federal, state and local taxing authorities.

Eligible Costs for Program Funds

Eligible costs shall be considered for micro-businesses, small businesses, and for-profit independent arts and cultural organizations negatively impacted by the COVID-19 pandemic or by their compliance with COVID-19 health and safety protocols which resulted in lost revenue, business modifications, interruptions, or closures. Such eligible costs shall have been incurred between March 1, 2020 and April 1, 2021.

The following costs incurred by a micro-business, small business, or for-profit independent arts and cultural organization shall be considered eligible under the program at a minimum:

  • payroll costs; costs of rent or mortgage as provided for in subparagraph (i) of this paragraph;
  • costs of repayment of local property or school taxes associated with such small business’s location as provided for in subparagraph (ii) of this paragraph; insurance costs;
  • utility costs; costs of personal protection equipment (PPE) necessary to protect worker and consumer health and safety;
  • heating, ventilation, and air conditioning (HVAC) costs, or other machinery or equipment costs, or supplies and materials necessary for compliance with COVID-19 health and safety protocols, and other documented COVID-19 costs as approved by the corporation.
  • Mortgage payments or commercial rent shall be considered eligible costs.
  • Payment of local property taxes and school taxes shall be considered eligible costs.

Grants awarded under the program shall not be used to re-pay or pay down any portion of a loan obtained through a federal coronavirus relief package for business assistance or any New York state business assistance programs.

Conclusion

It should be noted that State-provided grants to businesses are generally considered taxable income. However, depending on what the grant was for, the tax impact of the grant may be able to be reduced.

Author: CJ Stroh | cstroh@withum.com

To discuss whether applying for the COVID-19 pandemic small business recovery grant program—or any of the other programs created as part of the New York Budget Bill—please reach out to Withum’s State and Local Tax Team.

Business Tax Services

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