4338 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 

1Public Law 117–2. https://www.congress.gov/ 

117/plaws/publ2/PLAW-117publ2.pdf. 

2Throughout this Supplementary Information, 

Treasury uses ‘‘state, local, and Tribal 

governments’’ or ‘‘recipients’’ to refer generally to 

governments receiving SLFRF funds; this includes 

states, territories, Tribal governments, counties, 

metropolitan cities, and nonentitlement units of 

local government. 

3 86 FR 26786 (May 17, 2021). 

4Centers for Disease Control and Prevention, 

COVID Data Tracker: COVID–19 Vaccinations in the 

United States, https://covid.cdc.gov/covid-datatracker/#vaccinations (last visited December 31, 

2021). 

5Centers for Disease Control and Prevention, 

COVID Data Tracker, http://www.covid.cdc.gov/ 

covid-data-tracker/#datatracker-home (last visited 

December 7, 2021). 

6U.S. Bureau of Labor Statistics, Unemployment 

Rate [UNRATE], retrieved from FRED, Federal 

Reserve Bank of St. Louis; https://fred.

stlouisfed.org/series/UNRATE (last visited 

December 7, 2021). 

7 Id. 

8U.S. Bureau of Economic Analysis, Real Gross 

Domestic Product [GDPC1], retrieved from FRED, 

Federal Reserve Bank of St. Louis, https://fred.

stlouisfed.org/series/GDPC1 (last visited December 

7, 2021). 9U.S. Bureau of Labor Statistics, supra note 6. 10U.S. Bureau of Labor Statistics, All Employees, 

State Government [CES9092000001] and All 

Employees, Local Government [CES9093000001], 

retrieved from FRED, Federal Reserve Bank of St. 

Louis, https://fred.stlouisfed.org/series/ 

CES9092000001 and https://fred.stlouisfed.org/ 

series/CES9093000001 (last visited December 7, 

2021). 11The ARPA adds section 602 of the Social 

Security Act, which creates the State Fiscal 

Recovery Fund, and section 603 of the Social 

Security Act, which creates the Local Fiscal 

Recovery Fund (together, SLFRF). Sections 602 and 

603 contain substantially similar eligible uses; the 

primary difference between the two sections is that 

section 602 establishes a fund for states, territories, 

and Tribal governments and section 603 establishes 

a fund for metropolitan cities, nonentitlement units 

of local government, and counties. 

DEPARTMENT OF THE TREASURY 

31 CFR Part 35 

RIN 1505–AC77 

Coronavirus State and Local Fiscal 

Recovery Funds 

AGENCY: Department of the Treasury. 

ACTION: Final rule. 

SUMMARY: The Secretary of the Treasury 

(Treasury) is adopting as final the 

interim final rule published on May 17, 

2021, with amendments. This rule 

implements the Coronavirus State Fiscal 

Recovery Fund and the Coronavirus 

Local Fiscal Recovery Fund established 

under the American Rescue Plan Act. 

DATES: The provisions in this final rule 

are effective April 1, 2022. 

FOR FURTHER INFORMATION CONTACT: 

Katharine Richards, Director, 

Coronavirus State and Local Fiscal 

Recovery Funds, Office of Recovery 

Programs, Department of the Treasury, 

(844) 529–9527. 

SUPPLEMENTARY INFORMATION: 

I. Introduction 

Overview 

Since the first case of coronavirus 

disease 2019 (COVID–19) was 

discovered in the United States in 

January 2020, the pandemic has caused 

severe, intertwined public health and 

economic crises. In March 2021, as 

these crises continued, the American 

Rescue Plan Act of 2021 (ARPA) 1

established the Coronavirus State and 

Local Fiscal Recovery Funds (SLFRF) to 

provide state, local, and Tribal 

governments 2 with the resources 

needed to respond to the pandemic and 

its economic effects and to build a 

stronger, more equitable economy 

during the recovery. The U.S. 

Department of the Treasury (Treasury) 

issued an interim final rule 

implementing the SLFRF program on 

May 10, 2021 3 and has since disbursed 

over $240 billion to state, local, and 

Tribal governments and received over 

1,500 public comments on the interim 

final rule. Treasury is now issuing this 

final rule which responds to public 

comments, implements the ARPA 

statutory provisions on eligible and 

ineligible uses of SLFRF funds, and 

makes several changes to the provisions 

of the interim final rule, summarized 

below in the section Executive 

Summary of Major Changes. 

Since Treasury issued the interim 

final rule in May 2021, both the public 

health and economic situations facing 

the country have evolved. On the public 

health front, the United States has made 

tremendous progress in the fight against 

COVID–19, including a historic 

vaccination campaign that has reached 

over 80 percent of adults with at least 

one dose and is reaching millions of 

children as well.4 However, the disease 

continues to present an imminent threat 

to public health, especially among 

unvaccinated individuals. As the Delta 

variant spread across the country this 

summer and fall, the United States faced 

another severe wave of cases, deaths, 

and strain on the healthcare system, 

with the risk of hospitalization and 

mortality exponentially greater to 

unvaccinated Americans. COVID–19 has 

now infected over 50 million and killed 

over 800,000 Americans since January 

2020; tens of thousands of Americans 

continue to be infected each day.5 Even 

as the nation recovers, new and 

emerging COVID–19 variants may 

continue to pose threats to both public 

health and the economy. Moving 

forward, state, local, and Tribal 

governments will continue to play a 

major role in responding through 

vaccination campaigns, testing, and 

other services. 

The economic recovery similarly has 

made tremendous progress but faces 

continued risks from the disease and the 

disruptions it has caused. In the early 

months of the pandemic, the United 

States experienced the sharpest 

economic downturn on record, with 

unemployment spiking to 14.8 percent 

in April 2020.6 The economy has 

gradually added back jobs, with growth 

accelerating in the first half of 2021.7

However, as the Delta variant spread, 

the intensified health risks and renewed 

disruptions slowed growth, 

demonstrating the continued risks from 

the virus. By fall 2021, the economy had 

exceeded its pre-pandemic size 8 and 

unemployment had fallen below 5 

percent,9 but despite this progress, too 

many Americans remain unemployed, 

out of the labor force, or unable to pay 

their bills, with this pain particularly 

acute among lower-income Americans 

and communities of color. Again, 

moving forward, state, local, and Tribal 

governments will remain on the 

frontlines of the economic response and 

rebuilding a stronger economy in the 

aftermath of the pandemic. 

However, as state, local, and Tribal 

governments continue to face 

substantial needs to respond to public 

health and economic conditions, they 

have also experienced severe impacts 

from the pandemic and resulting 

recession. State, local, and Tribal 

governments cut over 1.5 million jobs in 

the early months of the pandemic amid 

sharp declines in revenue and remain 

over 950,000 jobs below their prepandemic levels.10 As the Great 

Recession demonstrated, austerity 

among state, local, and Tribal 

governments can hamper overall 

economic growth and severely curtail 

the ability of governments to serve their 

constituents. 

Recognizing these imperatives, the 

SLFRF program provides vital resources 

for state, local, and Tribal governments 

to respond to the pandemic and its 

economic effects and to replace revenue 

lost due to the public health emergency, 

preventing cuts to government services. 

Specifically, the ARPA provides that 

SLFRF funds 11 may be used: 

(a) To respond to the public health 

emergency or its negative economic 

impacts, including assistance to 

households, small businesses, and 

nonprofits, or aid to impacted industries 

such as tourism, travel, and hospitality; 

(b) To respond to workers performing 

essential work during the COVID–19 


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public health emergency by providing 

premium pay to eligible workers; 

(c) For the provision of government 

services to the extent of the reduction in 

revenue due to the COVID–19 public 

health emergency relative to revenues 

collected in the most recent full fiscal 

year prior to the emergency; and 

(d) To make necessary investments in 

water, sewer, or broadband 

infrastructure. 

In addition, Congress specified two 

types of ineligible uses of funds: funds 

may not be used for deposit into any 

pension fund or, for states and 

territories only, to directly or indirectly 

offset a reduction in net tax revenue 

resulting from a change in law, 

regulation, or administrative 

interpretation. 

Issued May 10, 2021, Treasury’s 

interim final rule provided further detail 

on eligible uses of funds within the four 

statutory categories, ineligible uses of 

funds, and administration of the 

program. The interim final rule 

provided state, local, and Tribal 

governments substantial flexibility to 

determine how best to use payments 

from the SLFRF program to meet the 

needs of their communities. The interim 

final rule aimed to facilitate swift and 

effective implementation by establishing 

a framework for determining the types 

of programs and services that are 

eligible under the ARPA along with 

examples of eligible uses of funds that 

state, local, and Tribal governments may 

consider. 

State, local, and Tribal governments 

are already deploying SLFRF funds to 

make an impact in their communities. 

The SLFRF program ensures that state, 

local, and Tribal governments have the 

resources needed to fight the pandemic, 

sustain and strengthen the economic 

recovery, maintain vital public services, 

and make investments that support 

long-term growth, opportunity, and 

equity. Treasury looks forward to 

supporting and engaging with state, 

local, and Tribal governments as they 

use these funds to make transformative 

investments in their communities. 

Finally, with so many pressing and 

effective ways to use SLFRF funds, there 

is no excuse for waste, fraud, or abuse 

of these funds. 

Treasury received over 1,500 

comments spanning nearly all aspects of 

the interim final rule. The final rule 

considers and responds to comments, 

provides clarification to many aspects of 

the interim final rule, and makes several 

changes to eligible uses under the 

program, summarized immediately 

below. 

Executive Summary of Major Changes 

and Clarifications 

The final rule provides broader 

flexibility and greater simplicity in the 

program, in response to public 

comments. Among other clarifications 

and changes, the final rule provides for 

the following: 

• Public Health and Negative 

Economic Impacts: In addition to 

programs and services, the final rule 

clarifies that recipients may use funds 

for capital expenditures that support an 

eligible COVID–19 public health or 

economic response. For example, 

recipients may build certain affordable 

housing, childcare facilities, schools, 

hospitals, and other projects consistent 

with the requirements in this final rule 

and the Supplementary Information. 

In addition, the final rule presumes 

that an expanded set of households and 

communities are ‘‘impacted’’ or 

‘‘disproportionately impacted’’ by the 

pandemic, thereby allowing recipients 

to provide responses to a broad set of 

households and entities without 

requiring additional analysis. Further, 

the final rule provides a broader set of 

enumerated eligible uses available for 

these communities as part of COVID–19 

public health and economic response, 

including making affordable housing, 

childcare, and early learning services 

eligible in all impacted communities 

and making certain community 

development and neighborhood 

revitalization activities eligible for 

disproportionately impacted 

communities. 

Further, the final rule allows for a 

broader set of uses to restore and 

support government employment, 

including hiring above a recipient’s prepandemic baseline, providing funds to 

employees that experienced pay cuts or 

furloughs, avoiding layoffs, and 

providing retention incentives. 

• Premium Pay: The final rule offers 

more streamlined options to provide 

premium pay, by broadening the share 

of essential workers who can receive 

premium pay without a written 

justification while maintaining a focus 

on lower-income and frontline essential 

workers. 

• Revenue Loss: The final rule offers 

a standard allowance for revenue loss of 

up to $10 million, not to exceed a 

recipient’s SLFRF award amount, 

allowing recipients to select between a 

standard amount of revenue loss or 

complete a full revenue loss calculation. 

Recipients that select the standard 

allowance may use that amount for 

government services. 

• Water, Sewer, and Broadband 

Infrastructure: The final rule 

significantly broadens eligible 

broadband infrastructure investments to 

address challenges with broadband 

access, affordability, and reliability, and 

adds additional eligible water and sewer 

infrastructure investments, including a 

broad range of lead remediation and 

stormwater management projects. 

Structure of the Supplementary 

Information 

In addition to this Introduction, this 

Supplementary Information is organized 

into four sections: (1) Eligible Uses, (2) 

Restrictions on Use, (3) Program 

Administration Provisions, and (4) 

Regulatory Analyses. 

The Eligible Uses section describes 

the standards to determine eligible uses 

of funds in each of the four eligible use 

categories: 

(1) Responding to the public health 

and negative economic impacts of the 

pandemic (which includes several subcategories) 

(2) Providing premium pay to 

essential workers 

(3) Providing government services to 

the extent of revenue loss due to the 

pandemic, and 

(4) Making necessary investments in 

water, sewer, and broadband 

infrastructure. 

Each eligible use category has 

separate and distinct standards for 

assessing whether a use of funds is 

eligible. Standards, restrictions, or other 

provisions in one eligible use category 

do not apply to the others. Therefore, 

recipients should first determine which 

eligible use category a potential use of 

funds fits within, then assess whether 

the potential use of funds meets the 

eligibility standard or criteria for that 

category. In the case of uses to respond 

to the public health and negative 

economic impacts of the pandemic, 

recipients should also determine which 

sub-category the eligible use fits within 

(i.e., public health, assistance to 

households, assistance to small 

businesses, assistance to nonprofits, aid 

to impacted industries, or public sector 

capacity and workforce), then assess 

whether the potential use of funds 

meets the eligibility standard for that 

sub-category. Treasury does not preapprove uses of funds; recipients are 

advised to review the final rule and may 

pursue eligible projects under it. 

In some sections of the rule, Treasury 

identifies specific uses of funds that are 

eligible, called ‘‘enumerated eligible 

uses’’; for example, Treasury provides 

many enumerated eligible uses of funds 

to respond to the public health and 

negative economic impacts of the 

pandemic. Uses of funds that are not 

specifically named as eligible in this 


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12Centers for Disease Control and Prevention, 

COVID Data Tracker, http://www.covid.cdc.gov/ 

covid-data-tracker/#datatracker-home (last visited 

December 31, 2021). 

13U.S. Bureau of Labor Statistics, All Employees, 

Total Nonfarm [PAYEMS] https://fred.

stlouisfed.org/series/PAYEMS (last visited 

December 7, 2021). 

final rule may still be eligible in two 

ways. First, under the revenue loss 

eligible use category, recipients have 

broad latitude to use funds for 

government services up to their amount 

of revenue loss due to the pandemic. A 

potential use of funds that does not fit 

within the other three eligible use 

categories may be permissible as a 

government service, which recipients 

can fund up to their amount of revenue 

loss. For example, transportation 

infrastructure projects are generally 

ineligible as a response to the public 

health and negative economic impacts 

of the pandemic; however, a recipient 

could fund these projects as a 

government service up to its amount of 

revenue loss, provided that other 

restrictions on use do not apply. See 

sections Revenue Loss and Restrictions 

on Use for further information. Second, 

the eligible use category for responding 

to the public health and negative 

economic impacts of the pandemic 

provides a non-exhaustive list of 

enumerated eligible uses, which means 

that the listed eligible uses include 

some, but not all, of the uses of funds 

that could be eligible. The Eligible Uses 

section provides a standard for 

determining if other uses of funds, 

beyond those specifically enumerated, 

are eligible. If a recipient would like to 

pursue a use of funds that is not 

specifically enumerated, the recipient 

should use the standard and other 

guidance provided in the section Public 

Health and Negative Economic Impacts 

to assess whether the use of funds is 

eligible. 

Next, the Restrictions on Use section 

describes limitations on how funds may 

be used. Treasury has divided the 

Restriction on Use section into (A) 

statutory restrictions under the ARPA, 

which include (1) offsetting a reduction 

in net tax revenue, and (2) deposits into 

pension funds, and (B) other restrictions 

on use, which include (1) debt service 

and replenishing reserves, (2) 

settlements and judgments, and (3) 

general restrictions. These restrictions 

apply to all eligible use categories; 

however, some restrictions apply only 

to certain types of recipient 

governments, and recipients are advised 

to review the final rule to determine 

which restrictions apply to their type of 

government (e.g., state, territory, Tribal 

government, county, metropolitan city, 

or nonentitlement unit of government). 

To reiterate, for recipient governments 

covered by a specific restriction, that 

restriction applies to all eligible use 

categories and any use of funds under 

the SLFRF program. Specifically: 

• For states and territories only, funds 

may not be used to offset directly or 

indirectly a reduction in net tax revenue 

resulting from a change in state or 

territory law. 

• For all recipients except Tribal 

governments, funds may not be used for 

deposits into a pension fund. 

• For all recipients, funds may not be 

used for debt service or replenishing 

financial reserves. 

• All recipients must also comply 

with three general restrictions. First, a 

recipient may not use SLFRF funds for 

a program, service, or capital 

expenditure that conflicts with or 

contravenes the statutory purpose of 

ARPA, including a program, service, or 

capital expenditure that includes a term 

or condition that undermines efforts to 

stop the spread of COVID–19. Second, 

recipients may not use SLFRF funds in 

violation of the conflict-of-interest 

requirements contained in the Award 

Terms and Conditions, including any 

self-dealing or violation of ethics rules. 

Lastly, recipients should be aware that 

federal, state, and local laws and 

regulations, outside of SLFRF program 

requirements, also apply, including for 

example, environmental laws and 

federal civil rights and 

nondiscrimination requirements, which 

include prohibitions on discrimination 

on the basis of race, color, national 

origin, sex (including sexual orientation 

and gender identity), religion, disability, 

age, or familial status (having children 

under the age of 18). 

The Program Administration 

Provisions section describes the 

processes and requirements for 

administering the program on an 

ongoing basis, specifically as relates to 

the following: Distribution of funds, 

timeline for using funds, transfer of 

funds from a recipient to different 

organizations, use of funds for program 

administration, reporting on use of 

funds, and remediation and recoupment 

of funds used for ineligible purposes. Of 

note, SLFRF funds may only be used for 

costs incurred within a specific time 

period, beginning March 3, 2021, with 

all funds obligated by December 31, 

2024 and all funds spent by December 

31, 2026. Recipients are advised to also 

consult Treasury’s Reporting and 

Compliance Guidance for additional 

information on program administration 

processes and requirements, including 

applicability of the Uniform Guidance. 

Finally, the section Regulatory 

Analyses provides Treasury’s analysis of 

the impacts of this rulemaking, as 

required by several laws, regulations, 

and Executive Orders. 

Throughout this Supplementary 

Information, statements using the terms 

‘‘should’’ or ‘‘must’’ refer to 

requirements, except when used in 

summarizing opinions expressed in 

public comments. Statements using the 

term ‘‘encourage’’ refer to 

recommendations, not requirements. 

II. Eligible Uses 

A. Public Health and Negative 

Economic Impacts 

Background 

Since the first case of COVID–19 was 

discovered in the United States in 

January 2020, the disease has infected 

over 50 million and killed over 800,000 

Americans.12 The disease—and 

necessary measures to respond—have 

had an immense public health and 

economic impact on millions of 

Americans across many areas of life, as 

detailed below in the respective sections 

on Public Health and Negative 

Economic Impacts. Since the release of 

the interim final rule in May 2021, the 

country has made major progress in 

fighting the disease and rebuilding the 

economy but faces continued risks, as 

illustrated by the spread of the Delta 

variant and the resulting slowdown in 

the economic recovery. The SLFRF 

program, and Treasury’s interim final 

rule, provide substantial flexibility to 

recipients to respond to pandemic 

impacts in their local community; this 

flexibility is designed to help state, 

local, and Tribal governments adapt to 

the evolving public health emergency 

and tailor their response as needs evolve 

and to the particular local needs of their 

communities. 

