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Maine launches Economic Recovery Grant Program for small businesses and nonprofits

Aug 26, 2020

The state of Maine has enacted a new grant program to help small businesses and nonprofits that have been negatively impacted by the COVID-19 pandemic.

Using $200 million of funding from the CARES Act, the Maine Economic Recovery Grant Program will aim to provide financial relief to businesses and nonprofits that demonstrate a need for it. Each qualifying business or nonprofit may be awarded up to $100,000 in grant funding.

When deciding whether you should apply for this relief package, it’s important to act quickly. The Maine Department of Economic & Community Development (DECD) is accepting applications through September 9, 2020. If your organization is selected for this grant, an email will be sent out by September 30 to inform you of your selection. Grant awards will be mailed out to recipients starting on October 1.

Do you qualify?

The program has 11 factors that you need to meet in order for you to be eligible. Your organization must:

  1. Employ a combined total of 50 or fewer employees and contract employees (employees who work fewer than 30 hours per week may qualify as ½ an employee for qualification purposes)
  2. Demonstrate a need for financial relief based on lost income (less expenses) since March 1, 2020
  3. Demonstrate an expected 20% loss in revenue less expenses during 2020
  4. Be a for-profit or nonprofit organization that isn’t listed as an exception. Some examples of organizations that do not qualify are as follows:
    1. Most professional services organizations (certain professional services do qualify based on NAICS codes starting with 5414, 5418 and 5419; some examples of these qualifying services are advertising, graphic design, marketing, photography and veterinary services)
    2. 501(c)(4) and 501(c)(6) nonprofit organizations
    3. Nursing homes
    4. Trade associations
    5. Country clubs
  5. Have significant operations in Maine
  6. Be current and in good standing with all Maine state payroll taxes, sales taxes and state income taxes through July 31, 2020
  7. Have been in operation for at least one year before August 1, 2020
  8. Be in good standing with the Maine Department of Labor
  9. Not be in bankruptcy
  10. Not have permanently ceased all operations
  11. Be in consistent compliance and not under any current or past enforcement action with COVID-19 Prevention Checklist requirements

If you can meet all 11 of these tests, then you are eligible to apply for this grant. In addition, the grant application will need information from your 2017, 2018 and 2019 tax returns. If you haven’t filed your 2019 return yet because it is on extension currently, that will be OK so long as 2017 and 2018 have been filed.

What can you use the funding for?

The grant is meant to assist an organization with recovering losses incurred as a direct result of the COVID-19 pandemic. Funds need to be spent on operations that are strictly within Maine. The DECD provides a suggested list of expenses that would qualify and a list of expenses that would not be allowed. Some of these include:

  • Allowable expenses:
    • Payroll costs
    • Rent and mortgage payments for the organization
    • Purchase of personal protective equipment
    • Necessary operating expenses
  • Unallowable expenses:
    • Depreciation
    • Entertainment
    • Lobbying

What are the tax consequences?

The grant money will be considered taxable income for the tax year in which the monies are received. The DECD will provide a 1099 that lists the grant amount received. However, the expenses paid for by this grant will be deductible as well.

Given the necessity to demonstrate at least a 20% loss, plus the program’s intent to help those with the most need, it should be unlikely that these funds create any significant tax impact on you or your organization. You should consult with your tax professional prior to accepting funding from this grant.

Applying for Maine small business grants and nonprofit grants

For more information, visit the DECD’s grant website at: https://www.maine.gov/decd/economic-recovery-grants

To apply online, follow the link here: https://appengine.egov.com/apps/me/economicrecoverygrant

Author(s)

Michael J. Santo, CPA
Senior Tax Manager
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Nick Crosman, CPA
Manager
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