Since mid-December 2021, NCACPA has been working with other trade associations, the NC Department of Revenue, and key legislative offices to to identify a practical solution that would allow corporations and single-member LLCs that don’t collect sales tax to participate in the state’s new Business Recovery Grant (BRG) program.
Shortly before the NCDOR began accepting grant applications, NCACPA noted that access to the $200 million available for “reimbursement grants” in the program was inequitable. Some businesses are precluded from applying solely because of their tax classification.
BACKGROUND
The BRG was enacted in the 2021 state budget to issue grants to eligible North Carolina businesses that experienced significant economic loss due to COVID-19. The program originated as a policy initiative of the NC Restaurant & Lodging Association (NCRLA), and their intent was to create an ARPA-funded grant program for businesses in the hospitality industry, especially those that didn’t receive PPP, EIDL, or RRG funds. The NCRLA proposed that the easiest way for their members to document economic loss was using Form E-500.
During legislative negotiations on the budget, Senate leaders pushed for other types of businesses to be able to participate, and the “reimbursement grant” portion of the BRG was created. A provision allowing partnerships that do not collect sales tax to demonstrate economic loss with a Form 1065 was added as a last-minute change during the closed-door negotiations.
PROBLEMS WITH THE PROGRAM
In December, the NCDOR provided NCACPA with drafts of the BRG application and other program documents for our review and comment. NCACPA immediately recommended that additional tax forms be allowed to document gross receipts for economic loss, especially for businesses that do not collect sales tax and are not organized as partnerships. Unfortunately, the statutory language creating the BRG was specific; the NCDOR had no authority or ability to broaden the documentation provision.
NCACPA approached the NCRLA with an offer to work together on a legislative proposal that would:
- Broaden the definition of “gross receipts” in the statute so that economic loss could be demonstrated using Forms 1120 or 1120-S, or Schedules C or F on an individual return; and
- Extend the application deadline for reimbursement grants until Feb. 15 or later.
NCRLA declined the offer and said it would oppose such a change in the law.
NEXT STEPS FOR IMPACTED BUSINESSES
Undeterred, NCACPA continued discussions with key legislators and their staff. NCACPA extends its appreciation to the offices of Representatives Dean Arp and Jason Saine for their assistance.
On January 18, NCACPA learned from Representative Arp’s office that recent conversations among legislative leaders yielded mixed results. The bad news:
- As a practical and political matter, getting the legislature back to Raleigh and re-opening the budget to address this matter before the January 31 BRG application deadline was highly unlikely.
- Legislators learned that more than 2,200 businesses have already applied for BRG funds, most likely already laying claim to the $500 million appropriated for the program. Additional applications would likely further dilute the amount of grant awards for all recipients.
The good news:
- Thanks to NCACPA’s lobbying on this issue, there is strong interest at the legislature in addressing the unintended inequity created in the BRG program structure. Discussions are already underway regarding a second round of funding for the BRG program targeted toward businesses that were inadvertently excluded from participating in the first round.
NCACPA will continue to work with the General Assembly on this policy matter during the upcoming short session.
Additional information about the BRG is available at ncdor.gov/business-recovery-grant.
If you have questions about this issue or other policy matters, please contact NCACPA Director of Advocacy Robert Broome, CAE.