Indeed, state, local, and Tribal 

governments face continued needs to 

respond at scale to the public health 

emergency. This includes continued 

public health efforts to slow the spread 

of the disease, to increase vaccination 

rates and provide vaccinations to new 

populations as they become eligible, to 

protect individuals living in congregate 

facilities, and to address the broader 

impacts of the pandemic on public 

health. Similarly, while a strong 

economic recovery is underway, the 

economy remains 3.9 million jobs below 

its pre-pandemic level, pointing to the 

continued need for response efforts, 

with low-income workers and 

communities of color facing elevated 

rates of unemployment and economic 

hardship.13 Long-standing disparities in 

health and economic outcomes in 


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14Treasury uses ‘‘underserved’’ to refer to 

populations sharing a particular characteristic, as 

well as geographic communities, that have been 

systematically denied a full opportunity to 

participate in aspects of economic, social, and civic 

life. In the interim final rule, Treasury generally 

used the term ‘‘disadvantaged’’ to refer to these 

same populations and communities. 

15U.S. Bureau of Labor Statistics, All Employees, 

State Government [CES9092000001] and All 

Employees, Local Government [CES9093000001], 

retrieved from FRED, Federal Reserve Bank of St. 

Louis, https://fred.stlouisfed.org/series/ 

CES9092000001 and https://fred.stlouisfed.org/ 

series/CES9093000001 (last visited December 7, 

2021). 

16Tracy Gordon, State and Local Budgets and the 

Great Recession, Brookings Institution (Dec. 31, 

2012), http://www.brookings.edu/articles/state-andlocal-budgets-and-the-great-recession. 

17 In some cases, a use may be permissible under 

another eligible use category even if it falls outside 

the scope of section (c)(1)(A) of section 602 and 603 

of the Social Security Act. 

underserved 14 communities, that 

amplified and exacerbated the impacts 

of the pandemic, also present continued 

barriers to full and equitable recovery. 

As state, local, and Tribal 

governments work to meet the public 

health and economic needs of their 

communities, these governments are 

also confronting the need to rebuild 

their own capacity. Facing severe 

budget challenges during the pandemic, 

many state, local, and Tribal 

governments have been forced to make 

cuts to services or their workforces, 

including cutting over 1.5 million jobs 

from February to May 2020, or delay 

critical investments. As of fall 2021, 

state, local, and Tribal government 

employment remained over 950,000 jobs 

below pre-pandemic levels.15 In the 

recovery from the Great Recession, cuts 

to state, local, and Tribal governments 

became a meaningful drag on economic 

growth for several years, and the SLFRF 

program provides the resources needed 

to re-invest in vital public services and 

workers to avoid this outcome.16

1. General Provisions: Structure and 

Standards 

Background: Sections 602(c)(1)(A) 

and 603(c)(1)(A) of the Social Security 

Act establish that recipients may use 

funds ‘‘to respond to the public health 

emergency with respect to COVID–19 or 

its negative economic impacts, 

including assistance to households, 

small businesses, and nonprofits, or aid 

to impacted industries such as tourism, 

travel, and hospitality.’’ The interim 

final rule established three categories 

within this eligible use: (1) Public 

health responses for those impacted by 

the pandemic, including the general 

public; (2) responses to the negative 

economic impacts that were 

experienced by those impacted as a 

result of the pandemic; and (3) 

additional services, either as a public 

health response or a response to the 

negative economic impacts of the 

pandemic, for disproportionately 

impacted communities. 

The interim final rule established the 

method to determine which specific 

programs or services may be eligible to 

respond to the public health emergency 

or to respond to the negative economic 

impacts of the public health emergency 

within this framework. The interim final 

rule included multiple enumerated uses 

that are eligible within each of these 

categories when provided to eligible 

populations, including populations that 

the interim final rule presumed to have 

been impacted (in the case of public 

health responses and responses to 

negative economic impacts) or 

disproportionately impacted (in the case 

of disproportionately impacted 

communities). Finally, the interim final 

rule also allowed recipients to designate 

additional individuals or classes as 

impacted or disproportionately 

impacted. The standards for each of 

these criteria under the interim final 

rule are discussed below. 

To assess whether a program or 

service would be eligible to respond to 

the public health emergency or its 

negative economic impacts, the interim 

final rule stated that, ‘‘the recipient [is 

required] to, first, identify a need or 

negative impact of the COVID–19 public 

health emergency and, second, identify 

how the program, service, or other 

intervention addresses the identified 

need or impact [. . . .] [E]ligible uses 

under this category must be in response 

to the disease itself or the harmful 

consequences of the economic 

disruptions resulting from or 

exacerbated by the COVID–19 public 

health emergency.’’ The enumerated 

eligible uses were presumed to meet this 

criterion. 

With respect to uses not specifically 

enumerated in the interim final rule as 

eligible public health responses, the 

interim final rule stated that, ‘‘[t]o assess 

whether additional uses would be 

eligible under this category, recipients 

should identify an effect of COVID–19 

on public health, including either or 

both of immediate effects or effects that 

may manifest over months or years, and 

assess how the use would respond to or 

address the identified need.’’ 

With respect to uses not specifically 

enumerated in the interim final rule as 

eligible responses to a negative 

economic impact of the public health 

emergency, the interim final rule stated 

that ‘‘[e]ligible uses that respond to the 

negative economic impacts of the public 

health emergency must be designed to 

address an economic harm resulting 

from or exacerbated by the public health 

emergency. In considering whether a 

program or service would be eligible 

under this category, the recipient should 

assess whether, and the extent to which, 

there has been an economic harm, such 

as loss of earnings or revenue, that 

resulted from the COVID–19 public 

health emergency and whether, and the 

extent to which, the use would respond 

to or address this harm.17 A recipient 

should first consider whether an 

economic harm exists and whether this 

harm was caused or made worse by the 

COVID–19 public health emergency.’’ 

The interim final rule went on to say 

that: ‘‘In addition, the eligible use must 

‘respond to’ the identified negative 

economic impact. Responses must be 

related and reasonably proportional to 

the extent and type of harm 

experienced; uses that bear no relation 

or are grossly disproportionate to the 

type or extent of harm experienced 

would not be eligible uses.’’ 

Throughout this final rule, Treasury 

refers to households, communities, 

small businesses, nonprofits, and 

industries that experienced public 

health or negative economic impacts of 

the pandemic as ‘‘impacted.’’ The first 

section in the interim final rule under 

this eligible use category included 

public health responses for these 

impacted classes. The second category 

in the interim final rule under this 

eligible use category included responses 

to the negative economic impacts that 

were experienced by these impacted 

classes as a result of the pandemic. 

The interim final rule further 

recognized that certain populations 

have experienced disproportionate 

health or negative economic impacts 

during the pandemic, as pre-existing 

disparities in these communities 

amplified the impacts of the pandemic. 

For example, the interim final rule 

recognized that the negative economic 

effects of the pandemic were 

particularly pronounced among lowerincome families, who were more likely 

to experience income loss and more 

likely to have a job that required inperson work. The interim final rule 

recognized the role of pre-existing social 

vulnerabilities and disparities in driving 

the disparate health and economic 

outcomes and presumed that programs 

designed to address these health or 

economic disparities are responsive to 

the public health or negative economic 

impacts of the COVID–19 public health 

emergency, when provided in 

disproportionately impacted 

communities. In addition to identifying 

certain populations and communities 


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18Note that small businesses, nonprofits, and 

industries may also function as subrecipients. For 

additional information on these distinctions see 

section Distinguishing Subrecipients versus 

Beneficiaries. 

presumed to be disproportionately 

impacted, it also empowered recipients 

to identify other disproportionately 

impacted households, populations, 

communities, or small businesses. The 

interim final rule provided that, in 

identifying these disproportionately 

impacted communities, recipients 

should be able to support their 

determination that the pandemic 

resulted in disproportionate public 

health or economic outcomes to the 

specific populations, households, or 

geographic areas to be served. 

Throughout this final rule, Treasury 

refers to those households, 

communities, small businesses, and 

nonprofits that experienced 

disproportionate public health or 

negative economic impacts of the 

pandemic as ‘‘disproportionately 

impacted.’’ The third category in the 

interim final rule under this eligible use 

included public health responses and 

responses to the negative economic 

impacts for these disproportionately 

impacted classes. 

The interim final rule provided 

significant flexibility for recipients to 

determine which households, 

populations, communities, or small 

businesses have been impacted and/or 

disproportionately impacted by the 

pandemic and to identify appropriate 

responses. The interim final rule 

included several provisions to provide 

simple methods for recipients to 

identify impacts and design programs to 

address those impacts. First, the interim 

final rule allowed recipients to 

demonstrate a negative economic 

impact on a population or class and 

provide assistance to households or 

small businesses that fall within that 

population or class. In such cases, the 

recipient need only demonstrate that an 

individual household or business is 

within the class that experienced a 

negative economic impact, rather than 

requiring a recipient to demonstrate that 

each individual household or small 

business experienced a negative 

economic impact, because the impact 

was already identified for the class. 

Second, in the interim final rule, 

Treasury presumed that certain 

populations have been impacted or 

disproportionately impacted and are 

thus eligible for services that respond to 

these impacts or disproportionate 

impacts. Specifically, the interim final 

rule permitted recipients to presume 

that households that experienced 

unemployment, increased food or 

housing insecurity, or are low- or 

moderate-income experienced a 

negative economic impact from the 

pandemic. The interim final rule also 

permitted recipients to presume that 

certain services provided in Qualified 

Census Tracts (QCTs), to individuals 

living in QCTs, or by Tribal 

governments are responsive to 

disproportionate impacts of the 

pandemic. In addition to the 

populations presumed to be impacted or 

disproportionately impacted, under the 

interim final rule, recipients could 

identify other impacted households or 

classes, as described above, as well as 

other populations, households, or 

geographic areas that are 

disproportionately impacted by the 

pandemic. 

Third, as mentioned previously, the 

interim final rule included a nonexhaustive list of uses of funds that 

Treasury identified as responsive to the 

impacts or disproportionate impacts of 

the pandemic. Treasury refers to these 

as ‘‘enumerated eligible uses.’’ 

To summarize, the interim final rule 

identified certain populations that are 

presumed to be impacted by the 

pandemic (and specific enumerated 

uses of funds that are responsive to that 

impact) and populations that are 

presumed to be disproportionately 

impacted by the pandemic (and specific 

enumerated uses of funds that are 

responsive to those disproportionate 

impacts). In addition, the interim final 

rule provided standards for recipients to 

assess whether additional uses of funds, 

beyond the enumerated eligible uses, 

are eligible for impacted and 

disproportionately impacted 

populations and permitted recipients to 

identify other households or classes that 

experienced impacts of the pandemic or 

disproportionate impacts of the 

pandemic. 

Rule Structure 

Public Comment: Many commenters 

expressed concern regarding the 

structure of the eligible uses, indicating 

they found the structure of the public 

health and negative economic impacts 

section of the interim final rule to be 

confusing or difficult to navigate. Other 

commenters indicated that they 

understood the enumerated uses to be 

the only eligible uses and/or the 

presumed eligible populations to be the 

only eligible populations. Several 

commenters expressed frustration about 

the number of eligible uses specifically 

enumerated in the interim final rule, 

which they considered too few, and 

commenters proposed a wide range of 

additional enumerated eligible uses (for 

further discussion, see the section 

Public Health and section Negative 

Economic Impacts). Commenters 

expressed concern with pursuing uses 

of funds not explicitly enumerated in 

the eligible use section or uncertainty 

regarding the broad flexibility provided 

under the interim final rule to pursue 

additional programs that respond to the 

public health or negative economic 

impacts of the pandemic or the process 

for doing so. 

Treasury Response: Treasury 

recognizes that many commenters felt 

the structure of the interim final rule 

could be clarified. These comments are 

consistent with many of the questions 

that Treasury has received from 

recipients, which requested clarification 

regarding the category their desired 

response fits into. Treasury observes 

that these comments and questions 

generally fall into four categories: (1) 

How to identify the correct public 

health or negative economic impact 

category for a particular response, (2) 

how to identify whether a particular use 

is eligible, (3) how to identify an 

impacted or disproportionately 

impacted class, and (4) whether an 

enumerated use can be provided to a 

class other than those presumed 

impacted or disproportionately 

impacted. In response to comments, 

Treasury is adjusting the structure of the 

public health and negative economic 

impacts eligible use section of the final 

rule to improve clarity and make it 

easier for recipients to interpret and 

apply the final rule. 

Specifically, Treasury is restructuring 

the rule to aid recipients in determining 

whether a particular response is eligible 

and how the particular response might 

be eligible under a particular category. 

This restructuring reinforces the 

fundamental criteria that a use of funds 

is eligible based on its responsiveness to 

a public health or negative economic 

impact experienced by individuals, 

households, small businesses, 

nonprofits, or impacted industries 

(together ‘‘beneficiaries’’).18 This 

restructuring is intended to make the 

rule easier to navigate and to 

implement, including any criteria or 

conditions on particular uses of funds. 

The reorganization of the public 

health and negative economic impacts 

section of the final rule is also intended 

to clarify the enumerated eligible uses 

described in the interim final rule. The 

reorganization itself is not intended to 

change the scope of the enumerated 

uses that were included in the interim 

final rule or that were allowable under 

the interim final rule. In some cases, 

specific enumerated uses are being 

altered, and those changes are discussed 


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19 In designing an intervention to mitigate 

COVID–19, the recipient should consider guidance 

from public health authorities, particularly the 

Centers for Disease Control and Prevention (CDC), 

in assessing appropriate COVID–19 mitigation and 

prevention strategies (see Centers for Disease 

Control and Prevention, COVID–19, https://

www.cdc.gov/coronavirus/2019-ncov/index.html). 

A program or service that imposes conditions on 

participation in or acceptance of the service that 

would undermine efforts to stop the spread of 

COVID–19 or discourage compliance with practices 

in line with CDC guidance for stopping the spread 

of COVID–19 is not a permissible use of funds. 

as changes within the section on that 

enumerated use. 

The final rule streamlines and aligns 

services and standards that are generally 

applicable or are provided for public 

health purposes. Under this approach, 

eligible uses to respond to the public 

health emergency are organized based 

on the type of public health problem: (1) 

COVID–19 mitigation and prevention, 

(2) medical expenses, (3) behavioral 

health care, and (4) preventing and 

responding to violence. Under this 

approach, eligible uses to respond to the 

negative economic impacts of the public 

health emergency are organized based 

on the type of beneficiary: (1) Assistance 

to households, (2) assistance to small 

businesses, and (3) assistance to 

nonprofits, alongside a fourth 

standalone eligibility category for aid to 

travel, tourism, hospitality, and other 

impacted industries. The first three 

categories, assistance to households, 

small businesses, and nonprofits, 

include enumerated eligible uses for 

impacted and disproportionately 

impacted beneficiaries. This change in 

structure is intended to provide a 

framework that clearly identifies the 

intended beneficiaries of uses of funds 

and provides clarity about what types of 

assistance are ‘‘responsive to the 

pandemic or its negative economic 

impacts’’ for these beneficiaries. 

a. Standards for Identifying a Public 

Health or Negative Economic Impact 

Standards: Designating a Public Health 

Impact 

Public Comment: Many commenters 

expressed uncertainty about how to 

determine whether a use of funds, 

beyond those specifically enumerated as 

eligible, might be an eligible public 

health response. For example, many 

commenters submitted questions asking 

whether specific uses of funds would be 

eligible. Others described what they 

considered to be impacts of the 

pandemic and argued that uses of funds 

to respond to these issues should be 

eligible. Some commenters requested 

that Treasury provide additional detail 

to guide their assessments of eligible 

uses of funds. For example, a 

commenter requested more clarification 

around exactly what and whose medical 

expenses can be covered. These 

comments ranged in their specificity 

and covered the full range of the 

enumerated eligible uses. 

Treasury Response: Treasury is 

clarifying that when assessing whether 

a program or service is an eligible use 

to respond to the public health impacts 

of the COVID–19 public health 

emergency, the Department will 

consider the two eligibility 

requirements discussed below. These 

standards apply to all proposed public 

health uses. 

First, there must be a negative public 

health impact or harm experienced by 

an individual or a class. For ease of 

administration, the interim final rule 

allowed, and the final rule maintains 

the ability for, recipients to identify a 

public health impact on a population or 

group of individuals, referred to as a 

‘‘class,’’ and to provide assistance to 

that class. In determining whether an 

individual is eligible for a program 

designed to address a harm experienced 

by a class, the recipient need only 

document that the individual is within 

the class that experienced a public 

health impact, see section Standards: 

Designating Other Impacted Classes. In 

the case of some impacts, for example 

impacts of COVID–19 itself that are 

addressed by providing prevention and 

mitigation services, such a class could 

reasonably include the general public. 

Second, the program, service, or other 

intervention must address or respond to 

the identified impact or harm. The final 

rule maintains the interim final rule 

requirement that eligible uses under this 

category must be in response to the 

disease itself or other public health 

harms that it caused.19

Responses must be reasonably 

designed to benefit the individual or 

class that experienced the public health 

impact or harm. Uses of funds should be 

assessed based on their responsiveness 

to their intended beneficiaries and the 

ability of the response to address the 

impact or harm experienced by those 

beneficiaries. 

Responses must also be related and 

reasonably proportional to the extent 

and type of public health impact or 

harm experienced. Uses that bear no 

relation or are grossly disproportionate 

to the type or extent of harm 

experienced would not be eligible uses. 

Reasonably proportional refers to the 

scale of the response compared to the 

scale of the harm. It also refers to the 

targeting of the response to beneficiaries 

compared to the amount of harm they 

experienced. In evaluating whether a 

use is reasonably proportional, 

recipients should consider relevant 

factors about the harm identified and 

the response. For example, recipients 

may consider the size of the population 

impacted and the severity, type, and 

duration of the impact. Recipients may 

also consider the efficacy, cost, costeffectiveness, and time to delivery of the 

response. 

If a recipient intends to fund capital 

expenditures in response to the public 

health impacts of the pandemic, 

recipients should refer to the section 

Capital Expenditures for details about 

the eligibility of capital expenditures. 

Standards: Designating a Negative 

Economic Impact 

Public Comment: Many commenters 

expressed uncertainty about how to 

determine whether uses of funds, 

beyond those specifically enumerated as 

eligible, might be eligible responses to 

negative economic impacts. For 

example, many commenters submitted 

questions asking whether specific uses 

of funds would be eligible. Others 

described what they considered to be 

impacts of the pandemic and argued 

that uses of funds to respond to these 

issues should be eligible. Some 

commenters requested that Treasury 

provide additional detail to guide their 

assessments of eligible uses of funds. 

These comments ranged in their 

specificity and covered the full range of 

eligible uses to respond to negative 

economic impacts. Several commenters 

asked for clarification about what types 

of food assistance would be considered 

eligible. Another commenter requested 

that the establishment of outdoor dining 

be eligible. Many commenters inquired 

about homeless shelters as an eligible 

use of SLFRF funds. 

Commenters also expressed 

uncertainty about the ability to establish 

classes, including geographic areas, that 

experienced a negative economic impact 

or disagreed with the requirement that 

an individual entity be impacted by the 

pandemic in order to receive assistance. 

For example, a commenter argued that 

interventions should not be limited to 

individuals or businesses that 

experienced an economic impact and 

should instead be used broadly to 

support economic growth. These 

commenters argued that an expenditure 

that supports a more robust economy 

may help combat the pandemic’s 

negative economic impacts, and it can 

do so even if funding is provided to 

individuals or entities that did not 

themselves experience a negative 

economic impact during the pandemic. 

Treasury Response: The final rule 

maintains the standard articulated in 


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20For example, expenses such as excessive 

compensation to employees or expenses which 

have already been reimbursed through another 

federal program, are not reasonably designed to 

address a negative economic impact to a 

beneficiary. 

