The New York State COVID-19 Pandemic Small Business Recovery Grant Program

As the economic effects of the pandemic continue to affect small businesses, New York State has developed a new grant to assist struggling small businesses. Applications are now open for the New York State COVID-19 Pandemic Small Business Recovery Grant Program (“the Program”).  The program is currently funded with $800 million and because grants are capped at $50,000, over 16,000 small businesses in New York State will be able to benefit from this program.  The Program reserves the right to prioritize businesses based on social and economic disadvantage, business type, geography, and industry.

Who Is Eligible?

To qualify, small businesses must meet all of the requirements below:

• Had gross receipts between $25,000 and $2,500,000 in 2019 or 2020
• Had a positive net profit in 2019
• Had a decrease in annual gross receipts of at least 25% from 2019 to 2020
• If a business only had a partial tax year in 2019, they can use the same “partial” period from 2020 to compare gross annual receipts for purposes of calculating eligibility
• Had total business expenses in 2020 exceeding that of the proposed grant amount
• Eligible businesses may not have qualified for any federal relief (including under the American Rescue Plan Act of 2021) unless, even after federal relief, they have been “unable to obtain sufficient business assistance”
• Businesses will not be eligible if they received any of the following:
• A Paycheck Protection Program loan of more than $250,000
• A COVID-18 EIDL Advance Grant of more than $10,000
• A COVID-19 EIDL Supplemental Targeted Advance Grant of more than $5,000
• SBA Shuttered Venue Operator Grant

The below businesses are ineligible, even if they meet all other requirements:

• Non-profits, churches, and other religious institutions
• Government-owned entities or elected official offices
• Businesses primarily engaged in political lobbying activities
• Businesses that received awards from the SBA Restaurant Revitalization Grant Program
• Landlords
• Passive real estate businesses
• Illegal businesses or enterprises
• Other industry or business types as specified by Empire State Development (“ESD”)

How Much Money Can My Small Business Receive?

The grant amounts are calculated by your annual gross receipts in 2019.

How Can I Use My Grant?

You must use this grant money to cover COVID-19-related losses or expenses between March 1, 2020 and April 1, 2021, including:

• Payroll
• Commercial rent or mortgage payments, but not prepayments, for NYS-based property
• Local property or school taxes associated with a location in NYS
• Insurance
• Utilities and HVAC costs
• Personal Protective Equipment that was necessary to protect worker/consumer health and safety
• Machinery or equipment costs
• Supplies and materials necessary for compliance with COVID-18 health and safety protocols
• For other COVID-19 costs, you may seek approval from Empire State Development

You may not use this grant money to pay back a federal or NYS COVID-19 loan.

While the program does not require verification of the use of funds, it is recommended you save any relevant receipts and invoices for any future inquiries. When submitting the application, you will have to certify that the funds will not be used for unauthorized purposes

Will This Money Be Taxed?

State taxes will be waived for all New York State COVID-19 Pandemic Small Business Recovery Grant Program grants; however, this grant will be federally taxed.

For more information, please see https://nysmallbusinessrecovery.com/.

April 2023 Update

You probably will receive a Form 1099-G in respect of a COVID-19 Small Business Recovery Grant. At least one commercial tax software program asks about state tax refunds reported on Form 1099-G early in its “interview” process. This is not the proper place to input a 1099-G for a COVID-19 Small Business Recovery Grant (that is because, if you input a 1099-G here, the tax software will assume it is a state tax refund, and if you did not itemize Schedule A of your 2021 tax return, the software will apply the tax benefit rule to it and will treat the refund as not taxable in the respective tax year. That is not the correct treatment; even if the grant is not taxable by New York State, it is still taxable at the federal level).

Instead, a reasonable alternative would be to input the grant amount under "other business income," and then also remember to exclude or subtract the grant amount from your New York income when dealing with the state tax return.

How Can FRB Help?

Throughout the COVID-19 pandemic, we have helped many of our clients navigate the various relief programs’ rules and regulations. Our COVID-19 Response team is familiar with SBA Economic Injury Disaster Loans and grants, Paycheck Protection Program loans and forgiveness applications, the New York Restaurant Revitalization Program, the Health Resources & Services Administration’s Provider Relief Fund, and more.

For the New York State COVID-19 Pandemic Small Business Recovery Grant Program, we would work with you to determine grant eligibility, compute the grant amount, prepare the necessary application, and provide counsel on any questions you might have. If you have any questions or want to discuss the grant further, please feel free to call us.

DISCLAIMER: This summary is not legal advice and does not create any attorney-client relationship. This summary does not provide a definitive legal opinion for any factual situation. Before the firm can provide legal advice or opinion to any person or entity, the specific facts at issue must be reviewed by the firm. Before an attorney-client relationship is formed, the firm must have a signed engagement letter with a client setting forth the Firm’s scope and terms of representation. The information contained herein is based upon the law at the time of publication.