"I agree, but was getting push back from client."

So what? The client is not the one signing as the professional preparer. You likely get a lot of pushback for various reasons. How often are they right and not you? Do you have supporting documentation or information? Why not? It's typically pretty easy to find on the web.

Without more details, no one can find that grant for you using web resources. As I mentioned, there are lots of these posts from the past two years, and the specifics help you find the Grant, and any related commentary from the specific State Revenue Dept. Or, the client needs to tell you the name of the grant, then you post it here. We can't help, because we don't know anything else.

"To clarify, grant was given by a small city for Arts & Culture Funding, nothing to do with Covid."

Are you sure? The Fed funds filtered down to Main Street USA. Again, without more details for the specific grant, no one can research this further. We don't even know which State this it.