21For example, a program or service that imposes 

conditions on participation in or acceptance of the 

service that would undermine efforts to stop the 

spread of COVID–19 or discourage compliance with 

practices in line with CDC guidance for stopping 

the spread of COVID–19 is not a permissible use of 

funds. 

the interim final rule. For clarity, the 

final rule re-articulates that when 

assessing whether a program or service 

is an eligible use to respond to the 

negative economic impacts of the 

COVID–19 public health emergency, 

Treasury will consider the two 

eligibility requirements discussed 

below. 

First, there must be a negative 

economic impact, or an economic harm, 

experienced by an individual or a class. 

The recipient should assess whether, 

and the extent to which, there has been 

an economic harm, such as loss of 

earnings or revenue, that resulted from 

the COVID–19 public health emergency. 

A recipient should first consider 

whether an economic harm exists and 

then whether this harm was caused or 

made worse by the COVID–19 public 

health emergency. This approach is 

consistent with the text of the statute, 

which provides that funds in this 

category must be used to ‘‘respond to 

the public health emergency with 

respect to . . . its negative economic 

impacts.’’ 

While economic impacts may either 

be immediate or delayed, individuals or 

classes that did not experience a 

negative economic impact from the 

public health emergency would not be 

eligible beneficiaries under this 

category. As noted above, the interim 

final rule permitted recipients to 

presume that households that 

experienced unemployment, increased 

food or housing insecurity, or are lowor moderate-income experienced a 

negative economic impact from the 

pandemic. For discussion of the final 

rule’s approach to this presumption, see 

section Populations Presumed Eligible. 

The final rule also maintains several 

provisions included in the interim final 

rule and subsequent guidance that are 

intended to ease administration of 

identifying that the beneficiary 

experienced a negative economic impact 

or harm. For example, the interim final 

rule allowed, and the final rule 

maintains the ability for, recipients to 

demonstrate a negative economic 

impact on a population or group, 

referred to as a ‘‘class,’’ and to provide 

assistance to households, small 

businesses, or nonprofits that fall within 

that class. In such cases, the recipient 

need only demonstrate that the 

household, small business, or nonprofit 

is within the class that experienced a 

negative economic impact, see section 

Standards: Designating Other Impacted 

Classes. This would allow, for example, 

an internet access assistance program 

for all households with children to 

support those households’ ability to 

participate in healthcare, work, and 

educational activities like extending 

learning opportunities, among other 

critical activities. In that case, the 

recipient would only need to identify a 

negative economic impact to the class of 

‘‘households with children’’ and would 

not need to document or otherwise 

demonstrate that each individual 

household served experienced a 

negative economic impact. 

Second, the response must be 

designed to address the identified 

economic harm or impact resulting from 

or exacerbated by the public health 

emergency. In selecting responses, the 

recipient must assess whether, and the 

extent to which, the use would respond 

to or address this harm or impact. This 

approach is consistent with the text of 

the statute, which provides that funds 

may be used to ‘‘respond to’’ the 

‘‘negative economic impacts’’ of the 

public health emergency ‘‘including 

assistance to households, small 

businesses, and nonprofits, or aid to 

impacted industries such as tourism, 

travel, and hospitality.’’ The list of 

potential responses (‘‘assistance’’ or 

‘‘aid’’) suggests that responses should 

address the ‘‘negative economic 

impacts’’ of particular types of 

beneficiaries (e.g., households or small 

businesses). 

Responses must be reasonably 

designed to benefit the individual or 

class that experienced the negative 

economic impact or harm. Uses of funds 

should be assessed based on their 

responsiveness to their intended 

beneficiary and the ability of the 

response to address the impact or harm 

experienced by that beneficiary.20

Responses must also be related and 

reasonably proportional to the extent 

and type of harm experienced; uses that 

bear no relation or are grossly 

disproportionate to the type or extent of 

harm experienced would not be eligible 

uses.21 Reasonably proportional refers 

to the scale of the response compared to 

the scale of the harm. It also refers to the 

targeting of the response to beneficiaries 

compared to the amount of harm they 

experienced; for example, it may not be 

reasonably proportional for a cash 

assistance program to provide assistance 

in a very small amount to a group that 

experienced severe harm and in a much 

larger amount to a group that 

experienced relatively little harm. In 

evaluating whether a use is reasonably 

proportional, recipients should consider 

relevant factors about the harm 

identified and the response. For 

example, recipients may consider the 

size of the population impacted and the 

severity, type, and duration of the 

impact. Recipients may also consider 

the efficacy, cost, cost-effectiveness, and 

time to delivery of the response. 

Finally, recipients should be aware of 

the distinction between beneficiaries of 

funds and subrecipients; a recipient 

may provide services to beneficiaries 

through subrecipients that did not 

experience a negative economic impact, 

see section Distinguishing Subrecipients 

versus Beneficiaries. That is, a recipient 

may award SLFRF funds to an entity 

that did not experience a negative 

economic impact in order to implement 

a program or provide a service to 

beneficiaries on its behalf. Such 

transfers, when implementing a public 

health or negative economic impact 

response, should be responsive to and 

designed to benefit individuals, 

households, small businesses, 

nonprofits, or impacted industries that 

did experience a public health or 

negative economic impact. 

Determining the Appropriate Eligible 

Use Category 

Public Comment: Some commenters 

expressed uncertainty about how to 

analyze negative economic impacts to 

different entities (e.g., households, small 

businesses, nonprofits). For example, 

commenters asked whether a nonprofit, 

which did not experience a negative 

economic impact itself, could be granted 

funds to provide services to individuals 

experiencing homelessness, who did 

experience negative economic impacts. 

Other commenters proposed providing 

assistance to support the expansion of 

small businesses, under the theory that 

this would create more job 

opportunities for unemployed workers 

who experienced negative economic 

impacts. 

Treasury Response: In the final rule, 

Treasury is clarifying that recipients 

should assess a potential use of funds 

based on which beneficiary experienced 

the negative economic impact, in other 

words, the households, small 

businesses, nonprofits, or impacted 

industries that experienced the negative 

economic impact. 

Treasury notes that recipients may 

award SLFRF funds to many different 

types of organizations to carry out 

eligible uses of funds and serve 

beneficiaries on behalf of a recipient. 


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22AMI is also often referred to as median family 

income for the area. Since AMI is synonymous with 

this term and used more generally, the final rule 

refers to AMI. 

23For the six New England states of Connecticut, 

Maine, Massachusetts, New Hampshire, Rhode 

Island, and Vermont, HUD provides AMI for towns 

rather than counties. Recipients in these states 

should use the AMI corresponding to their town 

when determining thresholds for both low and 

moderate income. 

When a recipient provides funds to 

another entity to carry out eligible uses 

of funds and serve beneficiaries the 

entity becomes a subrecipient (see 

section Distinguishing a Subrecipient 

versus a Beneficiary). For example, a 

recipient may grant funds to a nonprofit 

organization to provide food assistance 

(an eligible use) to low-income 

households (the beneficiaries). 

Recipients only need to assess whether 

the beneficiaries experienced a negative 

economic impact and whether the 

eligible use responds to that impact, 

consistent with the two-part framework 

described above; the organization 

carrying out the eligible use does not 

need to have experienced a negative 

economic impact if it is serving as the 

vehicle for reaching the beneficiaries. 

When making determinations about 

how to implement a program, recipients 

should consider whether that method of 

program implementation is an effective 

and efficient method to implement the 

program and do so in accordance with 

the Uniform Guidance provisions that 

govern procurements and sub-granting 

of federal funds, as applicable. 

As noted above, recipients should 

analyze eligible uses based on the 

beneficiary of the assistance or the 

entity that experienced a negative 

economic impact. Assistance to a small 

business or to an impacted industry 

must respond to a negative economic 

impact experienced by that small 

business or industry. Recipients may 

not provide assistance to small 

businesses or impacted industries that 

did not experience a negative economic 

impact, although recipients can identify 

negative economic impacts for classes, 

rather than individual businesses, and 

may also presume that small businesses 

in certain areas experienced impacts; 

see section General Provisions: 

Structure and Standards and section 

Assistance to Small Businesses for 

details. 

Several examples illustrate the 

application of these concepts. For 

example, a recipient could provide 

assistance to households via a contract 

with a business to create subsidized jobs 

for the long-term unemployed; in this 

case the business is a subrecipient and 

need not have experienced a negative 

economic impact, but the recipient 

would need to identify a specific 

connection between the assistance 

provided and addressing the negative 

economic impact experienced by the 

unemployed households. The recipient 

could, for instance, document the 

subsidized jobs created under the 

contract and their reservation for longterm unemployed individuals. 

Similarly, a recipient might provide 

assistance to a small business that 

experienced a pandemic-related loss of 

revenue. This small business is a 

beneficiary and may use those funds in 

many ways, potentially including hiring 

or retaining staff. However, general 

assistance to a business that did not 

experience a negative economic impact 

under the theory that this assistance 

generally grows the economy and 

therefore enhances opportunities for 

unemployed workers would not be an 

eligible use, because such assistance is 

not reasonably designed to impact the 

individuals or classes that experienced 

a negative economic impact. In other 

words, there is not a reasonable 

connection between the assistance 

provided and an impact on the 

beneficiaries. Such an activity would be 

attenuated from and thus not reasonably 

designed to benefit the households that 

experienced the negative economic 

impact. 

b. Populations Presumed Eligible 

Presumed Eligibility: Impacted and 

Disproportionately Impacted 

Households and Communities 

Background: As noted above, the 

interim final rule allowed recipients to 

presume that certain households were 

impacted or disproportionately 

impacted by the pandemic and thus 

eligible for responsive programs or 

services. Specifically, under the interim 

final rule, recipients could presume that 

a household or population that 

experienced unemployment, 

experienced increased food or housing 

insecurity, or is low- or moderateincome experienced negative economic 

impacts resulting from the pandemic, 

and recipients may provide services that 

respond to these impacts. 

The interim final rule also recognized 

that pre-existing health, economic, and 

social disparities contributed to 

disproportionate pandemic impacts in 

certain communities and allowed for a 

broader list of enumerated eligible uses 

to respond to the pandemic in 

disproportionately impacted 

communities. Under the interim final 

rule, recipients were allowed to 

presume that families residing in QCTs 

or receiving services provided by Tribal 

governments were disproportionately 

impacted by the pandemic. 

Definition of Low- and ModerateIncome 

Public Comment: As noted earlier, 

many commenters sought a definition 

for ‘‘low- and moderate-income’’ to 

provide recipients greater clarity on 

which specific households could be 

presumed to be impacted by the 

pandemic. 

Treasury Response: The final rule 

maintains the presumptions identified 

in the interim final rule and defines 

low- and moderate-income for the 

purposes of determining which 

households and populations recipients 

may presume to have been impacted. To 

simplify the administration of this 

presumption, the final rule adopts a 

definition of low- and moderate-income 

based on thresholds established and 

used in other federal programs. 

Definitions. The final rule defines a 

household as low income if it has (i) 

income at or below 185 percent of the 

Federal Poverty Guidelines (FPG) for the 

size of its household based on the most 

recently published poverty guidelines 

by the Department of Health and Human 

Services (HHS) or (ii) income at or 

below 40 percent of the Area Median 

Income (AMI) for its county and size of 

household based on the most recently 

published data by the Department of 

Housing and Urban Development 

(HUD).22

The final rule defines a household as 

moderate income if it has (i) income at 

or below 300 percent of the FPG for the 

size of its household based on the most 

recently published poverty guidelines 

by HHS or (ii) income at or below 65 

percent of the AMI for its county and 

size of household based on the most 

recently published data by HUD.23

Recipients may determine whether to 

measure income levels for specific 

households or for a geographic area 

based on the type of service to be 

provided. For example, recipients 

developing a program that serves 

specific households (e.g., a subsidy for 

internet access, a childcare program) 

may measure income at the household 

level. Recipients providing a service 

that reaches a general geographic area 

(e.g., a park) may measure median 

income of that area. 

Further, recipients should generally 

use the income threshold for the size of 

the household to be served (e.g., when 

providing childcare to a household of 

five, recipients should reference the 

income threshold for a household of 

five); however, recipients may use the 

income threshold for a default 

household size of three if providing 


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24U.S. Department of Health and Human Service, 

HHS Poverty Guidelines for 2021, available at 

https://aspe.hhs.gov/topics/poverty-economicmobility/poverty-guidelines. 25U.S. Department of Housing and Urban 

Development, FY 2021 Section 8 Income Limits, 

available at https://www.huduser.gov/portal/ 

datasets/il/il21/Section8-FY21.xlsx. Recipients may 

refer to the list of counties (and New England 

towns) identified by state and metropolitan area for 

identifying the appropriate area. U.S. Department of 

Housing and Urban Development, FY 2021 List of 

Counties (and New England Towns) Identified by 

State and Metropolitan Area, available at https://

www.huduser.gov/portal/datasets/il/il21/areadefinitions-FY21.pdf. 26The U.S. Census Bureau provides an interactive 

map: U.S. Census Bureau, Median Household 

Income State Selection Map, available at https://

data.census.gov/cedsci/map?q=Median

%20Household%20Income&g=0100000US

%2404000%24001&tid=ACSST5Y2019.S1901&cid=

S1901_C01_012E&vintage=2019. The U.S. Census 

Bureau also provides an interactive table: U.S. 

Census Bureau, Median Household Income In The 

Past 12 Months (In 2019 Inflation-Adjusted Dollars), 

available at https://data.census.gov/cedsci/table?q=

b19013&tid=ACSDT5Y2019.B19013&hidePreview=

true. 

27See U.S. Bureau of Labor Statistics, 

Occupational Employment and Wage Estimates, 

https://www.bls.gov/oes/current/oes_nat.htm (last 

visited December 7, 2021). 

28U.S. Census Bureau, Poverty Status by State, 

https://www.census.gov/data/tables/time-series/ 

demo/income-poverty/cps-pov/pov-46.html (last 

visited December 7, 2021). 

services that reach a general geographic 

area or if doing so would simplify 

administration of the program to be 

provided (e.g., when developing a park, 

recipients should use the income 

threshold for a household size of three 

and compare it to median income of the 

geographic area to be served). 

Note that recipients can also identify 

and serve other classes of households 

that experienced negative economic 

impacts or disproportionate impacts 

from the pandemic; recipients can 

identify these classes based on their 

income levels, including above the 

levels defined as low- and moderateincome in the final rule. For example, 

a recipient may identify that households 

in their community with incomes above 

the final rule threshold for low-income 

nevertheless experienced 

disproportionate impacts from the 

pandemic and provide responsive 

services. See section General Provisions: 

Standards for Identifying Other Eligible 

Populations for details on applicable 

standards. 

Applicable levels. For reference, the 

FPG is commonly referred to as the 

federal poverty level (FPL) and is 

related to—although distinct from—the 

U.S. Census Bureau’s poverty threshold. 

The final rule uses the FPG when 

referring specifically to the HHS 

guidelines, as these are the quantitative 

metrics used for determining low- and 

moderate-income households. 

The FPG by household size for 2021 

is included in the table below. 

Recipients should refer to HHS Poverty 

Guidelines for this information, which 

is updated annually and available on 

the HHS website.24 For calculating the 

thresholds of 40 percent and 65 percent 

of AMI, recipients should refer to the 

annual HUD Section 8 50 percent 

income limits by county and household 

size published by HUD and available on 

the HUD website; in particular, 

recipients should calculate the 40 

percent threshold as 0.8 times the 50 

percent income limit, and recipients 

should calculate the 65 percent 

threshold as 1.3 times the 50 percent 

income limit.25 Finally, for median 

income of Census Tracts and other 

geographic areas, recipients should refer 

to the most recent American 

Community Survey 5-year estimates 

available through the Census website.26

2021 FEDERAL POVERTY GUIDELINES

Household size 

48 contiguous 

states and the 

District of 

Columbia 

Alaska Hawaii 

1 ................................................................................................................................................... $12,880 $16,090 $14,820 

2 ................................................................................................................................................... 17,420 21,770 20,040 

3 ................................................................................................................................................... 21,960 27,450 25,260 

4 ................................................................................................................................................... 26,500 33,130 30,480 

5 ................................................................................................................................................... 31,040 38,810 35,700 

6 ................................................................................................................................................... 35,580 44,490 40.920 

7 ................................................................................................................................................... 40,120 50,170 46,140 

8 ................................................................................................................................................... 44,660 55,850 51,360 

For families/households with more than 8 persons, add the following amounts for each additional person: 

48 Contiguous States and the District of Columbia: $4,540. 

Alaska: $5,680. 

Hawaii: $5,220. 

Source: ‘‘HHS Poverty Guidelines for 2021,’’ available at https://aspe.hhs.gov/topics/poverty-economic-mobility/poverty-guidelines. 

Rationale. In defining low income, the 

final rule uses both the FPG and AMI to 

account for national trends and regional 

differences. The metric of 185 percent of 

FPG aligns with some other programs; 

for instance, under the National School 

Lunch Program, students with 

household incomes under 185 percent 

of FPG qualify for free or reduced-price 

lunch, and schools often use eligibility 

for free or reduced-price lunch as an 

indicator of low-income status under 

Title 1–A of the Elementary and 

Secondary Education Act. Eligibility for 

other programs, such as the Federal 

Communications Commission’s e-Rate 

program and the Special Supplemental 

Nutrition Program for Women, Infants 

and Children employ this metric as 

well. In addition, 185 percent of the 

FPG for a family of four is $49,025, 

which is approximately the wage 

earnings for a two-earner household in 

which both earners receive the median 

wage in occupations, such as waiters 

and waitresses and hotel clerks, that 

were heavily impacted by COVID–19.27

This measure is targeted toward those at 

the bottom of the income distribution 

and thus helps to promote use of SLFRF 

funds towards populations with the 

greatest needs. At the same time, with 

approximately one-quarter of Americans 

below 185 percent of the poverty 

threshold, this approach is broad 

enough to facilitate use of SLFRF funds 

across many jurisdictions.28 Because 

regions have different cost and income 

levels, this definition also allows for 

upward adjustment based on AMI for 

those regions where 40 percent of AMI 

exceeds 185 percent of FPG. The metric 

of 40 percent of AMI is based on the 

midpoint of values often used to 

designate certain categories of lowincome households; specifically, it is 

the midpoint of the 30 percent income 

limit and the 50 percent income limit 


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29For instance, Melissa Kearney et al. (2013) cap 

the ‘‘struggling lower middle-income class’’ at 250 

percent of the federal poverty level, while Isabel 

Sawhill and Edward Rodrigue (2015) define the 

‘‘middle class’’ as those with incomes of at least 300 

percent of the poverty line. Melissa Kearney et al., 

‘‘A Dozen Facts about America’s Struggling LowerMiddle Class,’’ The Hamilton Project (December 

2013), https://www.hamiltonproject.org/assets/

legacy/files/downloads_and_links/THP_12Low

IncomeFacts_Final.pdf; Isabel Sawhill and Edward 

Rodrigue, ‘‘An Agenda for Reducing Poverty and 

Improving Opportunity,’’ Brookings Institution, 

https://www.brookings.edu/wp-content/uploads/ 

2016/07/Sawhill_FINAL.pdf. 

30 Data on median annual wages from: U.S. 

Bureau of Labor and Statistics, Occupational 

Employment and Wage Statistics, available at 

https://www.bls.gov/oes/current/oes_nat.htm (last 

visited December 7, 2021). 

31For instance, households earning between 200 

and 300 percent of the FPG have significantly 

higher rates of food and housing insecurity than 

those earning above 300 percent of the FPG. Table 

1, Kyle J. Caswell and Stephen Zuckerman, Food 

Insecurity, Housing Hardship, and Medical Care 

Utilization, Urban Institute (June 2018), https://

www.urban.org/sites/default/files/publication/ 

98701/2001896_foodinsecurity_housinghardship_

medicalcareutilization_finalized.pdf. 

used in programs such as the 

Community Development Block Grant 

(CDBG) Program. 

