Business Recovery Grant

Phase 2 Grants Mailed

On Sept. 29, 2022, the N.C. Department of Revenue (NCDOR) mailed checks to more than 3,900 North Carolina businesses awarded grants during Phase 2 of the Business Recovery Grant Program.

On October 5, 2022, NCDOR mailed letters to applicants that were not approved.

Tab/Accordion Item

About the Program 

The Business Recovery Grant Program issued payments to eligible North Carolina businesses that experienced a significant economic loss due to COVID-19.  All grant funds have been distributed to businesses.  The project is being supported, in whole or in part, by federal award number SLRFP0129 awarded to the State of North Carolina by the U.S. Department of Treasury. 

On March 11, 2022, the law was changed to authorize a second phase of applications (“Phase 2”).

Phase 2 authorized two types of grants:

  • A hospitality grant is available to an eligible arts, entertainment, or recreation business, as well as an eligible accommodation or food service business such as a hotel, restaurant, or bar (NAICS code 71 and 72).
  • A reimbursement grant is available to an eligible business not classified in NAICS Code 71 and 72.

The law required the Department to close the application period for Phase 2 on or before June 1, 2022.

This comparison shows the difference between the two phases. 

Phase 1

The application period for Phase 1 closed on January 31, 2022.  The Department has mailed checks to all eligible Phase 1 applicants. 

Phase 2 

The application period for Phase 2 closed on Wednesday, June 1.  On September 29, 2022, the Department mailed checks to all eligible Phase 2 applicants. 

Business That Did Not Receive a Grant in Phase 1

A business is eligible for a grant in Phase 2 if it meets specific conditions. The conditions are dependent on the type of grant.

To qualify for a hospitality grant in Phase 2, a business must meet all of the following conditions:

  1. The primary activity of the business is properly reflected in NAICS Code 71 or 72 from March 1, 2019, through February 28, 2021.
  2. The business is a taxpayer subject to income tax under Article 4 of Chapter 105 of the North Carolina General Statutes.
  3. The business suffered an economic loss of at least 20%.

To qualify for a reimbursement grant in Phase 2, a business must meet all of the following conditions:

  1. The primary activity of the business is NOT properly reflected in NAICS Code 71 or 72 from March 1, 2019, through February 28, 2021.
  2. The business is a taxpayer subject to income tax under Article 4 of Chapter 105 of the North Carolina General Statutes.
  3. The business suffered an economic loss of at least 20%.

The grant amount is a percentage of the economic loss demonstrated by the eligible business or $500,000, whichever is less. Economic loss is determined based on the amount the business’ gross receipts in North Carolina were reduced from the period March 1, 2019 through February 29, 2020 (“Pre-COVID Period”) to the period March 1, 2020 through February 28, 2021 (“COVID Period”). 

For Phase 2, gross receipts are calculated using the sum of the following gross receipts:

  1. Gross receipts reported on line 1 of Form E-500, Sales and Use Tax Return (“Form E-500”). If the business did not report gross receipts on line 1 of Form E-500, it may substitute the sum of the receipts listed on lines 4 through 8 of Form E-500 in place of gross receipts listed on line 1 of Form E-500;
  2. Gross receipts that meet all of the following criteria:
    • The gross receipts were not reported on Form E-500.
    • The gross receipts are for transactions apportioned to North Carolina.
    • The gross receipts were reported on one of the following forms:
      • Line 1a of federal Form 1065.
      • Line 1a of federal Form 1120.
      • Line 1a of federal Form 1120-S.
      • Line 1 of federal Form 1040, Schedule C.
      • Line 9 of federal Form 1040, Schedule F.

Business That Received a Grant in Phase 1

A business that received a grant in Phase 1 is only eligible for a grant in Phase 2 if ALL of the following are true:

  1. The business has gross receipts that were not reported on Form E-500.
  2. The business has gross receipts that were not reported on federal Form 1065.
  3. The grant the business received in Phase 1 was less than $500,000.
  4. The gross receipts on Line 5b of the Phase 2 application must be greater than the gross receipts on Line 8b of the Phase 2 application. 

