BizTech Law Blog

Michigan Launches “Afflicted Business” Grant Program

Nearly two years after the start of the COVID-19 pandemic, the state of Michigan is continuing to design new programs to help support Michigan businesses that were negatively impacted by the pandemic and resulting economic shutdowns. Beginning March 1, 2022, Michigan will distribute up to $409 million under the new Afflicted Business Relief (ABR) grant program. Eligible businesses can apply beginning March 1, 2022 through March 31, 2022. Grants are not first-come, first-serve, but instead may be prorated depending on the number of eligible businesses that apply.

Eligible Businesses

To be eligible, a business must meet three criteria: (1) it must not be tax exempt, (2) it must not be a government entity, and (3) it must fit into one of the following categories:

• Entertainment Venue, including auditoriums, arenas, banquet halls, cinemas, concert halls, conference centers, performance venues, sporting venues, stadiums, and theaters;
• Recreational Facility or Place of Amusement, including amusement parks, arcades, bingo halls, bowling alleys, casinos, nightclubs, skating rinks, water parks, and trampoline parks;
• Cosmetology or Barber Services;
• Exercise Facility or Gym;
• Food Service Establishment;
• Nursery Dealer or Grower;
• Athletic Trainer;
• Body Art Facility; or
• Hotel or Bed & Breakfast.

Businesses will also need to complete an online application and provide financial documentation and information to verify their decline in Michigan total sales from 2019 to 2020, to verify fixed costs in 2020 (for new businesses which opened after October 2019), and enter into a beneficiary agreement with the state.

Financial Hardship

Financial hardship means an amount equal to an afflicted business’s decline in total sales in Michigan. To calculate this amount, the business sums the following:

• Base Hardship: which is either (i) the amount of Michigan property taxes paid in 2020, or (ii) if the business leases and does not pay property taxes, 17% of the lease costs in 2020; plus
• State Unemployment Insurance: 50% of the state unemployment insurance taxes paid in 2020; plus
• Select Fees Paid: any liquor license fee, licensee or food inspection fee paid, and any license or inspection fee paid other than the two described.

When calculating total sales, businesses must add to total sales any forgiven Paycheck Protection Program loans, any federal Restaurant Revitalization receipts, and all other state and local awards.

Award Methodology

Eligible businesses are divided into two categories: businesses in operation on October 1, 2019 and those that were not in operation on October 1, 2019, but started before June 1, 2020. For businesses in the first category, the grant is based on the percent decline in year-to-year total sales and is capped at the lesser of the amount of the financial hardship or $5 million. The following table shows the tranches of percent decline in sales and the corresponding grant award amount.

For new businesses – those formed after October 1, 2019 but before June 1, 2020 – the grant award is 25% of the financial hardship, which represents their calendar year fixed costs.

For questions regarding the Afflicted Business Relief program or for help determining program eligibility, please contact your Foster Swift attorney or a member of the firm’s Business & Tax group.

Categories: Financing, News, Sales Tax, Tax