In defining moderate income, the final 

rule uses both the FPG and AMI to 

account for national trends and regional 

differences. While there are different 

definitions of moderate income, 300 

percent of FPG falls within the range 

commonly used by researchers.29

Analysis of median wages among a 

sample of occupations likely impacted 

by the pandemic also suggests that an 

income cutoff of 300 percent of FPG 

would include many households with 

workers in such occupations.30

Moreover, the metric of 300 percent of 

FPG covers households that, while 

above the poverty line, often lack 

economic security.31 Treasury 

determined the AMI threshold for 

moderate income by maintaining the 

same ratio of FPG multiplier to AMI 

multiplier as in the definition of low 

income. This anchors the threshold to 

the existing definitions of moderate 

income from the literature while taking 

into account geographical variation in 

income and expenses in the same 

manner as the definition of low income. 

Eligibility Presumptions 

Public Comment: Many commenters 

believed that a broader range of groups 

should be considered presumptively 

impacted and disproportionately 

impacted, arguing that many 

households had been affected by the 

pandemic and that broader presumed 

eligibility would help recipients provide 

assistance quickly and effectively. 

Treasury also received many 

comments on the presumption that 

families living in QCTs or receiving 

services from Tribal governments were 

disproportionately impacted by the 

pandemic. While many commenters 

supported the interim final rule’s 

recognition of disproportionate impacts 

of the pandemic on low-income 

communities, many commenters 

disagreed with treating QCTs as the only 

presumed eligible group of 

disproportionately impacted 

households, apart from households 

served by Tribal governments. While 

acknowledging a potential increase in 

administrative burden, commenters 

recommended that Treasury presume 

other households or geographic areas, in 

addition to QCTs, were 

disproportionately impacted; 

suggestions included all low- and 

moderate-income households, 

geographic areas designated as 

Opportunity Zones, Difficult 

Development Areas (DDAs), areas with 

a certain amount of Real Estate 

Advantage Program (REAP) recipients, 

or use of eligibility criteria from the 

Community Reinvestment Act. One 

commenter generally recommended that 

a clearer definition of 

‘‘disproportionately impacted’’ should 

be provided and that any definition 

should include communities of color 

and people of limited means. Another 

recommended specific eligibility for 

people that had recently interacted with 

the criminal justice system. Many 

commenters representing Tribal 

governments and groups recommended 

a presumption of eligibility for all Tribal 

uses of funds, clarification that off 

reservation members remained eligible, 

and broad flexibility on use of funds. 

Additionally, commenters noted that 

some areas are technically eligible to be 

QCTs but fall short because of the 

aggregate population of eligible tracts. 

One commenter noted that these areas 

should be considered the same as QCTs 

for the purpose of SLFRF funds. Some 

commenters argued that rural counties 

typically have few QCTs despite high 

levels of poverty and disruption caused 

by the COVID–19 pandemic. Other rural 

commenters recommended that the 

designation be by county rather than at 

a more granular level, arguing that the 

QCT designation is biased towards 

urban areas and understates the harm 

done to rural America. Many 

commenters representing Tribal 

governments supported the 

presumption that services provided by 

Tribal governments respond to 

disproportionate impacts. 

Treasury Response 

Summary: While households residing 

in QCTs or served by Tribal 

governments were presumed to be 

disproportionately impacted, Treasury 

emphasizes that under the interim final 

rule recipients could also identify other 

households, populations, or geographic 

areas that were disproportionately 

impacted by the pandemic and provide 

services to respond. 

The final rule maintains the 

presumptions identified in the interim 

final rule, as well as recipients’ ability 

to identify other impacted or 

disproportionately impacted classes. 

The final rule also allows recipients to 

presume that low-income households 

were disproportionately impacted, and 

as discussed above, defines low- and 

moderate-income. Finally, under the 

final rule recipients may also presume 

that households residing in the U.S. 

territories or receiving services from 

territorial governments were 

disproportionately impacted. 

Households presumed to be impacted: 

Impacted households are those that 

experienced a public health or negative 

economic impact from the pandemic. 

With regard to public health impacts, 

recipients may presume that the general 

public experienced public health 

impacts from the pandemic for the 

purposes of providing services for 

COVID–19 mitigation and behavioral 

health. In other words, recipients may 

provide a wide range of enumerated 

eligible uses in these categories to the 

general public without further analysis. 

As discussed in the introduction, 

COVID–19 as a disease has directly 

affected the health of tens of millions of 

Americans, and efforts to prevent and 

mitigate the spread of the disease are 

needed and in use across the country. 

Further, the stress of the pandemic and 

resulting recession have affected nearly 

all Americans. Accordingly, the final 

rule presumes that the general public 

are impacted by and eligible for services 

to respond to COVID–19 mitigation and 

prevention needs, as well as behavioral 

health needs. 

With regard to negative economic 

impacts, as with the interim final rule, 

under the final rule recipients may 

presume that a household or population 

that experienced unemployment, 

experienced increased food or housing 

insecurity, or is low- or moderateincome experienced negative economic 

impacts resulting from the pandemic. 

The final rule’s definition of low- and 

moderate-income, by providing 

standard metrics based on widely 

available data, is intended to simplify 

administration for recipients. 

Households presumed to be 

disproportionately impacted: 

Disproportionately impacted 

households are those that experienced a 


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32For instance, the American Community Survey 

does not include all territories. U.S. Census Bureau, 

Areas Published, https://www.census.gov/ 

programs-surveys/acs/geography-acs/areaspublished.html (last visited November 9, 2021). 

33U.S. Department of Health and Human 

Services, supra note 24. 

34For instance, data from the American 

Community Survey is based on geographical 

location rather than Tribal membership. U.S. 

Census Bureau, My Tribal Area, https://

www.census.gov/Tribal/Tribal_glossary.php. 

35Lina Stoylar et. al., Challenges in the U.S. 

Territories: COVID–19 and the Medicaid Financing 

Cliff, Kaiser Family Foundation (May 18, 2021), 

https://www.kff.org/coronavirus-covid-19/issuebrief/challenges-in-the-u-s-territories-covid-19-andthe-medicaid-financing-cliff/. 

disproportionate, or meaningfully more 

severe, impact from the pandemic. As 

discussed in the interim final rule, preexisting disparities in health and 

economic outcomes magnified the 

impact of the COVID–19 public health 

emergency on certain households and 

communities. As with the interim final 

rule, under the final rule recipients may 

presume that households residing in 

QCTs or receiving services provided by 

Tribal governments were 

disproportionately impacted by the 

pandemic. In addition, under the final 

rule recipients may presume that lowincome households were 

disproportionately impacted by the 

pandemic. Finally, under the final rule 

recipients may also presume that 

households residing in the U.S. 

territories or receiving services from 

territorial governments were 

disproportionately impacted. 

Treasury notes that households 

presumed to be disproportionately 

impacted would also be presumptively 

impacted, as these households have not 

only experienced pandemic impacts but 

have experienced disproportionate 

pandemic impacts; as a result, these 

households are presumptively eligible 

for responsive services for both 

impacted and disproportionately 

impacted households. 

Many different geographic, incomebased, or poverty-based presumptions 

could be used to designate 

disproportionately impacted 

populations. The combination of 

permitting recipients to use QCTs, lowincome households, and services 

provided by Tribal or territorial 

governments as presumptions balances 

these varying methods. Specifically, 

QCTs are a commonly used designation 

of geographic areas based on low 

incomes or high poverty rates of 

households in the community; for 

recipients providing geographically 

targeted services, QCTs may provide a 

simple metric with readily available 

maps for use. However, Treasury 

recognizes that QCTs do not capture all 

underserved populations, including for 

reasons noted by commenters. By 

allowing recipients to also presume that 

low-income households were 

disproportionately impacted, the final 

rule provides greater flexibility to serve 

underserved households or 

communities. Data on household 

incomes is also readily available at 

varying levels of geographic granularity 

(e.g., Census Tracts, counties), again 

permitting flexibility to adapt to local 

circumstances and needs. Finally, 

Treasury notes that, as discussed further 

below, recipients may also identify 

other households, populations, and 

communities disproportionately 

impacted by the pandemic, in addition 

to those presumed to be 

disproportionately impacted. 

Additionally, Tribal and territorial 

governments may face both 

disproportionate impacts of the 

pandemic and administrability 

challenges with operationalizing the 

income-based standard; therefore, 

Treasury has presumed that services 

provided by these governments respond 

to disproportionate pandemic impacts. 

Given a lack of regularly published data 

on household incomes in most 

territories,32 as well as a lack of poverty 

guidelines developed for these 

jurisdictions,33 it may be highly 

challenging to assess disproportionate 

impact in these communities according 

to an income- or poverty-based 

standard. Similarly, data on incomes in 

Tribal communities are not readily 

available.34 Finally, as described in the 

sections on Public Health and Negative 

Economic Impacts, Tribal communities 

have faced particularly severe health 

and economic impacts of the pandemic. 

Similarly, available research suggests 

that preexisting health and economic 

disparities in the territories amplified 

the impact of the pandemic on these 

communities.35

Categorical Eligibility 

Public Comment: Several commenters 

suggested that the final rule permit 

recipients to rely on a beneficiary’s 

eligibility for other federal benefits 

programs as an easily administrable 

proxy for identifying a group or 

population that experienced a negative 

economic impact as a result of the 

COVID–19 public health emergency 

(i.e., categorical eligibility). In other 

words, a recipient would determine that 

individuals or households are eligible 

for an SLFRF-funded program based on 

the individual or household’s eligibility 

in another program, typically another 

federal benefit program. Commenters 

noted that categorical eligibility is a 

common policy in program 

administration that can significantly 

ease administrative burden on both 

program administrators and 

beneficiaries. 

Treasury Response: Treasury agrees 

that allowing recipients to identify 

impacted and disproportionately 

impacted beneficiaries based on their 

eligibility for other programs with 

similar income tests would ease 

administrative burden. To the extent 

that the other program’s eligibility 

criteria align with a population or class 

that experienced a negative economic 

impact of the pandemic, this approach 

is also consistent with the process 

allowed under the final rule for 

recipients to determine that a class has 

experienced a negative economic 

impact, and then document that an 

individual receiving services is a 

member of the class. For these reasons, 

the final rule recognizes categorical 

eligibility for the following programs 

and populations: 

• Impacted households. Treasury will 

recognize a household as impacted if it 

otherwise qualifies for any of the 

following programs: 

Æ Children’s Health Insurance 

Program (CHIP) 

Æ Childcare Subsidies through the 

Child Care and Development Fund 

(CCDF) Program 

Æ Medicaid 

Æ National Housing Trust Fund 

(HTF), for affordable housing programs 

only 

Æ Home Investment Partnerships 

Program (HOME), for affordable housing 

programs only 

• Disproportionately impacted 

households. Treasury will recognize a 

household as disproportionately 

impacted if it otherwise qualifies for any 

of the following programs: 

Æ Temporary Assistance for Needy 

Families (TANF) 

Æ Supplemental Nutrition Assistance 

Program (SNAP) 

Æ Free and Reduced-Price Lunch 

(NSLP) and/or School Breakfast (SBP) 

programs 

Æ Medicare Part D Low-income 

Subsidies 

Æ Supplemental Security Income 

(SSI) 

Æ Head Start and/or Early Head Start 

Æ Special Supplemental Nutrition 

Program for Women, Infants, and 

Children (WIC) 

Æ Section 8 Vouchers 

Æ Low-Income Home Energy 

Assistance Program (LIHEAP) 

Æ Pell Grants 

Æ For services to address educational 

disparities, Treasury will recognize Title 


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36Title I eligible schools means schools eligible to 

receive services under section 1113 of Title I, Part 

A of the Elementary and Secondary Education Act 

of 1965, as amended (20 U.S.C. 6313), including 

schools served under section 1113(b)(1)(C) of that 

Act. 

I eligible schools 36 as 

disproportionately impacted and 

responsive services that support the 

school generally or support the whole 

school as eligible 

c. Standards for Identifying Other 

Eligible Populations 

Standards: Designating Other Impacted 

Classes 

Public Comment: Treasury received 

multiple comments requesting 

additional clarification about how 

classes of impacted individuals may be 

designated, as well as questions asking 

whether recipients must demonstrate a 

specific public health or negative 

economic impact to each entity served 

(e.g., each household receiving 

assistance under a program). There were 

several comments requesting that 

specific geographic designations, like a 

county or Impact Zone, be eligible to 

use as a determining boundary. 

Treasury Response: The interim final 

rule allowed, and the final rule 

maintains, the ability for recipients to 

demonstrate a public health or negative 

economic impact on a class and to 

provide assistance to beneficiaries that 

fall within that class. Consistent with 

the scope of beneficiaries included in 

sections 602(c)(1)(A) and 603(c)(1)(A) of 

the Social Security Act, Treasury is 

clarifying that a recipient may identify 

such impacts for a class of households, 

small businesses, or nonprofits. In such 

cases, the recipient need only 

demonstrate that the household, small 

business, or nonprofit is within the 

relevant class. For example, a recipient 

could determine that restaurants in the 

downtown area had generally 

experienced a negative economic impact 

and provide assistance to those small 

businesses to respond. When providing 

this assistance, the recipient would only 

need to demonstrate that the small 

businesses receiving assistance were 

restaurants in the downtown area. The 

recipient would not need to 

demonstrate that each restaurant served 

experienced its own negative economic 

impact. 

In identifying an impacted class and 

responsive program, service, or capital 

expenditure, recipients should consider 

the relationship between the definition 

of the class and proposed response. 

Larger and less-specific classes are less 

likely to have experienced similar 

harms and thus the responses are less 

likely to be responsive to the harms 

identified. That is, as the group of 

entities being served by a program has 

a wider set of fact patterns, or the type 

of entities, their circumstances, or their 

pandemic experiences differ more 

substantially, it may be more difficult to 

determine that the class has actually 

experienced the same or similar 

negative economic impact and that the 

response is appropriately tailored to 

address that impact. 

Standard: Designating Other 

Disproportionately Impacted Classes 

Summary of Interim Final Rule: As 

noted above, the interim final rule 

provided a broad set of enumerated 

eligible uses of funds in 

disproportionately impacted 

communities, including to address preexisting disparities that contributed to 

more severe pandemic impacts in these 

communities. The interim final rule 

presumed that these services are eligible 

uses when provided in a QCT, to 

families and individuals living in QCTs, 

or when these services are provided by 

Tribal governments. Recipients may also 

provide these services to ‘‘other 

populations, households, or geographic 

areas disproportionately impacted by 

the pandemic’’ and, in identifying these 

disproportionately impacted 

communities, should be able to support 

their determination that the pandemic 

resulted in disproportionate public 

health or economic outcomes to the 

group identified. 

Public Comment: A significant 

number of commenters expressed 

uncertainty regarding the process for 

determining eligibility for 

disproportionately impacted 

communities beyond QCTs. A 

commenter noted that a clearer 

definition of ‘‘disproportionately 

impacted’’ should be delineated and 

that any definition should include 

communities of color and people of 

limited means. Some commenters 

suggested a template or checklist to see 

if an area meets the standard for 

disproportionately impacted 

communities outside of QCTs. Some 

commenters stated that QCT and nonQCT beneficiaries should be treated the 

same. 

Treasury Response: Under the interim 

final rule, presuming eligibility for 

services in QCTs, for populations living 

in QCTs, and for Tribal governments 

was intended to ease administrative 

burden, providing a simple path for 

recipients to offer services in 

underserved communities, and is not an 

exhaustive list of disproportionately 

impacted communities. To further 

clarify, the final rule codifies the 

interpretive framework discussed above, 

including presumptions of groups 

disproportionately impacted, as well as 

the ability to identify other 

disproportionately impacted 

populations, households, or geographies 

(referred to here as disproportionately 

impacted classes). 

As discussed in the interim final rule, 

in identifying other disproportionately 

impacted classes, recipients should be 

able to support their determination that 

the pandemic resulted in 

disproportionate public health or 

economic outcomes to the specific 

populations, households, or geographic 

areas to be served. For example, the 

interim final rule considered data 

regarding the rate of COVID–19 

infections and deaths in low-income 

and socially vulnerable communities, 

noting that these communities have 

experienced the most severe health 

impacts, compared to national averages. 

Similarly, the interim final rule 

considered the high concentration of 

low-income workers performing 

essential work, the reduced ability to 

socially distance, and other pre-existing 

public health challenges, all of which 

correlate with more severe COVID–19 

outcomes. The interim final rule also 

considered the disproportionate 

economic impacts of the pandemic, 

citing, for example, the rate of job losses 

among low-income persons as compared 

to the general population. The interim 

final rule then identified QCTs, a 

common, readily accessible, and 

geographically granular method of 

identifying communities with a large 

proportion of low-income residents, as 

presumed to be disproportionately 

impacted by the pandemic. 

In other words, the interim final rule 

identified disproportionately impacted 

populations by assessing the impacts of 

the pandemic and finding that some 

populations experienced meaningfully 

more severe impacts than the general 

public. Similarly, to identify 

disproportionately impacted classes, 

recipients should compare the impacts 

experienced by that class to the typical 

or average impacts of the pandemic in 

their local area, state, or nationally. 

Recipients may identify classes of 

households, communities, small 

businesses, nonprofits, or populations 

that have experienced a 

disproportionate impact based on 

academic research or government 

research publications, through analysis 

of their own data, or through analysis of 

other existing data sources. To augment 

their analysis, or when quantitative data 

is not readily available, recipients may 

also consider qualitative research and 

sources like resident interviews or 


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4350 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 

37Press Release, Centers for Disease Control and 

Prevention, First Travel-related Case of 2019 Novel 

Coronavirus Detected in United States (Jan. 21, 

2020), https://www.cdc.gov/media/releases/2020/ 

p0121-novel-coronavirus-travel-case.html. 38Centers for Disease Control and Prevention, 

COVID Data Tracker: Trends in Number of COVID– 

19 Cases and Deaths in the US Reported to CDC, 

by State/Territory, https://covid.cdc.gov/covid-datatracker/#trends_dailytrendscases (last visited 

December 7, 2021). 

39 Id. 

40Centers for Disease Control and Prevention, 

COVID Data Tracker, http://www.covid.cdc.gov/ 

covid-data-tracker/#datatracker-home (last visited 

December 31, 2021). 

41Centers for Disease Control and Prevention, 

COVID Data Tracker: COVID–19 Vaccinations in the 

United States, https://covid.cdc.gov/covid-datatracker/#vaccinations (last visited December 7, 

2021). 

42 Id. 

43Columbus, Ohio Recovery Plan, https://

www.columbus.gov/recovery/. 

44Luzerne County, Pennsylvania Recovery Plan, 

https://www.luzernecounty.org/DocumentCenter/ 

View/26304/Final-Interim-Recovery-PlanPerformance-Report-83121. 

45This includes implementing mitigation 

strategies consistent with the Centers for Disease 

Control and Prevention’s (CDC) Guidance for 

COVID–19 Prevention in K–12 Schools (November 

5, 2021), available at https://www.cdc.gov/ 

coronavirus/2019-ncov/community/schoolschildcare/k-12-guidance.html. 

feedback from relevant state and local 

agencies, such as public health 

departments or social services 

departments. In both cases, recipients 

should consider the quality of the 

research, data, and applicability of 

analysis to their determination. 

