Why Is Federal COVID Relief for Indie Cinemas and Music Venues Taking So Long? Blame Past Fraudsters

Entertainment lobbyists say extra measures to ensure relief funds go only to those in need have left thousands of venue owners waiting for weeks for aid

More than a month after the Small Business Administration opened applications for a $15 billion grant program to provide relief for movie theaters and other entertainment venues crippled by COVID-19, barely any applicants have received money.

Lobbyists say that concern about fraud is the main reason why. When the Paycheck Protection Program was approved by Congress last year to provide immediate relief to businesses closed by the pandemic, headlines popped up of recipients who used millions in grants to buy luxury items like mansions and supercars. In the early weeks of his presidency, Joe Biden vowed to crack down on such fraud, and the grant program developed for shuttered entertainment venues was designed with that goal in mind.

"In our latest talks with the SBA, we found out that the administration had created the program with the aim to have zero fraud and trained applicant reviewers to look at each grant request with the assumption that there was some sort of fraud there," said Jackie Brenneman, general counsel for the National Association of Theater Owners (NATO). "Meanwhile, we have thousands of applicants -- not just movie theaters we represent but other venues represented by our partners -- that needed to get this grant money weeks ago."

The Arena Cinelounge in Hollywood is one of hundreds of independent theaters that applied for COVID-19 relief grants for entertainment venues (Photo by Christian Meoli)

Last week, the Small Business Administration reported that just 90 applicants had been approved for grants out of over 4,600 that requests from organizations claiming financial losses of more than 90% year-over-year due to the pandemic. Of those 90, only a small handful have actually received a grant check in the mail, according to a joint statement released by NATO, the National Independent Venue Association and several other indie venue lobbyists.

This is in spite of the fact that the SBA opened the application site back on April 26 and has a reported team of 400 staffers reviewing applications for approval. So what's the holdup? Brenneman said that within the immense stack of paperwork that applicants had to provide, there is one form that has been identified as the biggest hurdle: Form 4506-T.

"4506-T is a form that basically says the applicant gives permission to the SBA to ask the Internal Revenue Service for tax return information," she explained. "It's meant to allow them to verify that the company is legitimate and that they are being honest about their reported profits and financial losses from the pandemic."

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Jeremy Fuster

Box Office Reporter • jeremy.fuster@thewrap.com • Twitter: @jeremyfuster