The grant amount for a business that received a grant in Phase 1 is a percentage of the amount by which Line 5b is greater than Line 8b. However, the combined Phase 1 and Phase 2 grant award for a business cannot exceed $500,000. 

Are you a Historically Underutilized Business (HUB)? 

If you are a Historically Underutilized Business (HUB), there may be additional funding available for your business.  Your HUB status has no bearing on the Department of Revenue’s Business Recovery Grant Program.  If you are a HUB that is not certified as such you may still be eligible for additional opportunities.  Click here if you have questions or want to be notified of additional information that could be beneficial to HUB businesses.

HUB Definition 

 A business is a HUB if fifty-one percent of the business is owned by, and the day-to-day management and daily business operations are controlled by, one of the following:

  • Black, Hispanic, Asian-American or American Indian
  • Female
  • Socially and Economically Disadvantaged person
  • Disabled

The application period for Phase 2 of the Business Recovery Grant Program closed on June 1, 2022.

On September 29, 2022, the Department mailed checks to all eligible Phase 2 applicants.  On October 5, 2022, NCDOR mailed letters to applicants that were not approved.

Read the press release 

Phase 1 payment information can be found here.

Note: These questions are intended to help you prepare your income tax return if you received a Form 1099-G because a grant was reported to the Internal Revenue Service (IRS).

Form 1099-G: Line 3 Grant

1. What is a Form 1099-G with a Line 3 Grant and why did I receive one from the North Carolina Department of Revenue?

Form 1099-G with a Line 3 Grant is a report of the grant payments you received from the Business Recovery Grant Program during the calendar year. The Internal Revenue Service (IRS) requires government agencies to report to the IRS certain payments made during the year.

2. Is the grant amount shown on Form 1099-G with a Line 3 Grant subject to federal income tax?

Whether a grant amount is included in federal gross income is determined under federal law.  The IRS has advised the Department that payments from the Business Recovery Grant Program are subject to federal income tax and should be included in the business’s gross income or gross receipts. 

3. Is the grant amount shown on Form 1099-G with a Line 3 Grant subject to North Carolina income tax?

No.  The grant is not subject to North Carolina income tax.  If the grant amount is included in federal AGI or federal taxable income, North Carolina allows a deduction for the grant payment amount on a North Carolina income tax return.  Additional guidance is available on our website in the instructions for the North Carolina income tax returns.

4. How was the amount on my Form 1099-G with a Line 3 Grant calculated?

The grant amount on Line 3 consists of the grant payments you received from the Business Recovery Grant Program during the year. 

5. I did not receive a grant award from the Business Recovery Grant Program. Why am I receiving a Form 1099-G with a Line 3 Grant?

If you did not receive a grant award from the Business Recovery Grant Program, contact the Department at 1-877-252-3052.

6. Why isn’t there withholding on my Form 1099-G with a Line 3 Grant?

Your Form 1099-G with a Line 3 Grant does not including withholding because no tax has been withheld from your grant award from the Business Recovery Grant Program.

7. I received a Form 1099-G with a Line 3 Grant after I filed my return. What do I do?

If you received a Form 1099-G with a Line 3 Grant after filing your return, you may need to file an amended federal and State income tax return.  You should consult federal law to determine if you are required to file an amended federal income tax return.

8. When are Form-1099-Gs with a Line 3 Grant mailed?

The forms were mailed no later than January 31, 2023.

9. I have misplaced my Form-1099-G with a Line 3 Grant. What should I do?

To request a duplicate Form 1099-G with a Line 3 Grant, contact the Department at 1-877-252-3052. Allow two weeks to receive the form.

10. I have checked my records and determined the amount reported on my Form 1099-G with a Line 3 Grant is incorrect. What should I do?

If you believe the amount on your Form 1099-G with a Line 3 Grant is incorrect, you should contact the Department at 1-877-252-3052.