In designing a program or service that 

responds to a disproportionately 

impacted class, a recipient must first 

identify the impact and then identify an 

appropriate response. To assess 

disproportionate impact, recipients 

should rely on data or research that 

measures the public health or negative 

economic impact. An assessment of the 

effects of a response (e.g., survey data on 

levels of resident support for various 

potential responses) is not a substitute 

for an assessment of the impact 

experienced by a particular class. Data 

about the appropriateness or desirability 

of a response may be used to assess the 

reasonableness of a response, once an 

impact or disproportionate impact has 

been identified but should not be the 

basis for assessing impact. 

2. Public Health 

Background 

On January 21, 2020, the Centers for 

Disease Control and Prevention (CDC) 

identified the first case of novel 

coronavirus in the United States.37

Since that time, and through present 

day, the United States has faced 

numerous waves of the virus that have 

brought acute strain on health care and 

public health systems. At various points 

in the pandemic, hospitals and 

emergency medical services have seen 

significant influxes of patients; response 

personnel have faced shortages of 

personal protective equipment; testing 

for the virus has been scarce; and 

congregate living facilities like nursing 

homes have seen rapid spread. 

Since the initial wave of the COVID– 

19 pandemic, the United States has 

faced several additional major waves 

that continued to impact communities 

and stretch public health services. The 

summer 2020 wave impacted 

communities in the south and 

southwest. As the weather turned colder 

and people spent more time indoors, a 

wave throughout fall and winter 2020 

impacted communities in almost every 

region of the country as the virus 

reached a point of uncontrolled spread 

and over 3,000 people died per day due 

to COVID–19.38

In December 2020, the Food and Drug 

Administration (FDA) authorized 

COVID–19 vaccines for emergency use, 

and soon thereafter, mass vaccination in 

the United States began. At the time of 

the interim final rule publication in May 

2021, the number of daily new 

infections was steeply declining as 

rapid vaccination campaigns progressed 

across the country. By summer 2021, 

COVID–19 cases had fallen to their 

lowest level since early months of the 

pandemic, when testing was scarce. 

However, throughout late summer and 

early fall, the Delta variant, a more 

infectious and transmittable variant of 

the SARS–CoV–2 virus, sparked yet 

another surge. From June to early 

September, the seven-day moving 

average of reported cases rose from 

12,000 to 165,000.39

As of December 2021, COVID–19 in 

total has infected over 50 million and 

killed over 800,000 Americans.40

Preventing and mitigating the spread of 

COVID–19 continues to require a major 

public health response from federal, 

state, local, and Tribal governments. 

First, state, local, and Tribal 

governments across the country have 

mobilized to support the national 

vaccination campaign. As of December 

2021, more than 80 percent of adults 

have received at least one dose, with 

more than 470 million total doses 

administered.41 Additionally, more than 

15 million children over the age of 12 

have received at least one dose of the 

vaccine and over 47 million people have 

received a booster dose.42 Vaccines for 

younger children, ages 5 through 11, 

have been approved and are reaching 

communities and families across the 

country. As new variants continue to 

emerge globally, the national effort to 

administer vaccinations and other 

COVID–19 mitigation strategies will be 

a critical component of the public 

health response. 

In early reporting on uses of SLFRF 

funds, recipients have indicated that 

they plan to put funds to immediate use 

to support continued vaccination 

campaigns. For example, one recipient 

has indicated that it plans to use SLFRF 

funds to support a vaccine incentive 

program, providing $100 gift cards to 

residents at community vaccination 

clinics. The program aimed to target 

communities with high public health 

needs.43 Another recipient reported that 

it is partnering with multiple agencies, 

organizations, and providers to 

distribute COVID–19 vaccinations to 

homebound residents in assisted living 

facilities.44

State, local, and Tribal governments 

have also continued to execute other 

aspects of a wide-ranging public health 

response, including increasing access to 

COVID–19 testing and rapid at-home 

tests, contact tracing, support for 

individuals in isolation or quarantine, 

enforcement of public health orders, 

new public communication efforts, 

public health surveillance (e.g., 

monitoring case trends and genomic 

sequencing for variants), enhancement 

to health care capacity through 

alternative care facilities, and 

enhancement of public health data 

systems to meet new demands or scaling 

needs. 

State, local, and Tribal governments 

have also supported major efforts to 

prevent COVID–19 spread through 

safety measures at key settings like 

nursing homes, schools, congregate 

living settings, dense worksites, 

incarceration settings, and in other 

public facilities. This has included, for 

example, implementing infection 

prevention measures or making 

ventilation improvements. 

In particular, state, local, and Tribal 

governments have mounted significant 

efforts to safely reopen schools. A key 

factor in school reopening is the ability 

to implement COVID–19 mitigation 

strategies such as providing masks and 

other hygiene resources, improving airquality and ventilation, increasing 

outdoor learning and eating spaces, 

testing and contact tracing protocols, 

and a number of other measures.45 For 

example, one recipient described plans 

to use SLFRF funds to further invest in 

school health resources that were 

critical components of school reopening 

and reducing the spread of COVID–19 in 

schools. Those investments include the 

increasing school nurses and social 


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46Nirmita Panchal et al., The Implications of 

COVID–19 for Mental Health and Substance Abuse 

(Feb. 10, 2021), https://www.kff.org/coronavirus

covid-19/issue-brief/the-implications-of-covid-19- 

for-mental-health-and-substance-use/#:∼:text=

Older%20adults%20are%20also%20 more,

prior%20to%20the%20current%20crisis; Mark E ́. 

Czeisler et al., Mental Health, Substance Abuse, and 

Suicidal Ideation During COVID–19 Pandemic— 

United States, June 24–30 2020, Morb. Mortal. 

Wkly. Rep. 69(32):1049–57 (Aug. 14, 2020), https:// 

www.cdc.gov/mmwr/volumes/69/wr/ 

mm6932a1.htm. 

47 Id. 48Rebecca T. Leeb et al., Mental Health-Related 

Emergency Department Visits Among Children 

Aged <18 Years During the COVID Pandemic— 

United States, January 1–October 17, 2020, Morb. 

Mortal. Wkly. Rep. 69(45):1675–80 (Nov. 13, 2020), 

https://www.cdc.gov/mmwr/volumes/69/wr/ 

mm6945a3.htm. 

49Centers for Disease Prevention and Control, 

National Center for Health Statistics, Provisional 

Drug Overdose Death Counts, https://www.cdc.gov/ 

nchs/nvss/vsrr/drug-overdose-data.htm (last visited 

May 8 December 6, 2021). 

50Panchal, supra note 46; Mark E ́. Czeisler et al., 

supra note 46. 

51The White House, FACT SHEET: More Details 

on the Biden-Harris Administration’s Investments 

in Community Violence Interventions (April 7, 

2021), https://www.whitehouse.gov/briefing-room/ 

statements-releases/2021/04/07/fact-sheet-moredetails-on-the-biden-harris-administrationsinvestments-in-community-violence-interventions/. 

52Federal Bureau of Investigation, FBI Releases 

2020 Crime Statistics (September 27, 2021) https:// 

www.fbi.gov/news/pressrel/press-releases/fbireleases-2020-crime-statistics. 

53 Id. 

54 Id. 

55The Educational Fund to Stop Gun Violence, 

Community Gun Violence, https://efsgv.org/learn/ 

type-of-gun-violence/community-gun-violence/ (last 

visited November 9, 2021). 

56 Giffords Law Center, Healing Communities in 

Crisis: Lifesaving Solutions to the Urban Gun 

Violence Epidemic (March 2016), https://giffords.

org/wp-content/uploads/2019/01/HealingCommunities-in-Crisis.pdf. 

57St. Louis, MO Recovery Plan, https://

www.stlouis-mo.gov/government/recovery/covid-19/ 

arpa/plan/. 

58Los Angeles County, CA Recovery Plan, http:// 

file.lacounty.gov/SDSInter/bos/supdocs/ 

160391.pdf. 

59Office of the White House, National Strategy for 

the COVID–19 Response and Pandemic 

Preparedness (Jan. 21, 2021), https://

www.whitehouse.gov/wp-content/uploads/2021/01/ 

National-Strategy-for-the-COVID-19-Response-andPandemic-Preparedness.pdf. 

60 In a study of 13 states from October to 

December 2020, the CDC found that Hispanic or 

Latino and Native American or Alaska Native 

individuals were 1.7 times more likely to visit an 

emergency room for COVID–19 than White 

individuals, and Black individuals were 1.4 times 

more likely to do so than White individuals. See 

Sebastian D. Romano et al., Trends in Racial and 

Ethnic Disparities in COVID–19 Hospitalizations, 

by Region—United States, March–December 2020, 

MMWR Morb Mortal Wkly Rep 2021, 70:560–565 

(Apr. 16, 2021), https://www.cdc.gov/mmwr/ 

volumes/70/wr/mm7015e2.htm?s_cid=mm7015e2_

w. 

61Centers for Disease Control and Prevention, 

COVID Data Tracker: Trends in COVID–19 Cases 

and Deaths in the United States, by County-level 

Population Factors, https://covid.cdc.gov/coviddata-tracker/#pop-factors_totaldeaths (last visited 

December 7, 2021). 

62The CDC’s Social Vulnerability Index includes 

fifteen variables measuring social vulnerability, 

including unemployment, poverty, education 

levels, single-parent households, disability status, 

non-English speaking households, crowded 

housing, and transportation access. 

Centers for Disease Control and Prevention, 

COVID Data Tracker: Trends in COVID–19 Cases 

and Deaths in the United States, by Social 

Continued 

workers, improved ventilation systems, 

and other health and safety measures. 

The need for public health measures 

to respond to COVID–19 will continue 

moving forward. This includes the 

continuation of vaccination campaigns 

for the general public, booster doses, 

and children. This also includes 

monitoring the spread of COVID–19 

variants, understanding the impact of 

these variants, developing approaches to 

respond, and monitoring global COVID– 

19 trends. Finally, the long-term health 

impacts of COVID–19 will continue to 

require a public health response, 

including medical services for 

individuals with ‘‘long COVID,’’ and 

research to understand how COVID–19 

impacts future health needs and raises 

risks for the tens of millions of 

Americans who have been infected. 

The COVID–19 pandemic also 

negatively impacted other areas of 

public health, particularly mental health 

and substance use. In January 2021, over 

40 percent of American adults reported 

symptoms of depression or anxiety, up 

from 11 percent in the first half of 

2019.46 The mental health impacts of 

the pandemic have been particularly 

acute for adults ages 18 to 24, racial and 

ethnic minorities, caregivers for adults, 

and essential workers, with all reporting 

significantly higher rates of considering 

suicide.47 The proportion of children’s 

emergency department visits related to 

mental health has also risen 

noticeably.48 Similarly, rates of 

substance use and overdose deaths have 

spiked: Preliminary data from the CDC 

show a nearly 30 percent increase in 

drug overdose mortality from April 2020 

to April 2021, bringing the estimated 

overdose death toll for a 12-month 

period over 100,000 for the first time 

ever.49 The CDC also found that 13 

percent of adults started or increased 

substance use to cope with stress related 

to COVID–19 and 26 percent reported 

having symptoms of trauma- and 

stressor-related disorder (TRSD) related 

to the pandemic.50

Another public health challenge 

exacerbated by the pandemic was 

violent crime and gun violence, which 

increased during the pandemic and has 

disproportionately impacted lowincome communities.51 According to 

the Federal Bureau of Investigation 

(FBI), although the property crime rate 

fell 8 percent in 2020, the violent crime 

rate increased 6 percent in 2020 

compared to 2019 data.52 In particular, 

the estimated number of aggravated 

assault offenses rose 12 percent, while 

murder and manslaughter increased 30 

percent from 2019 to 2020.53 The 

proportion of homicides committed 

with firearms rose from 73 percent in 

2019 to 76 percent in 2020.54 Exposure 

to violence can create serious short-term 

and long-term harmful effects to health 

and development, and repeated 

exposure to violence may be connected 

to negative health outcomes.55

Addressing community violence as a 

public health issue may help prevent 

and even reduce additional harm to 

individuals, households, and 

communities.56

Many communities are using SLFRF 

funds to invest in holistic approaches in 

violence prevention that are rooted in 

targeted outreach and addressing root 

causes. For example, the City of St. 

Louis is planning to invest in expanding 

a ‘‘community responder’’ model 

designed to provide clinical help and to 

divert non-violent calls away from the 

police department. Additionally, the 

city will expand access to mental health 

services, allowing residents to seek 

support at city recreation centers, 

libraries, and other public spaces.57

Similarly, Los Angeles County will 

further invest in its ‘‘Care First, Jails 

Last’’ program which seeks to replace 

‘‘arrest and incarceration’’ responses 

with health interventions.58

While the pandemic affected 

communities across the country, it 

disproportionately impacted some 

demographic groups and exacerbated 

health inequities along racial, ethnic, 

and socioeconomic lines.59 The CDC 

has found that racial and ethnic 

minorities are at increased risk for 

infection, hospitalization, and death 

from COVID–19, with Hispanic or 

Latino and Native American or Alaska 

Native patients at highest risk.60

Similarly, low-income and socially 

vulnerable communities have seen the 

most severe health impacts. For 

example, counties with high poverty 

rates also have the highest rates of 

infections and deaths, with 308 deaths 

per 100,000 compared to the U.S. 

average of 238 deaths per 100,000, as of 

December 2021.61 Counties with high 

social vulnerability, as measured by 

factors such as poverty and educational 

attainment, have also fared more poorly 

than the national average, with 325 

deaths per 100,000 as of December 

2021.62 Over the course of the 


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Vulnerability Index, https://covid.cdc.gov/coviddata-tracker/#pop-factors_totaldeaths (last visited 

December 7, 2021). 

63Centers for Disease Control and Prevention, 

Risk for COVID–19 Infection, Hospitalization, and 

Death By Race/Ethnicity, https://www.cdc.gov/ 

coronavirus/2019-ncov/covid-data/investigationsdiscovery/hospitalization-death-by-raceethnicity.html (last visited December 7, 2021). 

64See, e.g., Centers for Disease Control and 

Prevention, Risk of Severe Illness or Death from 

COVID–19 (Dec. 10, 2020), https://www.cdc.gov/ 

coronavirus/2019-ncov/community/health-equity/ 

racial-ethnic-disparities/disparities-illness.html 

(last visited December 7, 2021). 

65Milena Almagro et al., Racial Disparities in 

Frontline Workers and Housing Crowding During 

COVID–19: Evidence from Geolocation Data (Sept. 

22, 2020), NYU Stern School of Business 

(forthcoming), available at https://papers.ssrn.com/ 

sol3/papers.cfm?abstract_id=3695249; Grace 

McCormack et al., Economic Vulnerability of 

Households with Essential Workers, JAMA 

324(4):388–90 (2020), available at https://jamanet

work.com/journals/jama/fullarticle/2767630. 

66See, e.g., Joseph G. Courtney et al., Decreases 

in Young Children Who Received Blood Lead Level 

Testing During COVID–19—34 Jurisdictions, 

January–May 2020, Morb. Mort. Wkly. Rep. 

70(5):155–61 (Feb. 5, 2021), https://www.cdc.gov/ 

mmwr/volumes/70/wr/mm7005a2.htm; Emily A. 

Benfer & Lindsay F. Wiley, Health Justice Strategies 

to Combat COVID–19: Protecting Vulnerable 

Communities During a Pandemic, Health Affairs 

Blog (Mar. 19, 2020), https://www.healthaffairs.org/ 

do/10.1377/hblog20200319.757883/full/. 

67See, e.g., Centers for Disease Control and 

Prevention, supra note 62; Benfer & Wiley, supra 

note 66; Nathaniel M. Lewis et al., Disparities in 

COVID–19 Incidence, Hospitalizations, and Testing, 

by Area-Level Deprivation—Utah, March 3–July 9, 

2020, Morb. Mortal. Wkly. Rep. 69(38):1369–73 

(Sept. 25, 2020), https://www.cdc.gov/mmwr/ 

volumes/69/wr/mm6938a4.htm. 

68 Generally, funding uses eligible under CRF as 

a response to the direct public health impacts of 

COVID–19 will continue to be eligible under the 

ARPA, including those not explicitly listed in the 

final rule, with the following two exceptions: (1) 

The standard for eligibility of public health and 

safety payrolls has been updated (see section Public 

Sector Capacity and Workforce in General 

Provisions: Other) and (2) expenses related to the 

issuance of tax-anticipation notes are no longer an 

eligible funding use (see section Restrictions on 

Use: Debt Service). 

pandemic, Native Americans have 

experienced more than one and a half 

times the rate of COVID–19 infections, 

more than triple the rate of 

hospitalizations, and more than double 

the death rate compared to White 

Americans.63 Low-income and minority 

communities also exhibit higher rates of 

pre-existing conditions that may 

contribute to an increased risk of 

COVID–19 mortality.64 In addition, 

individuals living in low-income 

communities may have had more 

limited ability to socially distance or to 

self-isolate when ill, resulting in faster 

spread of the virus, and were overrepresented among essential workers, 

who face greater risk of exposure.65

Social distancing measures in 

response to the pandemic may have also 

exacerbated pre-existing public health 

challenges. For example, for children 

living in homes with lead paint, 

spending substantially more time at 

home raises the risk of developing 

elevated blood lead levels, while 

screenings for elevated blood lead levels 

declined during the pandemic.66 The 

combination of these underlying social 

and health vulnerabilities may have 

contributed to more severe public health 

outcomes of the pandemic within these 

communities, resulting in an 

exacerbation of pre-existing disparities 

in health outcomes.67

Summary of the Interim Final Rule 

Approach to Public Health 

Summary: As discussed above, the 

interim final rule provided flexibility for 

recipients to pursue a wide range of 

eligible uses to ‘‘respond to’’ the 

COVID–19 public health emergency. 

Uses of funds to ‘‘respond to’’ the public 

health emergency address the SARSCoV–2 virus itself, support efforts to 

prevent or decrease spread of the virus, 

and address other impacts of the 

pandemic on public health. The interim 

final rule implemented these provisions 

by identifying a non-exhaustive list of 

programs or services that may be funded 

as responding to COVID–19 

(‘‘enumerated eligible uses’’), along with 

considerations for evaluating other 

potential uses of funds not explicitly 

listed. Enumerated eligible uses are 

discussed below. For guidance on how 

to determine whether a particular use is 

allowable, beyond those enumerated, 

see section Standards: Identifying a 

Public Health Impact. 

Enumerated eligible uses under this 

section built and expanded upon 

permissible expenditures under the 

Coronavirus Relief Fund; for clarity, the 

interim final rule expressly listed as 

eligible uses the uses permissible under 

the Coronavirus Relief Fund, with 

minor exceptions.68 The interim final 

rule also recognized that the nature of 

the COVID–19 public health emergency, 

and responsive policy measures, 

programs, and services, had changed 

over time and is expected to continue 

evolving. 

The interim final rule categorized 

enumerated eligible uses to respond to 

the public health emergency into several 

categories: (1) COVID–19 mitigation and 

prevention, (2) medical expenses, (3) 

behavioral health care, (4) public health 

and safety staff, (5) expenses to improve 

the design and execution of health and 

public health programs, and (6) eligible 

uses to address disparities in public 

health outcomes. For each category in 

turn, this section describes public 

comments received and Treasury’s 

responses, as well as comments received 

proposing additional enumerated 

eligible uses. 

Reorganizations and CrossReferences: In some cases, enumerated 

eligible uses included in the interim 

final rule under responding to the 

public health emergency have been recategorized in the organization of the 

final rule to enhance clarity. For 

discussion of eligible uses for public 

health and safety staff and to improve 

the design and execution of public 

health programs, please see section 

Public Sector Capacity and Workforce in 

General Provisions: Other. For 

discussion of eligible uses to address 

disparities in public health outcomes, 

please see section Assistance to 

Households in Negative Economic 

Impacts. 

