MUSIC, FILM ORGS URGE CONGRESS TO FIX THE CARES ACT

Nearly 50 prominent music and film orgs—including the Recording Academy, the RIAA, ASCAP, BMI, SESAC, Global Music Rights, the Academy of Country Music, A2IM, SoundExchange and SAG/AFTRA—sent a letter on Friday to leaders of Congress regarding the CARES Act. The missive details the ways implementation of the legislation has fallen short in assisting workers in need in the entertainment community and requests that these flaws in implementation be remedied in a new CARES Act COVID relief package.

“While we appreciate the efforts of lawmakers to meet the challenges of this pandemic, we need to ensure that our community is getting the aid they need to survive,” the letter reads in part. “Musicians are struggling to access the basic financial resources available due to conflicting and burdensome requirements in relief programs. Simply, there is a hole in this safety net that Congress must fix in the next version of the CARES Act.”

The letter lays out in stark terms the crisis that the live-entertainment industry is grappling with amid the pandemic: “We need help that only [Congress] can provide, in a way that recognizes the particulars of our industry. On behalf of the hundreds of thousands of us across the country, thank you for your understanding and your action.”

The orgs then assert that the implementation of the Pandemic Unemployment Assistance program (PUA) has overlooked workers who have mixed income and report it on W-2 and 1099 forms. “In almost all cases that we see in every state, a minimum amount of W-2 income disqualifies a self-employed individual for PUA and significantly lowers the amount of assistance they receive,” the letter states. “PUA must be updated to recognize these different income streams and allow individuals to show their mixed sources of revenue for a full accounting of their annual income.”

The letter also expresses concerns about the Paycheck Protection Program and the Economic Injury Disaster Loan program that were included in the first CARES Act.

Here's the full text of the letter:

Dear Speaker Pelosi, Leader McConnell, Leader McCarthy and Leader Schumer:

The broad and diverse American entertainment community would like to thank you for your continued efforts to provide assistance to those affected by the COVID-19 pandemic. The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act and the subsequent “Paycheck Protection Program and Health Care Enhancement Act” were sincerely welcomed programs, particularly their essential coverage of independent contractors, sole proprietors, and other self-employed individuals who make up so much of the live entertainment workforce.

As you know, many of our jobs have not only vanished, they will be gone for quite some time. From on-set production to public performance, our work in the entertainment industry naturally requires close personal interaction and public gatherings. Even when business restrictions are eased, it will take much longer to restore the social interaction inherently necessary for the creative industries to operate.

For those of us in the creative field to survive—and recover—after this crisis, we must be able to access the full support intended by Congress. Thus, we would like to highlight a few ways that the CARES Act has fallen short in assisting those of us most in need and hope that it will be instructive in your continued discussions on any further federal funding assistance.

First, given the unique nature of our industry, many in our profession work from project to project and gig to gig, not only in multiple jobs but in various capacities. As a result, creators often find themselves working as employees receiving W-2 wages and as independent contractors (or otherwise self-employed) receiving 1099 income for performances, royalties, and other services. Unfortunately, implementation of the Pandemic Unemployment Assistance program (PUA) has overlooked workers with mixed income. In almost all cases that we see in every state, a minimum amount of W-2 income disqualifies a self-employed individual for PUA and significantly lowers the amount of assistance they receive. PUA must be updated to recognize these different income streams and allow individuals to show their mixed sources of revenue for a full accounting of their annual income.

In addition, those who work on location or perform on tour earn freelance income in multiple states, some of which does not come with a 1099. While some state agencies allow for this type of reporting, some do not. Congress’s intent is that such workers should be fully eligible for at least the minimum PUA amount, but state implementation does not fully reflect this intention. PUA must be updated to recognize these unique circumstances.

Second, the CARES Act does not recognize the full scope of small business arrangements prevalent within our industry. As the PUA mixed income issue and the actual operation of our industry make clear, the Paycheck Protection Program (PPP) should be sure to allow payments to self-employed individuals, including independent contractors. The workers in our industry cannot afford to be shut out of federal assistance on such a technicality and any future plan should recognize self-employed individuals as eligible payroll participants.

Third, SBA’s PPP guidelines on eligibility criteria and requirements for the self-employed are overly burdensome and restrictive. SBA requires a 2019 Schedule C as the principal document to determine eligibility and loan size, even though the IRS delayed the 2019 tax year filing deadline to July 15, 2020. This puts a burden on smaller, independent creators who must now scramble to secure professional accounting services so they can supply a 2019 Schedule C. More importantly, the SBA restricts self-employed applicants to loans that are sized according solely to net business income as reflected on a Schedule C. Net business income does not reflect the fact that professionals have significant overhead costs—mortgages, studio rentals, equipment costs, health insurance premiums, and other expenses.

The SBA should allow the use of 1099-MISC forms and consideration of health insurance costs in the calculation of loan amounts, as well as the 2018 Schedule C when a 2019 form is not readily available. SBA should calculate loans consistent with the intent of the CARES Act, which allows for consideration of any compensation to a sole proprietor or independent contractor.

Finally, the SBA has limited the Economic Injury Disaster Loan (EIDL) grant of up to $10,000 to only $1,000 per employee. This means self-employed individuals who do not have employees are unfairly penalized, even though they need immediate relief just as much as any other small business. Congress clearly lays out in the CARES Act that funds from the EIDL advance may be used for many purposes other than payroll.

And when it’s time to once again open the doors to live music venues and recording studios, music will continue to need help. The government must commit to provide adequate testing, contact tracing, viral treatments and a vaccine to ensure safety and restore public trust. We will also need clear national guidelines to facilitate touring and live performances from musicians and entertainers in venues of all sizes.

There is no sugarcoating this: the entire live entertainment industry has been decimated. We trade in imagination, but the reality of our situation is dire. Today, we eagerly share our craft when we can—through video streams, on social media, or from apartment balconies. But it is not a viable “work from home” solution and it will not sustain us. We need help that only you can provide, in a way that recognizes the particulars of our industry. On behalf of the hundreds of thousands of us across the country, thank you for your understanding and your action.