Frequently Asked Questions for Phase 2 of the Business Recovery Grant Program

Section I: Eligibility and Qualification for the Business Recovery Grant Program

Section II: Completing the Application for the Business Recovery Grant Program

Section III. Receiving the Business Recovery Grant

Section IV: Miscellaneous

Section I: Eligibility and Qualification for the Business Recovery Grant Program

1. What is the Business Recovery Grant Program (BRG)?

The Business Recovery Grant Program (the “Program”) provides a grant payment to aid eligible North Carolina businesses that suffered significant economic damage from the COVID-19 pandemic.  The Program was established in Session Law 2021-180 that was signed by Governor Cooper in November 2021. Legislation signed by the Governor in March 2022, updates the Program’s eligibility criteria allowing many additional businesses to apply for the Program.

2. Is this a new grant program?

No, this is not a new grant program.  As required by law, the NCDOR re-opened the application period of the Program because the total amount of grants requested by eligible businesses during the initial application period did not exhaust the $500 million in funds authorized for the Program. 

Phase 1 of the Program closed on January 31, 2022.  The application period for Phase 2 of the Program closed on June 1, 2022. 

3. What businesses may be eligible for a grant in Phase 2?

Businesses in North Carolina such as sole proprietorships, corporations, partnerships, LLCs and other types of businesses that suffered economic loss during the pandemic may be eligible for a grant in Phase 2.  Changes to the Program for Phase 2 allow a business to calculate its economic loss using an expanded list of tax forms making the Program available to businesses that do not report gross receipts on Form E-500 or federal Form 1065. This change may also allow eligible businesses to apply for a larger grant award during Phase 2. Refer to Section I, Question 13 for the full list of tax forms used to calculate gross receipts for Phase 2.

In addition, a business that was ineligible during Phase 1 because it received other COVID-19 relief may now be eligible for a grant in Phase 2.  For more information on what is considered other COVID-19 relief, go to Section III, Question 2.

The application period for Phase 2 of the Program closed on June 1, 2022.

4. What are the eligibility requirements for Phase 2 of the Program?

The eligibility requirements for Phase 2 depend on the type of grant.

Hospitality Grant

To qualify for a hospitality grant, you must meet all of the following conditions:

  1. Your business was classified in NAICS Code 71 or 72 from March 1, 2019 through February 28, 2021.

  2. You are a taxpayer subject to North Carolina income tax imposed by Article 4 of Chapter 105 of the North Carolina General Statutes.

  3. You suffered an economic loss, as the term is defined for the Program, of at least 20%.

Reimbursement Grant

To qualify for a reimbursement grant, you must meet all of the following conditions:

  1. Your business was not classified in NAICS Code 71 or 72 from March 1, 2019 through February 28, 2021.

  2. You are a taxpayer subject to North Carolina income tax imposed by Article 4 of Chapter 105 of the North Carolina General Statutes.

  3. You suffered an economic loss, as the term is defined for the Program, of at least 20%.

Note: Businesses that previously received other COVID-19 relief and were ineligible for a Reimbursement Grant in Phase 1 may have been eligible for a grant in Phase 2.  For more information on what is considered other COVID-19 relief, go to Section III, Question 2 of this webpage.

5. Is there somewhere where I can see the differences between Phase 1 and Phase 2?

This comparison shows the difference between the two phases.

6. My business received a grant in Phase 1.  Am I eligible for another grant in Phase 2?

If your business has additional gross receipts that were not reported on Form E-500 or federal Form 1065, then you may have been eligible to apply for an additional grant payment.

If all of your business’ gross receipts for transactions apportioned to North Carolina were reported on Form E-500 or federal Form 1065, then you are ineligible to receive a grant in Phase 2. 

In addition, if you received a grant award of $500,000, then you are ineligible to receive a grant in Phase 2. 

7. I made an error on my Phase 1 application. My application for Phase 1 understated my Pre-COVID gross receipts reported on my Form E-500 or federal Form 1065.  Could I apply for an additional grant based on these understated gross receipts?