Conversely, discussion of eligible 

assistance to small businesses and 

nonprofits to respond to public health 

impacts has been moved from 

Assistance to Small Businesses and 

Assistance to Nonprofits in Negative 

Economic Impacts to this section. This 

change is consistent with the interim 

final rule, which provides that 

appropriate responses to address the 

public health impacts of COVID–19 may 

be provided to any type of entity. 

a. COVID–19 Mitigation and Prevention 

COVID–19 public health response and 

mitigation tactics. Recognizing the 

broad range of services and 

programming needed to contain 

COVID–19, the interim final rule 

provided an extensive list of 

enumerated eligible uses to prevent and 

mitigate COVID–19 and made clear that 

the public health response to the virus 

is expected to continue to evolve over 

time, necessitating different uses of 

funds. 

Enumerated eligible uses of funds in 

this category included: Vaccination 

programs; medical care; testing; contact 

tracing; support for isolation or 

quarantine; supports for vulnerable 

populations to access medical or public 

health services; public health 

surveillance (e.g., monitoring case 

trends, genomic sequencing for 

variants); enforcement of public health 

orders; public communication efforts; 

enhancement to health care capacity, 

including through alternative care 

facilities; purchases of personal 

protective equipment; support for 

prevention, mitigation, or other services 

in congregate living facilities (e.g., 

nursing homes, incarceration settings, 

homeless shelters, group living 

facilities) and other key settings like 

schools; ventilation improvements in 

congregate settings, health care settings, 

or other key locations; enhancement of 


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69See Centers for Disease Control and Prevention, 

COVID Data Tracker, https://covid.cdc.gov/coviddata-tracker/#trends_dailycases (last visited 

December 7, 2021). 

70See Centers for Disease Control and Prevention, 

COVID–19, https://www.cdc.gov/coronavirus/2019- 

ncov/index.html (last visited November 8, 2021). 

71See § 35.6(b); Coronavirus State and Local 

Fiscal Recovery Funds, 86 FR at 26786. 

72Centers for Disease Control and Prevention, 

COVID Data Tracker: COVID–19 Vaccinations in the 

United States, https://covid.cdc.gov/covid-datatracker/#vaccinations (last visited October 18, 

2021). 

73U.S. Food and Drug Administration, 

Coronavirus (COVID–19) Update: FDA Takes 

Additional Actions on the Use of a Booster Dose for 

COVID–19 Vaccines, https://www.fda.gov/newsevents/press-announcements/fda-authorizes-pfizerbiontech-covid-19-vaccine-emergency-use-children5-through-11-years-age (last visited November 8, 

2021). 

74U.S. Food and Drug Administration, FDA 

Authorizes Pfizer-BioNTech COVID–19 Vaccine for 

Emergency Use in Children 5 through 11 Years of 

Age, https://www.fda.gov/news-events/pressannouncements/fda-authorizes-pfizer-biontechcovid-19-vaccine-emergency-use-children-5- 

through-11-years-age (last visited November 8, 

2021). 

public health data systems; other public 

health responses; and capital 

investments in public facilities to meet 

pandemic operational needs, such as 

physical plant improvements to public 

hospitals and health clinics or 

adaptations to public buildings to 

implement COVID–19 mitigation tactics. 

These enumerated uses are consistent 

with guidance from public health 

authorities, including the CDC. 

Public Comment: Many commenters 

were supportive of expansive 

enumerated eligible uses for mitigating 

and preventing COVID–19, noting the 

wide range of activities that 

governments may undertake and the 

continued changing landscape of 

pandemic response. Some commenters 

requested that Treasury engage in 

ongoing consideration of and 

consultation on evolving public health 

needs and resulting eligible expenses. 

Some commenters noted that their 

jurisdiction does not have an official 

public health program, for example 

smaller jurisdictions or those that do not 

have a health department, and requested 

clarification on whether their public 

health expenses would still be eligible 

in compliance with program rules. 

Treasury Response: In the final rule, 

Treasury is maintaining an expansive 

list of enumerated eligible uses to 

mitigate and prevent COVID–19, given 

the wide-ranging activities that 

governments may take to further these 

goals, including ‘‘other public health 

responses.’’ Note that the final rule 

discusses several of these enumerated 

uses in more detail below. 

Treasury is further clarifying that 

when providing COVID–19 prevention 

and mitigation services, recipients can 

identify the impacted population as the 

general public. Treasury presumes that 

all enumerated eligible uses for 

programs and services, including 

COVID–19 mitigation and prevention 

programs and services, are reasonably 

proportional responses to the harm 

identified unless a response is grossly 

disproportionate to the type or extent of 

harm experienced. Note that capital 

expenditures are not considered 

‘‘programs and services’’ and are not 

presumed to be reasonably proportional 

responses to an identified harm except 

as provided in section Capital 

Expenditures in General Provisions: 

Other. In other words, recipients can 

provide any COVID–19 prevention or 

mitigation service to members of the 

general public without any further 

analysis of impacts of the pandemic on 

those individuals and whether the 

service is responsive. 

This approach gives recipient 

governments an extensive set of eligible 

uses that can adapt to local needs, as 

well as evolving response needs and 

developments in understanding of 

transmission of COVID–19. Treasury 

emphasizes how the enumerated 

eligible uses can adapt to changing 

circumstances. For example, when the 

interim final rule was released, national 

daily COVID–19 cases were at relatively 

low levels and declining; 69 as the Delta 

variant spread and cases peaked in 

many areas of the country, particularly 

those with low vaccination rates, 

government response needs and tactics 

evolved, and the SLFRF funds provided 

the ability to quickly and nimbly adapt 

to new public health needs. Treasury 

also notes that funds may be used to 

support compliance with and 

implementation of COVID–19 safety 

requirements, including vaccination 

requirements, testing programs, or other 

required practices. 

Recipient governments do not need to 

have an official health or public health 

program in order to utilize these eligible 

uses; any recipient can pursue these 

eligible uses, though Treasury 

recommends consulting with health and 

public health professionals to support 

effective implementation. 

The CDC has provided 

recommendations and guidelines to 

help mitigate and prevent COVID–19. 

The interim final rule and final rule 

help support recipients in stopping the 

spread of COVID–19 through these 

recommendations and guidelines.70 The 

final rule reflects changing 

circumstances of COVID–19 and 

provides a broad range of permissible 

uses for mitigating and preventing the 

spread of the disease, in a manner 

consistent with CDC guidelines and 

recommendations. 

The purpose of the SLFRF funds is to 

mitigate the fiscal effects stemming from 

the COVID–19 public health emergency, 

including by supporting efforts to stop 

the spread of the virus. The interim final 

rule and final rule implement this 

objective by, in part, providing that 

recipients may use SLFRF funds for 

COVID–19 mitigation and prevention.71

A program or service that imposes 

conditions on participation in or 

acceptance of the service that would 

undermine efforts to stop the spread of 

COVID–19 or discourage compliance 

with recommendations and guidelines 

in CDC guidance for stopping the spread 

of COVID–19 is not a permissible use of 

funds. In other words, recipients may 

not use funds for a program that 

undermines practices included in the 

CDC’s guidelines and recommendations 

for stopping the spread of COVID–19. 

This includes programs that impose a 

condition to discourage compliance 

with practices in line with CDC 

guidance (e.g., paying off fines to 

businesses incurred for violation of 

COVID–19 vaccination or safety 

requirements), as well as programs that 

require households, businesses, 

nonprofits, or other entities not to use 

practices in line with CDC guidance as 

a condition of receiving funds (e.g., 

requiring that businesses abstain from 

requiring mask use or employee 

vaccination as a condition of receiving 

SLFRF funds). 

Vaccination programs and vaccine 

incentives. At the time of the interim 

final rule release, many vaccination 

programs were using mass vaccination 

tactics to rapidly reach Americans en 

masse for first vaccine doses.72 Since 

that time, the FDA has authorized 

booster vaccine doses for certain groups 

and certain vaccines and has also 

authorized vaccines for youths 73 74 The 

inclusion of ‘‘vaccination programs’’ as 

an eligible use allows for adaptation as 

the needs of programs change or new 

groups become eligible for different 

types of vaccinations. 

Public Comment: Since the release of 

the interim final rule, many recipient 

governments have also requested 

clarification on whether vaccine 

incentives are a permissible use of 

funds. 

Treasury Response: Treasury issued 

guidance clarifying that ‘‘[vaccine] 

programs that provide incentives 

reasonably expected to increase the 

number of people who choose to get 

vaccinated, or that motivate people to 

get vaccinated sooner than they 

otherwise would have, are an allowable 


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75Coronavirus State and Local Fiscal Recovery 

Funds, Frequently Asked Questions, as of July 19, 

2021; https://home.treasury.gov/system/files/136/ 

SLFRPFAQ.pdf. Note that programs may provide 

incentives to individuals who have already received 

a vaccination if the incentive is reasonably expected 

to increase the number of people who choose to get 

vaccinated or motivate people to get vaccinated 

sooner and the costs are reasonably proportional to 

the expected public health benefit. 

use of funds so long as such costs are 

reasonably proportional to the expected 

public health benefit.’’ 75 This use of 

funds remains permissible under the 

final rule. 

Capital Expenditures 

Public Comment: Many commenters 

requested clarification around the types 

and scope of permissible capital 

investments in public facilities to meet 

pandemic operational needs; ventilation 

improvements in congregate settings, 

health care settings, or other key 

locations; and whether support for 

prevention and mitigation in congregate 

facilities could include facilities 

renovations, improvements, or 

construction of new facilities, or if the 

facilities must solely be used for 

COVID–19 response. 

Treasury Response: For clarity, 

Treasury has addressed the eligibility 

standard for capital expenditures, or 

investments in property, facilities, or 

equipment, in one section of this 

Supplementary Information; see section 

Capital Expenditures in General 

Provisions: Other. In recognition of the 

importance of capital expenditures in 

the COVID–19 public health response, 

Treasury enumerates that the following 

projects are examples of eligible capital 

expenditures, as long as they meet the 

standards for capital expenditures in 

section Capital Expenditures in General 

Provisions: Other: 

• Improvements or construction of 

COVID–19 testing sites and laboratories, 

and acquisition of related equipment; 

• Improvements or construction of 

COVID–19 vaccination sites; 

• Improvements or construction of 

medical facilities generally dedicated to 

COVID–19 treatment and mitigation 

(e.g., emergency rooms, intensive care 

units, telemedicine capabilities for 

COVID–19 related treatment); 

• Expenses of establishing temporary 

medical facilities and other measures to 

increase COVID–19 treatment capacity, 

including related construction costs; 

• Acquisition of equipment for 

COVID–19 prevention and treatment, 

including ventilators, ambulances, and 

other medical or emergency services 

equipment; 

• Improvements to or construction of 

emergency operations centers and 

acquisition of emergency response 

equipment (e.g., emergency response 

radio systems); 

• Installation and improvements of 

ventilation systems; 

• Costs of establishing public health 

data systems, including technology 

infrastructure; 

• Adaptations to congregate living 

facilities, including skilled nursing 

facilities, other long-term care facilities, 

incarceration settings, homeless 

shelters, residential foster care facilities, 

residential behavioral health treatment, 

and other group living facilities, as well 

as public facilities and schools 

(excluding construction of new facilities 

for the purpose of mitigating spread of 

COVID–19 in the facility); and 

• Mitigation measures in small 

businesses, nonprofits, and impacted 

industries (e.g., developing outdoor 

spaces). 

Other clarifications on COVID–19 

mitigation: Medical care, supports for 

vulnerable populations, data systems, 

carceral settings. Based on public 

comments and questions received from 

recipients following the interim final 

rule, Treasury is making several further 

clarifications on enumerated eligible 

uses in this category. 

Public Comment: Several commenters 

requested clarification on eligible uses 

of funds for medical care; Treasury 

addresses those comments in the section 

Medical Expenses below. 

Public Comment: Recipients posed 

questions on the type and scope of 

activities eligible as ‘‘supports for 

vulnerable populations to access 

medical or public health services.’’ 

Treasury Response: Enumerated 

eligible uses should be considered in 

the context of the eligible use category 

or section where they appear; in this 

case, ‘‘supports for vulnerable 

populations to access medical or public 

health services’’ appears in the section 

COVID–19 Mitigation and Prevention. 

As such, these eligible uses should help 

vulnerable or high-risk populations 

access services that mitigate COVID–19, 

for example, transportation assistance to 

reach vaccination sites, mobile 

vaccination or testing programs, or onsite vaccination or testing services for 

homebound individuals, those in group 

homes, or similar settings. 

Public Comment: Some commenters 

asked whether ‘‘enhancement of public 

health data systems’’ could include 

investments in software, databases, and 

other information technology resources 

that support responses to the COVID–19 

public health emergency but also 

provide benefits for other use cases and 

long-term capacity of public health 

departments and systems. 

Treasury Response: These are 

permissible uses of funds under the 

interim final rule and remain eligible 

under the final rule. 

Assistance to Businesses and Nonprofits 

To Implement COVID–19 Mitigation 

Strategies 

Background: As detailed above, 

Treasury received many public 

comments describing uncertainty about 

which eligible use category should be 

used to assess different potential uses of 

funds. As a result, Treasury has recategorized some uses of funds in the 

final rule to provide greater clarity, 

consistent with the principle that uses 

of funds should be assessed based on 

their intended beneficiary. For example, 

COVID–19 mitigation and prevention 

serves the general public or specific 

populations within the public. 

However, in the interim final rule, 

assistance to small businesses, 

nonprofits, and impacted industries to 

implement COVID–19 mitigation and 

prevention strategies was categorized in 

the respective sections within Negative 

Economic Impacts. The final rule 

consolidates all COVID–19 mitigation 

and prevention within Public Health. 

Public Comment: Treasury has 

received multiple comments and 

questions about which eligible use 

permits the recipient to provide 

assistance to businesses and nonprofits 

to address the public health impacts of 

COVID–19. 

Treasury Response: In the final rule, 

these services have been re-categorized 

under COVID–19 mitigation and 

prevention to reflect the fact that this 

assistance responds to public health 

impacts of the pandemic rather than the 

negative economic impacts to a small 

business, nonprofit, or impacted 

industry. When providing COVID–19 

mitigation and prevention services, 

recipients can identify the impacted 

entity as small businesses, nonprofits, or 

businesses in impacted industries in 

general. As with all enumerated eligible 

uses, recipients may presume that all 

COVID–19 mitigation and prevention 

programs and services are reasonably 

proportional responses to the harm 

identified unless a response is grossly 

disproportionate to the type or extent of 

harm experienced. Note that capital 

expenditures are not considered 

‘‘programs and services’’ and are not 

presumed to be reasonably proportional 

responses to an identified harm except 

as provided in section Capital 

Expenditures in General Provisions: 

Other. In other words, recipients can 

provide any COVID–19 prevention or 

mitigation service to small businesses, 

nonprofits, and businesses in impacted 


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76See Centers for Disease Control and Prevention, 

Participate in Outdoor and Indoor Activities, 

https://www.cdc.gov/coronavirus/2019-ncov/dailylife-coping/outdoor-activities.html (last visited 

November 8, 2021). 

77Hotlines or warmlines, crisis intervention, 

overdose prevention, infectious disease prevention, 

and services or outreach to promote access to 

physical or behavioral health primary care and 

preventative medicine. 

industries without any further analysis 

of impacts of the pandemic on those 

entities and whether the service is 

responsive. 

In some cases, this means that an 

entity not otherwise eligible to receive 

assistance to respond to negative 

economic impacts of the pandemic, for 

example an entity that did not 

experience a negative economic impact, 

may still be eligible to receive assistance 

under this category for COVID–19 

mitigation and prevention services. 

Uses of funds can include loans, 

grants, or in-kind assistance to small 

businesses, nonprofits, or other entities 

to implement COVID–19 prevention or 

mitigation tactics, such as vaccination; 

testing; contact tracing programs; 

physical plant changes to enable greater 

use of outdoor spaces or ventilation 

improvements; enhanced cleaning 

efforts; and barriers or partitions. For 

example, this would include assistance 

to a restaurant to establish an outdoor 

patio, given evidence showing much 

lower risk of COVID–19 transmission 

outdoors.76 Uses of funds can also 

include aid to travel, tourism, 

hospitality, and other impacted 

industries to implement COVID–19 

mitigation and prevention measures to 

enable safe reopening, for example, 

vaccination or testing programs, 

improvements to ventilation, physical 

barriers or partitions, signage to 

facilitate social distancing, provision of 

masks or personal protective equipment, 

or consultation with infection 

prevention professionals to develop safe 

reopening plans. 

Recipients providing assistance to 

small businesses, nonprofits, or 

impacted industries that includes 

capital expenditures (i.e., expenditures 

on property, facilities, or equipment) 

should also review the section Capital 

Expenditures in General Provisions: 

Other, which describes eligibility 

standards for these expenditures. 

Recipients providing assistances in the 

form of loans should review the section 

Treatment of Loans Made with SLFRF 

Funds in General Provisions: Other. 

Recipients should also be aware of the 

difference between beneficiaries of 

assistance and subrecipients when 

working with small businesses, 

nonprofits, or impacted industries. As 

noted above, Treasury presumes that the 

general public, as well as small 

businesses, nonprofits, and impacted 

industries in general, has been impacted 

by the COVID–19 disease itself and is 

eligible for services that mitigate or 

prevent COVID–19 spread. As such, a 

small business, nonprofit, or impacted 

industry receiving assistance to 

implement COVID–19 mitigation 

measures is a beneficiary of assistance 

(e.g., granting funds to a small business 

to develop an outdoor patio to reduce 

transmission). In contrast, if a recipient 

contracts with, or grants funds to, a 

small business, nonprofit, or impacted 

industry to carry out an eligible use for 

COVID–19 mitigation on behalf of the 

recipient, the entity is a subrecipient 

(e.g., contracting with a small business 

to operate COVID–19 vaccination sites). 

For further information on 

distinguishing between beneficiaries 

and subrecipients, as well as the 

impacts of the distinction on reporting 

and other requirements, see section 

Distinguishing Subrecipients versus 

Beneficiaries. 

b. Medical Expenses 

Background: The interim final rule 

also included as an enumerated eligible 

use medical expenses, including 

medical care and services to address the 

near-term and potential longer-term 

impacts of the disease on individuals 

infected. 

Public Comment: Some commenters 

sought clarification on the types of 

medical expenses eligible and for 

whom, including whether funds could 

be used under this category for 

expanding health insurance coverage 

(e.g., subsidies for premiums, expanding 

a group health plan), improvements to 

healthcare facilities or establishment of 

new medical facilities, direct costs of 

medical services, and costs to a selffunded health insurance plan (e.g., a 

county government health plan) for 

COVID–19 medical care. 

Treasury Response: In the final rule, 

Treasury is maintaining this enumerated 

eligible use category and clarifying that 

it covers costs related to medical care 

provided directly to an individual due 

to COVID–19 infection (e.g., treatment) 

or a potential infection (e.g., testing). 

This can include medical costs to 

uninsured individuals; deductibles, copays, or other costs not covered by 

insurance; costs for uncompensated care 

at a health provider; emergency medical 

response costs; and, for recipients with 

a self-funded health insurance plan, 

excess health insurance costs due to 

COVID–19 medical care. These are 

medical expenses due to COVID–19 and 

distinguish this category of eligible uses 

from other related eligible uses, like 

COVID–19 mitigation and prevention 

and health insurance expenses to 

households, to provide greater clarity 

for recipients in determining which 

category of eligible uses they should 

review to assess a potential use of funds. 

