Unless you can find a specific piece of legislation that covers this specific grant, then you treat it as regular business income. You don't report it Net. You report it Gross.

Examples: The Feds gave funds to the States, which gave them to health care providers to enhance HVAC systems during covid. That specifically is exempt.

Fisheries gave out grants during covid, but these were listed as market consideration, not remediation, and are ordinary business income.

Sometimes they are reported on 1099-G and sometimes 1099-Misc, and that doesn't seem to differentiate them, either. The issuer might not be a governmental entity. Example: Food banks and farmers are NGO.

Yes, subject to SE.