No.  You could not apply for an additional grant in Phase 2. You cannot increase the amount of gross receipts reported on Form E-500 or federal Form 1065.  You could only apply for an additional grant if you had gross receipts not reported on Form E-500 or federal Form 1065, and reported on the following federal forms, provided the gross receipts are for transactions apportioned to North Carolina:

  1. Line 1a of Form 1120.

  2. Line 1a of Form 1120-S.

  3. Line 1 of Form 1040, Schedule C

  4. Line 9 of Form 1040, Schedule F

8. My business was denied a grant in Phase 1 because I received a PPP loan (other COVID-19 relief).  Was I eligible for a grant in Phase 2?

You may have been eligible for the grant in Phase 2.  The maximum amount you can receive is 10% of your net economic loss up to $500,000.

9. What is the NAICS code and where can I locate my business’s NAICS code?

A NAICS Code is a classification within the North American Industry Classification System adopted by the United States Office of Management and Budget.  Generally, your NAICS Code should be similar to the Principal Business Code or Professional Activity Code reported on your federal income tax return. Find out more information by visiting the NAICS website.

10. What business industries are classified in the 71 and 72 NAICS code?

Businesses classified in NAICS codes 71 and 72 include businesses primarily engaged in the following sectors:  Accommodation, Food Services, Arts, Entertainment, and Recreation.  For a complete list of business sectors and more information, visit the NAICS website.

11. How do I determine if I’m subject to North Carolina income tax under Article 4 of Chapter 105 of the North Carolina General Statutes?

In general, Article 4 of Chapter 105 covers corporate income tax, individual income tax, and partnership income tax.  If you have further questions, review Article 4 in its entirety.

12. How do I determine my economic loss?

Your economic loss is determined based on the amount your gross receipts in North Carolina were reduced from the period March 1, 2019 through February 29, 2020 (“Pre-COVID Period”) to the period March 1, 2020 through February 28, 2021 (“COVID Period”). 

13. How do I determine my gross receipts?

For Phase 2, gross receipts are calculated using the sum of the following gross receipts:

  1. Gross receipts reported on line 1 of Form E-500, Sales and Use Tax Return (“Form E-500”). If the business did not report gross receipts on line 1 of Form E-500, it may substitute the sum of the receipts listed on lines 4 through 8 of Form E-500 in place of gross receipts listed on line 1 of Form E-500;

  2. Gross receipts that meet all of the following criteria:

    • The gross receipts were not reported on Form E-500.

    • The gross receipts are for transactions apportioned to North Carolina.

    • The gross receipts were reported on one of the following forms:

      • Line 1a of federal Form 1065.

      • Line 1a of federal Form 1120.

      • Line 1a of federal Form 1120-S.

      • Line 1 of federal Form 1040, Schedule C.

      • Line 9 of federal Form 1040, Schedule F.

Note: Applicants that file the Simplified Electronic Return (SER) for sales and use tax may substitute the North Carolina "Total Sales" amount from SER schema in place of North Carolina gross receipts listed on line 1 of Form E-500.

14. My business is a corporation that has multiple North Carolina Sales and Use Tax Account IDs, should I have applied for a grant for each sales and use tax account ID?

No.  If the corporation has multiple North Carolina Sales and Use Tax Account IDs under one FEIN, you must have included the sum of the gross receipts reported on your Form E-500s for all of your sales and use tax account IDs.  In addition, you were required to attach a list of all of your sales and use tax account IDs to your application.

15. I am an individual operating multiple business locations in North Carolina.  I have multiple North Carolina Sales and Use Tax Account IDs and file a separate schedule C for each location.  Should I have applied for a grant for each location?

No.  You should have filed one application as the business owner.  You must have included the sum of the gross receipts reported on your Form E-500s for all of your North Carolina sales and use tax account IDs.  In addition, you were required to attach a list of your North Carolina sales and use tax account IDs to your application.

Gross receipts not listed on the Form E-500s but reported on your federal Form 1040, Schedule C, Line 1 or Schedule F, Line 9, if applicable, must have been included in the calculation provided the gross receipts are for transactions apportioned to the State.

16. I have two businesses that are LLCs in North Carolina.  The businesses are registered to collect North Carolina sales and use tax as LLCs with different FEINs.  However, I am the sole member of the LLCs and the entities are disregarded for federal income tax purposes.  How should I have filed the applications?

