District of Columbia Enacts $100 Million Grant Program for Businesses Hurt by COVID-19

Each grant to an eligible business can be for up to 15% of the revenue lost by it in the second quarter of 2020 due to the COVID-19 public health emergency.

Reduction in Business. To obtain a grant, an eligible business must demonstrate a reduction in business revenue due to circumstances resulting from the public health emergency, showing a 50% or more loss in gross receipts for the quarter ending June 2020 compared to the same quarter in 2019. Newly opened businesses can use a more recent comparison period.

Amount of Grant. Each grant to an eligible business can be in an amount up to 15% of lost revenue for the relevant quarter but not more than the “average monthly gross receipts for any single month in 2019.” This provision is probably meant to refer to the average of all months in that year.

Eligible Business. The term “eligible business” is defined as (i) a child development center; or (ii) a business enterprise that is eligible for certification as a local business enterprise and that (a) is an establishment in the hotel, retail, restaurant, or sports and entertainment sectors, (b) derives at least 80% of its revenue from sales of merchandise, food, beverages, accommodation services, ticket sales, advertising, media, or sponsorship, or a combination of these, and (c) is still open or would be open were it not for the public health emergency.

• A “local business enterprise” is defined as one that: (i) has its principal office in the District of Columbia; (ii) requires that its CEO and highest level managerial employees perform their managerial functions in that principal office; (iii) can demonstrate that more than 50% of: (a) its employees are residents of the District, (b) its owners are residents of the District, (c) its assets, excluding bank accounts, are located in the District, or (d) its gross receipts are District gross receipts; and (iv) one of: (a) is licensed pursuant to the District’s General License Law (Chapter 28 of Title 47 of the D.C. Code), (b) is subject to the District’s Income and Franchise Taxes (Chapter 18 of Title 47 of the D.C. Code), or (c) is subject to the District’s tax on unincorporated businesses (D.C. Code § 47-1808.01(1) through (5)) and more than 50% of the business is owned by residents of the District (D.C. Code § 2-218.02 & § 2-218.31).
• The term “restaurant” is defined as “full-service restaurants, including limited service restaurants, fast food restaurants, and food service providers such as cafes, delicatessens, coffee shops, supermarkets, grocery stores, vending trucks or carts, food trucks, cafeterias.” The Act probably means to include in “restaurants” the listed businesses in addition to full-service restaurants.
• The term “sports and entertainment sector” is defined as “an establishment that is open or was open to the public prior to the declaration of the public health emergency for entertainment or leisure.” The Act probably means to include in the “sector” any of the “sports and entertainment venues” which the Act defines to include bars, entertainment venues, nightlife establishments, theatres, sports, recreation and entertainment venues, and art galleries.

Landlords. A landlord is eligible for a grant of up to one-half of the rent abatement or other benefit provided by the landlord to its eligible business tenant. Specifically, the grant may be awarded if the landlord’s rental income is “limited to the property leased to the eligible business” and the landlord has abated rent payments or otherwise provided a benefit to the eligible business in an amount equal in value to at least twice the amount of the grant. A landlord who receives an award must notify the Mayor if the landlord terminates, during the 18 months following a grant to the landlord, a lease agreement with an eligible business and must provide evidence that the termination was: (i) with the consent of the eligible business or (ii) unrelated to nonpayment of rent due to the impact of the public health emergency on the eligible business.

Use of Funds. Eligible businesses may use the funds to comply with the demands of the public health emergency, reopening, accommodating to the emerging business environment, or for any other reason determined by the Mayor to likely spur economic recovery.

Appropriations. The Act specifies that the $100 million for Business Support Grants is to come from monies appropriated to the District of Columbia under the initial Coronavirus Aid, Relief, and Economic Security Act (CARES Act), enacted by Congress, approved on March 27, 2020 (Pub. L. No. 116-136; 134 Stat. 281).

Set Aside. The Act sets aside 12.5% of its grants for an eligible business that (i) is or is eligible to be a resident-owned business and a small business enterprise; and (ii) either (a) is at least 51% owned by economically disadvantaged individuals, (b) is at least 51% woman owned, or (c) is or is eligible to be a disadvantaged business enterprise.

• “Resident-owned business” is defined as “a local business enterprise owned by an individual who is, or a majority of individuals who are, subject to personal income tax solely in the District of Columbia” (D.C. Code § 2-218.02).
• A “small business enterprise”: (1) is a local business enterprise; (2) is independently owned, operated, and controlled; and (3) either (a) is a small business concern under the federal Small Business Act (15 U.S.C. §§ 631 et seq.) or (b) has had an average annualized gross receipts for the three years preceding certification not exceeding certain sector-specific amounts, itself and with its defined affiliates (D.C. Code § 2-218.02 & § 2-218.32).
• An “economically disadvantaged individual” is an individual whose ability to compete in the free enterprise system is impaired because of diminished opportunities to obtain capital and credit as compared to others in the same line of business where such impairment is related to the individual’s status as socially disadvantaged. An individual is socially disadvantaged if the individual has reason to believe that the individual has been subjected to prejudice or bias because of his or her identity as a member of a group without regard to his or her qualities as an individual (D.C. Code § 2-218.02).
• A “disadvantaged business enterprise” is: (1) owned, operated, and controlled by economically disadvantaged individuals and (2) is a local business enterprise (D.C. Code § 2-218.02 & § 2-218.33).

Public Health Emergency. In response to COVID-19, the Mayor declared a public emergency in her Order Number 2020-045, and a public health emergency in her Order Number 2020-46, each dated March 11, 2020, and each for an initial period of 15 days. The emergencies have been extended through October 9, 2020.

Regulations. The Mayor is to issue regulations to implement the Act. The process for these grants is likely to be similar to that followed by the office of the Deputy Mayor for Planning and Economic Development for Microgrants issued under D.C. Act 23-247 discussed at this link.

The Act instructs the Mayor to “consider” prioritizing businesses closed due to the public health emergency, and unable to open until Phase 3 or 4 of the District’s Reopening Plan, as follows: 38% to restaurants, 28% to hotels, 14.5% to retail, 14.5% to sports and entertainment sectors, and 5% to child development centers.

Further Legislation. The Act described above is the Business Support Grants Emergency Amendment Act of 2020 (D.C. Act 23-347, introduced as D.C. Bill 23-0833). The Act will remain in effect for 90 days after it took effect on July 27, 2020.

There is parallel legislation in process, the Business Support Grants Temporary Amendment Act of 2020 (D.C. Bill 23-0832). The temporary legislation is largely the same except that it will take longer to become effective and will remain in effect for 225 days after it takes effect. There also are pending changes to the specifics of the 12.5% set aside.

For more information, please reach out to your regular Pillsbury contact or the authors of this client alert.

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