For discussion of eligibility for 

programs to expand health insurance 

coverage, see section Assistance to 

Households. 

c. Behavioral Health Care 

Background: Recognizing that the 

public health emergency, necessary 

mitigation measures like social 

distancing, and the economic downturn 

have exacerbated mental health and 

substance use challenges for many 

Americans, the interim final rule 

included an enumerated eligible use for 

mental health treatment, substance use 

treatment, and other behavioral health 

services, including a non-exhaustive list 

of specific services that would be 

eligible under this category. 

Public Comment: Many commenters 

expressed support for the interim final 

rule’s recognition of behavioral health 

impacts of the pandemic and eligible 

uses under this category. Several 

commenters requested clarification on 

the types of eligible services under this 

category, specifically whether both 

acute and chronic care are included as 

well as services that often do not 

directly accept insurance payments, like 

peer support groups. Some commenters 

highlighted the importance of cultural 

competence in providing effective 

behavioral health services. Some 

commenters suggested that funding 

should be available broadly and quickly 

for this purpose, recommending that 

funding available for behavioral health 

not be tied to the amount of revenue 

loss experienced by the recipient. 

Treasury Response: In the final rule, 

Treasury is maintaining this enumerated 

eligible use category and clarifying that 

it covers an expansive array of services 

for prevention, treatment, recovery, and 

harm reduction for mental health, 

substance use, and other behavioral 

health challenges caused or exacerbated 

by the public health emergency. The 

specific services listed in the interim 

final rule also remain eligible.77

Treasury is further clarifying that 

when providing behavioral health 

services, recipients can identify the 

impacted population as the general 

public and, as with all enumerated 

eligible uses, presume that all programs 

and services are reasonably proportional 

responses to the harm identified unless 

a response is grossly disproportionate to 

the type or extent of harm experienced. 

In contrast, capital expenditures are not 


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78However, SLFRF funds may not be used to 

reimburse a service that was also billed to 

insurance. 

79 In line with the Department of Health and 

Human Services, Overdose Prevention Strategy, 

https://www.hhs.gov/overdose-prevention/, and the 

Office of National Drug Control Policy, 

Administration’s Statement on Drug Policy 

Priorities for Year One (April 1, 2021), https://

www.whitehouse.gov/wp-content/uploads/2021/03/ 

BidenHarris-Statement-of-Drug-Policy-PrioritiesApril-1.pdf. 

considered ‘‘programs and services’’ and 

are not presumed to be reasonably 

proportional responses to an identified 

harm except as provided in section 

Capital Expenditures in General 

Provisions: Other. 

In other words, recipients can provide 

behavioral health services to members 

of the general public without any 

further analysis of impacts of the 

pandemic on those individuals and 

whether the service is responsive. 

Recipients may also use this eligible use 

category to respond to increased rates of 

behavioral health challenges at a 

population level or, at an individual 

level, new behavioral health challenges 

or exacerbation of pre-existing 

challenges, including new barriers to 

accessing treatment. 

Services that respond to these impacts 

of the public health emergency may 

include services across the continuum 

of care, including both acute and 

chronic care, such as prevention, 

outpatient treatment, inpatient 

treatment, crisis care, diversion 

programs (e.g., from emergency 

departments or criminal justice system 

involvement), outreach to individuals 

not yet engaged in treatment, harm 

reduction, and supports for long-term 

recovery (e.g., peer support or recovery 

coaching, housing, transportation, 

employment services). 

Recipients may also provide services 

for special populations, for example, 

enhanced services in schools to address 

increased rates of behavioral health 

challenges for youths, mental health 

first responder or law enforcementmental health co-responder programs to 

divert individuals experiencing mental 

illness from the criminal justice system, 

or services for pregnant women with 

substance use disorders or infants born 

with neonatal abstinence syndrome. 

Finally, recipients may use funds for 

programs or services to support 

equitable access to services and reduce 

racial, ethnic, or socioeconomic 

disparities in access to high-quality 

treatment. 

Eligible uses of funds may include 

services typically billable to 

insurance 78 or services not typically 

billable to insurance, such as peer 

support groups, costs for residence in 

supportive housing or recovery housing, 

and the 988 National Suicide Prevention 

Lifeline or other hotline services. 

Recipients may also use funds in 

conjunction with other federal grants or 

programs (see section Program 

Administration Provisions), though 

eligible services under SLFRF are not 

limited to those eligible under existing 

federal programs. 

Given the public health emergency’s 

exacerbation of the ongoing opioid and 

overdose crisis, Treasury highlights 

several ways that funds may be used to 

respond to opioid use disorder and 

prevent overdose mortality.79

Specifically, eligible uses of funds 

include programs to expand access to 

evidence-based treatment like 

medications to treat opioid use disorder 

(e.g., direct costs or incentives for 

emergency departments, prisons, jails, 

and outpatient providers to offer 

medications and low-barrier treatment), 

naloxone distribution, syringe service 

programs, outreach to individuals in 

active use, post-overdose follow up 

programs, programs for diversion from 

the criminal justice system, and 

contingency management interventions. 

Finally, for clarity, Treasury has 

addressed the eligibility standard for 

capital expenditures, or investments in 

property, facilities, or equipment, in one 

section of this Supplementary 

Information; see section Capital 

Expenditures in General Provisions: 

Other. Examples of capital expenditures 

related to behavioral health that 

Treasury recognizes as eligible include 

behavioral health facilities and 

equipment (e.g., inpatient or outpatient 

mental health or substance use 

treatment facilities, crisis centers, 

diversion centers), as long as they 

adhere to the standards detailed in the 

Capital Expenditures section. 

d. Preventing and Responding to 

Violence 

Background: The interim final rule 

highlighted that some types of violence 

had increased during the pandemic and 

that the ability of victims to access 

services had decreased, noting as an 

example the challenges that individuals 

affected by domestic violence face in 

accessing services. Accordingly, the 

interim final rule enumerated as an 

eligible use, in disproportionately 

impacted communities, evidence-based 

community violence intervention 

programs. Following the release of the 

interim final rule, Treasury received 

several recipient questions regarding 

whether and how funds may be used to 

respond to an increase in crime, 

violence, or gun violence in some 

communities during the pandemic. 

Treasury released further guidance 

identifying how enumerated eligible 

uses and eligible use categories under 

the interim final rule could support 

violence reduction efforts, including 

rehiring public sector staff, behavioral 

health services, and services to address 

negative economic impacts of the 

pandemic that may aid victims of crime. 

The guidance also identified an 

expanded set of enumerated eligible 

uses to address increased gun violence. 

Public Comment: Several commenters 

expressed support for this use of funds. 

Treasury Response: In the final rule, 

Treasury is maintaining enumerated 

eligible uses in this area and clarifying 

how to apply eligibility standards. 

Throughout the final rule, enumerated 

eligible uses should respond to an 

identified impact of the COVID–19 

public health emergency in a reasonably 

proportional manner to the extent and 

type of harm experienced. Many of the 

enumerated eligible uses—like 

behavioral health services, services to 

improve employment opportunities, and 

services to address educational 

disparities in disproportionately 

impacted communities—that respond to 

the public health and negative economic 

impacts of the pandemic may also have 

benefits for reducing crime or aiding 

victims of crime. For example, the 

pandemic exacerbated the impact of 

domestic violence, sexual assault, and 

human trafficking; enumerated eligible 

uses like emergency housing assistance, 

cash assistance, or assistance with food, 

childcare, and other needs could be 

used to support survivors of domestic 

violence, sexual assault, or human 

trafficking who experienced public 

health or economic impacts due to the 

pandemic. 

Public Comment: Several commenters 

expressed support for community 

violence intervention programs or 

argued that traditional public safety 

approaches had negatively impacted the 

social determinants of health in their 

communities. Several commenters 

recommended inclusion of approaches 

like mental health or substance use 

diversion programs. 

Treasury Response: Treasury 

recognizes the importance of 

comprehensive approaches to 

challenges like violence. The final rule 

includes an enumerated eligible use for 

community violence intervention 

programs in all communities, not just 

the disproportionately impacted 

communities eligible under the interim 

final rule. Given the increased rate of 

violence during the pandemic, Treasury 

has determined that this enumerated 


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80U.S. Bureau of Labor Statistics, All Employees, 

Total Nonfarm [PAYEMS], retrieved from FRED, 

Federal Reserve Bank of St. Louis; https://

fred.stlouisfed.org/series/PAYEMS (last visited 

December 7, 2021). 81 Id. 82U.S. Bureau of Labor Statistics, Unemployment 

Rate [UNRATE], retrieved from FRED, Federal 

Reserve Bank of St. Louis; https://fred.

stlouisfed.org/series/UNRATE (last visited 

December 7, 2021). 83U.S. Bureau of Labor Statistics, supra note 80. 84U.S. Bureau of Labor Statistics, supra note 82. 85U.S. Bureau of Economic Analysis, Real Gross 

Domestic Product [GDPC1], retrieved from FRED, 

Federal Reserve Bank of St. Louis, https://fred.

stlouisfed.org/series/GDPC1 (last visited December 

7, 2021). 86U.S. Department of the Treasury, Economy 

Statement by Catherine Wolfram, Acting Assistant 

Secretary for Economy Policy, for the Treasury 

Borrowing Advisory Committee (November 1, 

2021), available at https://home.treasury.gov/news/ 

press-releases/jy0453. 

87 Yuka Hayashi, IMF Cuts Global Growth 

Forecast Amid Supply-Chain Disruptions, 

Pandemic Pressures, Wall Street Journal (October 

12, 2021), available at https://www.wsj.com/ 

articles/imf-cuts-global-growth-forecast-amidsupply-chain-disruptions-warns-of-inflation-risks11634043601. 

88U.S. Bureau of Labor Statistics, supra note 80. 

89U.S. Bureau of Labor Statistics, Civilian Labor 

Force Level [CLF16OV], retrieved from FRED, 

Federal Reserve Bank of St. Louis, https://fred.

stlouisfed.org/series/CLF16OV (last visited 

December 7, 2021). 

90U.S. Bureau of Labor Statistics, Labor Force 

Statistics from the Current Population Survey: 

Employment status of the civilian population by sex 

and age (December 6, 2021), https://www.bls.gov/ 

news.release/empsit.t01.htm (last visited December 

7, 2021); U.S. Bureau of Labor Statistics, Labor 

Force Statistics from the Current Population 

Survey: Employment status of the civilian 

noninstitutional population by race, Hispanic or 

Latino ethnicity, sex, and age (December 6, 2021), 

https://www.bls.gov/web/empsit/cpseea04.htm (last 

visited December 7, 2021); U.S. Bureau of Labor 

Statistics, Labor Force Statistics from the Current 

Population Survey: Employment status of the 

civilian noninstitutional population 25 years and 

over by educational attainment (December 6, 2021), 

https://www.bls.gov/web/empsit/cpseea05.htm (last 

visited December 7, 2021). 

91Elise Gould & Jori Kandra, Wages grew in 2020 

because the bottom fell out of the low-wage labor 

market, Economic Policy Institute (Feb. 24, 2021), 

https://files.epi.org/pdf/219418.pdf. See also, 

Michael Dalton et al., The K-Shaped Recovery: 

Examining the Diverging Fortunes of Workers in the 

Recovery from the COVID–19 Pandemic using 

Business and Household Survey Microdata, U.S. 

Bureau of Labor Statistics Working Paper Series 

(July 2021), https://www.bls.gov/osmr/researchpapers/2021/pdf/ec210020.pdf. 

92Center on Budget and Policy Priorities, 

Tracking the COVID–19 Recession’s Effects on 

Food, Housing, and Employment Hardships, 

https://www.cbpp.org/research/poverty-andinequality/tracking-the-covid-19-economys-effectson-food-housing-and (last visited December 17, 

2021). 

eligible use is responsive to the impacts 

of the pandemic in all communities. 

The final rule incorporates guidance 

issued after the interim final rule on 

specifically types of services eligible, 

including: 

• Evidence-based practices like 

focused deterrence, street outreach, 

violence interrupters, and hospitalbased violence intervention models, 

complete with wraparound services 

such as behavioral therapy, trauma 

recovery, job training, education, 

housing and relocation services, and 

financial assistance; and 

• Capacity-building efforts at 

community violence intervention 

programs like funding more 

intervention workers, increasing their 

pay, providing training and professional 

development for intervention workers, 

and hiring and training workers to 

administer the programs. 

Public Comment: Some commenters 

sought further clarification on whether 

some of the enumerated eligible uses are 

considered responsive to all crime, 

violent crime, or gun violence. 

Treasury Response: Enumerated 

eligible uses that respond to an increase 

in gun violence may be pursued in 

communities experiencing an increase 

in gun violence associated with the 

pandemic, specifically: (1) Hiring law 

enforcement officials—even above prepandemic levels—or paying overtime 

where the funds are directly focused on 

advancing community policing 

strategies for gun violence, (2) 

additional enforcement efforts to reduce 

gun violence exacerbated by the 

pandemic, including prosecuting gun 

traffickers, dealers, and other parties 

contributing to the supply of crime 

guns, as well as collaborative federal, 

state, and local efforts to identify and 

address gun trafficking channels, and (3) 

investing in technology and equipment 

to allow law enforcement to more 

efficiently and effectively respond to the 

rise in gun violence resulting from the 

pandemic, for example technology to 

assist in the identification of guns 

whose serial numbers have been 

damaged. 

3. Negative Economic Impacts 

a. Assistance to Households 

Background 

While the U.S. economy is now on the 

path to a strong recovery, the public 

health emergency, including the 

necessary measures taken to protect 

public health, resulted in significant 

economic and financial hardship for 

many Americans. As businesses closed, 

consumers stayed home, schools shifted 

to remote education, and travel declined 

precipitously, over 22 million jobs were 

lost in March and April 2020.80 One 

year later, in April 2021, the economy 

still remained over 8 million jobs below 

its pre-pandemic peak,81 and the 

unemployment rate hovered around 6 

percent.82

In the months since Treasury issued 

the interim final rule in May 2021, the 

economy has made large strides in its 

recovery. The economy gained over 4 

million jobs in the seven months from 

May to November 2021; 83 the 

unemployment rate fell more than 1.5 

percentage points to 4.2 percent, which 

is the lowest rate since February 2020; 84

and the size of the nation’s economy 

surpassed the pre-pandemic peak in the 

second quarter of 2021.85

While the economy has made 

immense progress in its recovery since 

May 2021, the economy has also faced 

setbacks that illustrate the continued 

risks to the recovery. As the Delta 

variant spread across the country this 

summer and fall, the United States faced 

another severe wave of cases, deaths, 

and strain on the healthcare system, 

which contributed to a slowdown in the 

pace of recovery in the third quarter.86

Supply chain disruptions have also 

demonstrated the difficulties of 

restarting a global economy.87

Moreover, although many Americans 

have returned to work as of November 

2021, the economy remains 3.9 million 

jobs below its pre-pandemic peak,88 and 

2.4 million workers have dropped out of 

the labor market altogether relative to 

February 2020.89 Thus, despite much 

progress, there is a continued need to 

respond to the pandemic’s economic 

effects to ensure a full, broad-based, and 

equitable recovery. 

Indeed, the pandemic’s economic 

impacts continue to affect some 

demographic groups more than others. 

Rates of unemployment remain 

particularly severe among workers of 

color and workers with lower levels of 

educational attainment; for example, the 

overall unemployment rate in the 

United States was 4.2 percent in 

November 2021, but certain groups saw 

much higher rates: 6.7 percent for Black 

workers, 5.2 percent for Hispanic or 

Latino workers, and 5.7 percent for 

workers without a high school 

diploma.90 Job losses have also been 

particularly steep among low-wage 

workers, with these workers remaining 

furthest from recovery as of the end of 

2020.91 A severe recession, and its 

concentrated impact among low-income 

workers, has amplified food and 

housing insecurity, with an estimated 

nearly 20 million adults living in 

households where there is sometimes or 

often not enough food to eat and an 

estimated 12 million adults living in 

households that were not current on 

rent.92

While economic effects have been 

seen across many communities, there 

are additional disparities by race and 

income. For example, approximately 


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93Michael Karpman, Dulce Gonzalez, Genevieve 

M. Kenney, Parents Are Struggling to Provide for 

Their Families during the Pandemic, Urban 

Institute (May 2020), https://www.urban.org/ 

research/publication/parents-are-strugglingprovide-their-families-during-pandemic?utm_

source=urban_researcher&utm_

medium=email&utm_campaign=covid_

parents&utm_term=lhp. 

94Women have carried a larger share of childcare 

responsibilities than men during the COVID–19 

crisis. See, e.g., Gema Zamarro & Marı ́a J. Prados, 

Gender differences in couples’ division of 

childcare, work and mental health during COVID– 

19, Rev. Econ. Household 19:11–40 (2021), 

available at https://link.springer.com/article/ 

10.1007/s11150-020-09534-7; Titan Alon et al., The 

Impact of COVID–19 on Gender Equality, National 

Bureau of Economic Research Working Paper 26947 

(April 2020), available at https://www.nber.org/ 

papers/w26947. 

95U.S. Bureau of Labor Statistics, Labor Force 

Participation Rate—20 Yrs. & Over, Black or African 

American Women [LNS11300032], retrieved from 

FRED, Federal Reserve Bank of St. Louis; https:// 

fred.stlouisfed.org/series/LNS11300032 (last visited 

December 7, 2021). 

96U.S. Bureau of Labor Statistics, Labor Force 

Participation Rate—20 Yrs. & Over, Black or African 

American Men [LNS11300031], retrieved from 

FRED, Federal Reserve Bank of St. Louis; https:// 

fred.stlouisfed.org/series/LNS11300031 (last visited 

December 7, 2021). 

97U.S. Bureau of Labor Statistics, Labor Force 

Participation Rate—20 Yrs. & Over, White Women 

[LNS11300029], retrieved from FRED, Federal 

Reserve Bank of St. Louis; https://fred.stlouis

fed.org/series/LNS11300029 (last visited December 

7, 2021). 

98See, e.g., Michael Greenstone & Adam Looney, 

Unemployment and Earnings Losses: A Look at 

Long-Term Impacts of the Great Recession on 

American Workers, Brookings Institution (Nov. 4, 

2011), https://www.brookings.edu/blog/jobs/2011/ 

11/04/unemployment-and-earnings-losses-a-lookat-long-term-impacts-of-the-great-recession-onamerican-workers/. 

99Chi Chi Wu, Solving the Credit Conundrum: 

Helping Consumers’ Credit Records Impaired by the 

Foreclosure Crisis and Great Recession, National 

Consumer Law Center (Dec. 2013), https://

www.nclc.org/images/pdf/credit_reports/reportcredit-conundrum-2013.pdf. 

100 Irwin Garfinkel, Sara McLanahan, Christopher 

Wimer, eds., Children of the Great Recession, 

Russell Sage Foundation (Aug. 2016), available at 

https://www.russellsage.org/publications/childrengreat-recession. 

101 Kyle J. Casewell and Stephen Zuckerman, 

Food Insecurity, Housing Hardship, and Medical 

Care Utilization, Urban Institute (June 2018), 

available at https://www.urban.org/sites/default/ 

files/publication/98701/2001896_foodinsecurity_

housinghardship_medicalcareutilization_

finalized.pdf. 

102Housing insecurity is defined as not paying 

the full amount of rent or mortgage and/or utility 

bills (gas, oil, or electricity) sometime in the 

previous 12 months. 

103Housing quality hardship is defined as an 

affirmative response to one or more questions 

related to problems with a respondent’s physical 

dwelling: Pests and/or insects; leaking roof or 

ceiling; windows that are broken or cannot shut; 

exposed electrical wires; broken plumbing (toilet, 

hot water, other); holes in walls, ceiling, or floor; 

no appliances (refrigerator or stove); and no phone 

(of any kind). 