Each business should have filed separate applications as LLCs because they are LLCs registered to collect and remit sales and use tax with different FEINs.   

Gross receipts not listed on the Form E-500s but reported on your federal Form 1120 or Form 1065, if applicable, must have been included in the calculation for the entity that files the income tax return provided the gross receipts are for transactions apportioned to the State. 

Note: Eligible gross receipts not reported on Form E-500 could only be included on the application for the entity filing the income tax return and cannot be included on applications for two different legal entities. 

17. If a business has more than one owner, will each owner receive the grant?

No.  The grant will be awarded to the business, not individual owners.  Individuals should not file a grant application unless they operate a sole proprietorship.   

18. I am an LLC with a single owner (“a single member LLC”). I chose to operate my business in North Carolina as an S Corporation (a single member LLC taxed as an S Corporation”).  I file Form E-500, Sales and Use Tax Return and suffered an economic loss of over 20% during the COVID Period.  Am I eligible for a grant?

Yes. Since you operate your business as an S Corporation and the S Corporation is subject to North Carolina income tax, you may be eligible for a grant if you suffered an economic loss of at least 20%. 

19. I have not filed an E-500, Sales & Use Tax Return(s), during the “COVID Period.”  What should I do?

You should file and pay the E-500 Sales and Use Tax Return(s) for the missing period(s).  You must have included the gross receipts that will be reported on Line 1 of the E-500 when calculating your gross receipts for the “COVID Period.”

20. I do not have a sales and use tax account ID and report my businesses gross receipts on my federal Form 1040, Schedule C. However, I did not file my 1040 Schedule C when completing my 2020 Individual Income tax return. Was I able to submit supporting documentation to show my loss?

No. If you do not have a sales and use tax account ID, you must have provided your gross receipts from line 1 on federal Form 1040, Schedule C and attached it to your application for the pre-COVID and COVID periods. 

21. My business started in June 2019 so I don’t have gross receipts prior to that date. Could I have applied for the grant?

Yes. However, it is unlikely that you would be able to show an economic loss as required by the enacting statute.  The law requires you to compare your gross receipts for the period beginning March 1, 2020 and ending February 28, 2021 to the prior 12-month period.  As a result, your business may not have suffered a 20% economic loss when comparing the two periods because you had no gross receipts from March 1, 2019 through June 2019.  

22. If I permanently closed my business after February 28, 2021 but meet the eligibility criteria, am I still eligible to receive the grant?

If your business is permanently closed at the time of the application, you are not eligible to receive a grant.  A business cannot be permanently closed at the time of application for a grant.

23. My business permanently closed during the “COVID Period.”  Am I still eligible to receive the grant?

No. The business cannot be permanently closed at the time of the application. This includes a business that has taken steps to dissolve or has filed documentation with the Department indicating the business is permanently closed.  The Department will look to the cancellation or withdrawal of any business’s filings.  Additionally, if a business closed its sales and use tax account with the Department, filed Form NC-BN with the Department or filed Form NC-3 indicating it is closing, the business is permanently closed.

24. My business changed its structural type between the Pre-COVID period and application period. Am I eligible for a grant?

It depends on several factors such as the entity type and whether you reported gross receipts under a sales & use tax account ID or on a federal income tax form.

25. Could I have used my Streamlined Sales Tax Identification Number (SST ID) instead of the NC Sales and Use Tax Account ID?

Yes, the SST ID could have been substituted for the sales and use tax account ID on your application.

26. If I am a wholesale business and do not have taxable sales, could I have applied for the grant?

If you meet all eligibility requirements, you could have applied for a grant.  

Section II: Completing the Application for the Business Recovery Grant Program

1. What do I need to do to apply for the grant?

The application period for Phase 2 of the Program closed on June 1, 2022.

2. When is the last day I could have submitted my Business Recovery Grant Program application for Phase 2 and be eligible to receive the grant?

