NC Business Recovery Grant Applications Due January 31st

Since March 2020, it’s been one thing after another for North Carolina businesses. Government shutdowns, shelter in place orders, job losses, reopening and repeated closures, and countless other pivots including vaccine mandates and exclusions. Heading into 2022, businesses have been faced with even more challenges from labor shortages, supply chain disruptions, and rising material/supply costs. That’s why North Carolina’s Business Recovery Grant will be a lifeline to many struggling businesses. A one-time payment of up to $500,000 is available for hospitality businesses and those that did not receive federal COVID-19 assistance. There are application requirements and several factors to consider before applying, and eligible businesses have until January 31^st to apply. To help clients, prospects, and others, Wilson Lewis has provided a summary of the key points below.

North Carolina SB105

Senate Bill 105, also known as the 2021 Appropriations Act, became law on November 18, 2021. It’s a $25.9 billion budget bill that directs state spending in areas ranging from infrastructure, education, and salary increases for teachers and state employees. SB105 covers the fiscal years of 2021-22 and 2022-23 and is the first state budget since 2018.

But while much attention has been given to how state funds will be spent and the relevant tax items in the legislation, a notable part of SB105 focuses on giving eligible North Carolina businesses some much-needed financial assistance.

Business Recovery Grant Program

Included in North Carolina’s budget is the Business Recovery Grant Program. It uses funding from the American Rescue Plan Act to help state businesses struggling the most due to COVID-19. The two-part grant program is administered through North Carolina’s Department of Revenue (NCDOR). $500 million has been set aside for funding, with $200 million allocated to non-hospitality businesses. The North Carolina Restaurant and Lodging Association will receive $5 million for hospitality grants focused on workforce recruitment.

To be eligible, businesses must have suffered at least a 20 percent economic loss and be subject to state income tax. Eligible businesses are sole proprietors, LLCs, partnerships, and corporations.

Two types of grants are available: hospitality and reimbursement. Essentially, one grant sets aside money for businesses with NAICS Codes 71 (Arts, Entertainment and Recreation) or 72 (Accommodation and Food Services), and the other grant is open to all other businesses.

If a business could qualify under either category, funding would come from the Hospitality grant. Business owners with more than one business, or corporations with more than one location, should file one application for all entities and/or locations.

In addition to the 20 percent economic loss threshold, reimbursement grant applicants cannot have received any previous COVID-19 relief funding. This includes the:

• Paycheck Protection Program
• Economic Injury Disaster Loan (EIDL) Advance
• Restaurant Revitalization Fund
• Shuttered Venue Operators Grant Program
• North Carolina Job Retention Grant

The economic loss threshold measures a 20 percent or greater loss from March 1, 2019 – February 29, 2020, against March 1, 2020 – February 28, 2021. Businesses should use gross receipts reported on Form E-500 (Sales and Use Tax Return), Line 1 or Lines 4-8 (if no amount was entered on Line 1). Partnerships can also refer to Form 1065, Line 1(a) if those gross receipts were not already reported on Form E-500 and only apply to North Carolina revenue.

According to the NCDOR, “Applicants that file the Simplified Electronic Return (SER) may substitute the North Carolina “Total Sales” amount from SER schema in place of North Carolina gross receipts listed on line 1 of Form E-500.”

Hospitality grant applicants are still eligible for the Business Recovery Grant if they previously accepted and used other funding, as described above, except the award would be limited to 10 percent of the loss.

It is possible to be approved for a certain amount but receive a smaller grant. If there are more eligible applicants than total funding, NCDOR will reduce approved applicants’ awards so that every eligible applicant receives part of the funding. Applicants that did not previously receive any COVID-19 funds would be prioritized to receive the maximum grant.  Any unused funds will go back to the state’s funding reserve pool.

Other Considerations

Business Recovery Grant payments are not subject to state tax but may still be subject to federal income tax. It is possible that the program could reopen if there are additional funds; otherwise, late applications will not be accepted. Status updates on previous North Carolina COVID-19 business resources can be found here.

Contact Us

The Business Recovery Grant offers a limited opportunity to qualify for COVID-19 relief funding when many other assistance programs have already closed. Now is the time to review your situation to determine if you qualify. If you have questions about the information outlined above or need assistance with an accounting or tax issue, Wilson Lewis can help. For additional information call us at 770-476-1004 or click here to contact us. We look forward to speaking with you soon.