Applications submitted electronically, faxed, mailed to the designated address, or delivered to a Department service center must have been received by the Department on or before June 1, 2022.   

3. How do I know the Department has received my online application?

If you received an email confirmation with the subject line ‘Completed: Please DocuSign: NC-182 Phase 2 Application for Business Recovery Grant Program’, then the Department is in receipt of your electronic application.  If you submitted an electronic application but do not see a confirmation email, then check your spam email inbox. 

If you still do not see a confirmation email, then call the Department at 1-877-252-4487.    

Please note: Applications faxed or mailed to the Department did not receive a receipt confirmation from the Department.

4. If I made a mistake on my Phase 2 application or forgot to include an attachment, how can I correct it?

Phase 2 is closed. Therefore, a Phase 2 application cannot be amended at this time. 

5. I was not able to submit an application for the grant on or before June 1, 2022.  Will I be eligible to receive the grant if I submit an application after June 1, 2022?

No.  The law required the Department to close the application period for Phase 2 on or before June 1, 2022. 

Section III. Receiving your Business Recovery Grant

1. When will the Department issue grants?

Updated payment information is available in the Payments tab.

For Phase 1 payment information, visit the Phase 1 webpage.

2. I received a grant check.  How was the grant amount calculated?

If you were awarded a hospitality grant (business classified in NAICS code 71 or 72) please click here for more information.

If you were awarded a reimbursement grant (business not classified in NAICS code 71 or 72) please click here for more information.

3. How will I receive a grant award?

The Department mailed paper checks to grant recipients using the mailing address provided by the applicant on the application.  Payment distribution information is located on the Payments tab.

4. How will I know if I was not approved for a grant? 

On October 5, 2022, the Department mailed letters to applicants that were not approved.

5. Who will the grant check be made payable to?

If the business is a sole proprietorship, the check will be made payable to the individual operating as a sole proprietorship.  If the business is an entity, then the check will be made payable to the legal business name of the applicant listed on the application.

6. What address will the grant check be mailed to?

The check will be mailed to the mailing address you listed on your application.

7. I received my grant check. How much time do I have to deposit the check?

You have 180 days from the date the check was written to deposit the check.

8. I disagree with the Department’s grant amount calculation. Can I dispute the determination?

No. The Department's determination on grant amount issuance is final.  

9. I received an email/letter from the Department requesting additional information but missed the deadline to respond.  Can I provide the information to the Department and be awarded a grant?

No. The information must have been provided by the requested date listed in your email/letter. Under North Carolina law, the Department’s determination is final.  You cannot appeal this decision.  In addition, all grant funds have been distributed to eligible applicants.

Section IV: Miscellaneous

1. Will I owe the Internal Revenue Service tax on the grant?

Whether the grant is included in federal gross income is determined under federal law.  Generally, however, all income is taxable for federal tax purposes unless specifically exempted by federal law.  The Department of Revenue will issue a 1099-G for the 2022 tax year if you receive a grant payment.

2. Will the grant be included in my North Carolina taxable income?

No. If the grant is included in federal AGI or federal taxable income, North Carolina allows a deduction for the grant payment on the North Carolina income tax return.  The grant is not subject to North Carolina income tax. Additional guidance is available on our website in the instructions for North Carolina income tax returns.

3. What is the difference between the Business Recovery Grant Program and a federal stimulus check I received from a federal government program?

The Business Recovery Grant Program is a State program administered by the Department of Revenue.  The purpose of the grant is to aid eligible North Carolina businesses that suffered substantial economic damage from the COVID-19 pandemic. Any federal grant payments received were from a federally administered program on behalf of the U.S. government.

4. I have a question about the Business Recovery Grant Program that is not covered in these frequently asked questions.  What should I do?

If you have any questions about the program, you may call the North Carolina Department of Revenue at 1-877-252-4487 (8:00 am until 4:30 pm EST, Monday through Friday).

The application period for Phase 1 of the Business Recovery Grant Program closed on January 31, 2022. If you submitted a Phase 1 application or want additional information about payments, eligibility requirements or frequently asked questions, please visit the BRG Phase 1 page.