104 Id. 

105Elise Gould and Melat Kassa. Low-wage, lowhours workers were hit hardest in the COVID–19 

recession: The State of Working America 2020 

employment report, Economic Policy Institute (May 

2021), available at https://www.epi.org/publication/ 

swa-2020-employment-report/. 

106 Id. 

107 Id. 

108 Id. 

109R. Chetty, J. Friedman, N. Hendren, M. 

Stepner, & Team, T. O. I., The Economic Impacts 

of COVID–19: Evidence from a New Public Database 

Built Using Private Sector Data (No. w27431; p. 

w27431) (2020), National Bureau of Economic 

Research. https://doi.org/10.3386/w27431. 

110M. Despard, Michal Grinstein-Weiss, Yung 

Chun, and Stephen Roll, COVID–19 job and income 

loss leading to more hunger and financial hardship, 

Brookings Institute (July 13, 2020), https://

www.brookings.edu/blog/upfront/2020/07/13/ 

covid-19-job-and-income-loss-leading-to-morehunger-and-financial-hardship/. 

111N. Panchal, R. Kamal, C. Mun ̃ ana, & P. 

Chidambaram, The Implications of COVID–19 for 

Mental Health and Substance Use, Kaiser Family 

Foundation (February 10, 2021), https:// 

half of low-income, Black, and Hispanic 

parents reported difficulty covering 

costs related to food, housing, utility, or 

medical care.93 Over the course of the 

pandemic, inequities also manifested 

along gender lines, as schools closed to 

in-person activities, leaving many 

working families without childcare 

during the day.94 Women of color have 

been hit especially hard: The labor force 

participation rate for Black women has 

fallen by 3.6 percentage points 95 during 

the pandemic as compared to 1.3 

percentage points for Black men 96 and 

1.7 percentage points for White 

women.97

As the economy recovers, the effects 

of the pandemic-related recession may 

continue to impact households, 

including a risk of longer-term effects on 

earnings and economic potential. For 

example, unemployed workers, 

especially those who have experienced 

longer periods of unemployment, earn 

lower wages over the long term once 

rehired.98 In addition to the labor 

market consequences for unemployed 

workers, recessions can also cause 

longer-term economic challenges 

through, among other factors, damaged 

consumer credit scores 99 and reduced 

familial and childhood wellbeing.100

These potential long-term economic 

consequences underscore the continued 

need for robust policy support. 

Low- and moderate-income 

households, those with income levels at 

or below 300 percent of the federal 

poverty level (FPL), face particular 

hardships and challenges. These 

households report much higher rates of 

food insecurity and housing hardships 

than households with higher incomes. 

For example, households with incomes 

at or below 300 percent FPL are several 

times more likely to have reported 

struggling with food insecurity 

compared to households with income 

above 300 percent FPL.101 Similarly, 

low- and moderate-income households 

reported being housing insecure 102 at 

rates more than twice as high as higherincome households, and low- and 

moderate-income households reported 

housing quality hardship 103 at rates 

statistically significantly greater than 

the rate for higher-income 

households.104 The economic crisis 

caused by the pandemic worsened 

economic outcomes for workers in many 

low- and moderate-income households. 

Industries that employed low-wage 

workers experienced a disproportionate 

level of job loss. For example, from 

February 2020 to February 2021, the 

hospitality and leisure industry lost 

nearly 3.5 million jobs.105 While the 

entire industry was impacted, 72 

percent of the job losses occurred in the 

lowest wage service occupations 

compared to only a 6 percent rate of job 

loss in the highest wage management 

and finance jobs.106 Similar trends exist 

in other heavily impacted industries. In 

public education, the lowest wage 

occupations, service and transportation 

jobs, saw a job loss rate of 20 and 26 

percent, respectively.107 During that 

same time period, the highest wage 

occupations in public education, 

management, actually saw jobs increase 

by 7 percent.108

While many households suffered 

negative economic outcomes as a result 

of the COVID–19 pandemic and 

economic recession, households with 

low incomes were impacted in 

disproportionate and exceptional ways. 

From January 2020 to March 2021, lowwage workers experienced job loss at a 

rate five times higher than middle-wage 

workers, and high-wage workers 

actually experienced an increase in job 

opportunities.109 Because workers in 

low-income households were more 

likely to lose their job or experience 

reductions in pay, those same 

households were also more likely to 

experience economic hardships like 

trouble paying utility bills, affording 

rent or mortgage payments, purchasing 

food, and paying for medical 

expenses.110 The disproportionate 

negative impacts the pandemic has had 

on low-income families extend beyond 

financial insecurity. For example, lowincome families have reported higher 

levels of social isolation, stress, and 

other negative mental health outcomes 

during the pandemic. While over half of 

all U.S. adults report that their mental 

health was negatively affected by the 

pandemic, adults with low incomes 

reported major negative mental health 

impacts at a rate nearly twice that of 

adults with high incomes.111


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www.kff.org/coronavirus-covid-19/issue-brief/theimplications-of-covid-19-for-mental-health-andsubstance-use/. 

112For which recipients may presume that any 

student who did not have access to in-person 

instruction for a significant period of time was 

impacted by the pandemic. 

Summary of Interim Final Rule and 

Final Rule Structure 

Summary: The interim final rule 

provided a non-exhaustive list of 

enumerated eligible uses to respond to 

the negative economic impacts of the 

pandemic through assistance to 

households, as well as a standard for 

assessing whether uses of funds beyond 

those enumerated are eligible. 

The interim final rule described 

enumerated eligible uses for assistance 

to households in several categories: (1) 

Assistance to unemployed workers, (2) 

state Unemployment Insurance Trust 

Funds, (3) assistance to households, and 

(4) expenses to improve the efficacy of 

economic relief. Note that the interim 

final rule posed several questions to the 

public on enumerated eligible uses for 

assistance to households; comments on 

these questions are addressed in the 

relevant subject matter section below. 

In addition, in recognition that preexisting health, economic, and social 

disparities contributed to 

disproportionate pandemic impacts in 

certain communities, the interim final 

rule also provided a broader list of 

enumerated eligible uses to respond to 

the pandemic in disproportionately 

impacted communities, specifically: (1) 

Building stronger communities through 

investments in housing and 

neighborhoods, (2) addressing 

educational disparities, and (3) 

promoting healthy childhood 

environments. In the interim final rule, 

under the Public Health section, 

recipients could also provide services to 

address health disparities and increase 

access to health and social services; 

these eligible uses have been reorganized into the Assistance to 

Households section to consolidate 

responses in disproportionately 

impacted communities and enhance 

clarity. 

This section addresses enumerated 

eligible uses in the final rule to respond 

to negative economic impacts to 

households. As a reminder, recipients 

may presume that a household or 

population that experienced 

unemployment, experienced increased 

food or housing insecurity, or is low or 

moderate income experienced negative 

economic impacts resulting from the 

pandemic, and recipients may provide 

services to them that respond to these 

impacts, including these enumerated 

eligible uses. 

For guidance on how to determine 

whether a particular use, beyond those 

enumerated, is eligible; further detail on 

which households and communities are 

presumed eligible for services; and how 

to identify eligible households and 

communities beyond those presumed 

eligible, see section General Provisions: 

Structure and Standards. 

Reorganizations and CrossReferences: The final rule reorganizes 

all enumerated eligible uses for 

impacted and disproportionately 

impacted households into the section 

Assistance to Households, with the 

exception that expenses to improve the 

efficacy of economic relief has been recategorized into a different section of 

the final rule for increased clarity; for 

discussion of that use category, see 

section General Provisions: Other. 

Note that in conducting this 

reorganization, and based on further 

analysis and in response to comments, 

Treasury has determined that several 

enumerated uses included in the 

interim final rule for disproportionately 

impacted communities are directly 

responsive to negative economic 

impacts experienced by impacted 

households. In the final rule, these uses 

have been moved from 

‘‘disproportionately impacted’’ to 

‘‘impacted’’ households accordingly, 

making these services available to both 

disproportionately impacted and 

impacted households. These uses 

include assistance applying for public 

benefits or services; programs or 

services that address or mitigate the 

impacts of the COVID–19 public health 

emergency on childhood health or 

welfare, including childcare, early 

learning services, programs to provide 

home visits, and services for families 

involved in the child welfare system 

and foster youth; programs to address 

the impacts of lost instructional time for 

students; 112 and programs or services 

that address housing insecurity, lack of 

affordable housing, or homelessness. 

The following activities remain 

enumerated eligible uses for 

disproportionately impacted 

households: Remediation of lead paint 

or other lead hazards; housing vouchers 

and assistance relocating to 

neighborhoods with higher levels of 

economic opportunity; and programs or 

services that address educational 

disparities, including assistance to highpoverty school districts to advance 

equitable funding across districts and 

geographies and evidence-based 

services to address the academic, social, 

emotional, and mental health needs of 

students. 

Enumerated Eligible Uses for Impacted 

Households 

The interim final rule included 

several enumerated eligible uses to 

provide assistance to households or 

populations facing negative economic 

impacts due to COVID–19. Enumerated 

eligible uses included: Food assistance; 

rent, mortgage, or utility assistance; 

counseling and legal aid to prevent 

eviction or homelessness; emergency 

assistance for burials, home repairs, 

weatherization, or other needs; internet 

access or digital literacy assistance; cash 

assistance; or job training to address 

negative economic or public health 

impacts experienced due to a worker’s 

occupation or level of training. It also 

posed a question as to what other types 

of services or costs Treasury should 

consider as eligible uses to respond to 

the negative economic impacts of 

COVID–19. 

This section addresses each of these 

enumerated eligible uses in turn, with 

the exception of job training, which has 

been re-categorized for increased clarity 

to the eligible use for ‘‘assistance to 

unemployed and underemployed 

workers.’’ In general, commenters 

supported inclusion of these 

enumerated eligible uses to address key 

economic needs among households due 

to the pandemic, and Treasury is 

maintaining these eligible uses in the 

final rule, in line with commenters’ 

recommendations. 

1. Food assistance. The interim final 

rule included an enumerated eligible 

use for food assistance. Some 

commenters expressed support for this 

eligible use and emphasized the 

importance of aid to address food 

insecurity. Some commenters raised 

questions as to whether food assistance 

funds could be used to augment services 

provided through organizations like 

food banks, churches, and other food 

delivery services, or generally be subawarded to these organizations. 

Treasury Response: Treasury is 

maintaining this enumerated eligible 

use without change. Recipients may, as 

was the case under the interim final 

rule, administer programs through a 

wide range of entities, including 

nonprofit and for-profit entities, to carry 

out eligible uses on behalf of the 

recipient government (see section 

Distinguishing Subrecipients versus 

Beneficiaries). Further, Treasury is 

clarifying that capital expenditures 

related to food banks and other facilities 

primarily dedicated to addressing food 

insecurity are eligible; recipients 

seeking to use funds for capital 

expenditures should refer to the section 

Capital Expenditures in General 


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4360 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 

113See FAQ 2.21. Coronavirus State and Local 

Fiscal Recovery Funds, Frequently Asked 

Questions, as of July 19, 2021; https://

home.treasury.gov/system/files/136/SLFRPFAQ.pdf. 

114 Jung Hyun Choi, Laurie Goodman, and Daniel 

Pang, The Pandemic Is Making It Difficult for Momand-Pop Landlords to Maintain Their Properties, 

Urban Institute (July 23, 2021), https://

www.urban.org/urban-wire/pandemic-making-itdifficult-mom-and-pop-landlords-maintain-theirproperties. 

115U.S. Energy Information Administration, 

Residential Energy Consumption Survey (2017), 

Retrieved from https://www.eia.gov/consumption/ 

residential/data/2015/hc/php/hc11.1.php. 

D. Herna ́ndez, Understanding ‘energy insecurity’ 

and why it matters to health, Social Science & 

Medicine, 167, 1–10 (2016), https://doi.org/ 

10.1016/j.socscimed.2016.08.029. 

116Herna ́ndez, D. (2016). Understanding ‘energy 

insecurity’ and why it matters to health. Social 

Science & Medicine, 167, 1–10. https://doi.org/ 

10.1016/j.socscimed.2016.08.029. 

117U.S. Energy Information Administration, 

Residential Energy Consumption Survey (RECS) 

https://www.eia.gov/consumption/residential/data/ 

2015/hc/php/hc11.1.php. (last visited November 9, 

2021) 

Provisions: Other for additional 

eligibility standards that apply to uses 

of funds for capital expenditures. 

2. Emergency housing assistance. The 

interim final rule included an 

enumerated eligible use for rent, 

mortgage, or utility assistance and 

counseling and legal aid to prevent 

eviction or homelessness. 

Public Comment: Several commenters 

supported the inclusion of eviction 

prevention activities as an eligible use 

given the high number of households 

behind on rent and potentially at risk of 

eviction. Following release of the 

interim final rule, Treasury had also 

received requests for elaboration on the 

types of eligible services in this 

category. Some commenters also 

recommended including assistance to 

households for delinquent property 

taxes, for example to prevent tax 

foreclosures on homes, as an 

enumerated eligible use. 

Treasury Response: In response to 

requests for elaboration on the types of 

eligible services for eviction prevention, 

Treasury has provided further guidance 

that these services include ‘‘housing 

stability services that enable eligible 

households to maintain or obtain 

housing, such as housing counseling, 

fair housing counseling, case 

management related to housing stability, 

outreach to households at risk of 

eviction or promotion of housing 

support programs, housing related 

services for survivors of domestic abuse 

or human trafficking, and specialized 

services for individuals with disabilities 

or seniors that support their ability to 

access or maintain housing,’’ as well as 

‘‘legal aid such as legal services or 

attorney’s fees related to eviction 

proceedings and maintaining housing 

stability, court-based eviction 

prevention or eviction diversion 

programs, and other legal services that 

help households maintain or obtain 

housing.’’ 113 Treasury also emphasized 

that recipients may work with court 

systems, nonprofits, and a wide range of 

other organizations to implement 

strategies to support housing stability 

and prevent evictions. 

In the final rule, Treasury is 

maintaining these enumerated eligible 

uses, including those described in the 

interim final rule and later guidance, in 

line with commenters’ 

recommendations. To enhance clarity, 

Treasury is also elaborating on some 

types of services included under this 

eligible use category; this remains a 

non-exhaustive list of eligible services. 

For example, eligible services under this 

use category include: Rent, rental 

arrears, utility costs or arrears (e.g., 

electricity, gas, water and sewer, trash 

removal, and energy costs, such as fuel 

oil), reasonable accrued late fees (if not 

included in rental or utility arrears), 

mortgage payment assistance, financial 

assistance to allow a homeowner to 

reinstate a mortgage or to pay other 

housing-related costs related to a period 

of forbearance, delinquency, or default, 

mortgage principal reduction, 

facilitating mortgage interest rate 

reductions, counseling to prevent 

foreclosure or displacement, relocation 

expenses following eviction or 

foreclosure (e.g., rental security 

deposits, application or screening fees). 

Treasury is clarifying that assistance to 

households for delinquent property 

taxes, for example to prevent tax 

foreclosures on homes, was permissible 

under the interim final rule and 

continues to be so under the final rule. 

In addition, Treasury is also clarifying 

that recipients may administer utility 

assistance or address arrears on behalf 

of households through direct or bulk 

payments to utility providers to 

facilitate utility assistance to multiple 

consumers at once, so long as the 

payments offset customer balances and 

therefore provide assistance to 

households. 

This eligible use category also 

includes emergency assistance for 

individuals experiencing homelessness, 

either individual-level assistance (e.g., 

rapid rehousing services) or assistance 

for groups of individuals (e.g., master 

leases of hotels, motels, or similar 

facilities to expand available shelter). 

Further, Treasury is clarifying that 

transitional shelters (e.g., temporary 

residences for people experiencing 

homelessness) are eligible capital 

expenditures. Recipients seeking to use 

funds for capital expenditures should 

refer to the section Capital Expenditures 

in General Provisions: Other for 

additional eligibility standards that 

apply to uses of funds for capital 

expenditures. 

Note that this enumerated eligible use 

describes ‘‘emergency housing 

assistance,’’ or assistance for responses 

to the immediate or near-term negative 

economic impacts of the pandemic. The 

final rule also clarifies and expands the 

ability of recipients to use SLFRF funds 

to address the general lack of affordable 

housing and housing challenges 

underscored by the pandemic. For 

discussion of affordable housing eligible 

uses, including services that primarily 

increase access to affordable, highquality housing and support stable 

housing and homeownership over the 

long term, see the eligible use for 

‘‘promoting long-term housing security: 

Affordable housing and homelessness.’’ 

3. Emergency assistance for pressing 

needs: Burials, home repairs, 

weatherization, or other needs. The 

interim final rule included an 

enumerated eligible use for emergency 

assistance for burials, home repairs, 

weatherization, and other needs; these 

types of programs may provide 

emergency assistance for pressing and 

unavoidable household needs. Treasury 

did not receive comments on this 

eligible use and is maintaining it in the 

final rule. 

Background on Home Repairs and 

Weatherization: The economic 

downturn has meant fewer households 

had the resources needed to make 

necessary home repairs and 

improvements. In May 2021, 28 percent 

of landlords reported deferring 

maintenance and 27 percent of tenants 

reported maintenance requests going 

unanswered.114 While small and 

cosmetic repairs can often wait, 

deferring major repairs, such as 

plumbing needs, can result in unsafe 

and unhealthy living environments and, 

eventually, the need for more expensive 

repairs and fixes. 

In addition to repairs, many homes 

are in need of weatherization. 

Weatherization assistance helps lowand moderate-income Americans save 

energy, reduce their utility bills, and 

keeps them and their homes safe. One 

in three households is energy 

insecure,115 meaning they do not have 

the ability to meet their energy needs.116

Weatherization efforts are particularly 

important for low- and moderateincome households. Households of 

color, renters, and households with low 

or moderate incomes are all more likely 

to report energy insecurity.117 These 


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Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4361 

118A. Drehobl, & L. Ross, Lifting the high energy 

burden in America’s largest cities: How energy 

efficiency can improve low income and 

underserved communities, American Council for an 

Energy Efficient Economy (2016), https://

www.aceee.org/sites/default/files/publications/ 

researchreports/u1602.pdf. 

119See, e.g., Nation Telecommunications and 

Information Administration, More than Half of 

American Households Used the Internet for HealthRelated Activities in 2019, NTIA Data Show 

(December 7, 2020), https://www.ntia.gov/blog/ 

2020/more-half-american-households-usedinternet-health-related-activities-2019-ntia-datashow; Nation Telecommunications and Information 

Administration, Nearly a Third of American 

Employees Worked Remotely in 2019, NTIA Data 

Show (September 3, 2020) https://www.ntia.gov/ 

blog/2020/nearly-third-american-employeesworked-remotely-2019-ntia-data-show; and 

generally, Nation Telecommunications and 

Information Administration, Digital Nation Data 

Explorer (June 10, 2020), https://www.ntia.gov/ 

data/digital-nation-data-explorer. 

120BroadbandSearch Blog Post, How Do U.S. 

Internet Costs Compare To The Rest Of The World?, 

available at https://www.broadbandsearch.net/blog/ 

internet-costs-compared-worldwide. 

121Pew Research Center, Mobile Technology and 

Home Broadband 2021 (June 3, 2021), https://

www.pewresearch.org/internet/2021/06/03/mobiletechnology-and-home-broadband-2021/. 

122Pew Research Center, 53% of Americans Say 

the internet Has Been Essential During the COVID– 

19 Outbreak (April 30, 2020), https://www.pew

research.org/internet/2020/04/30/53-of-americanssay-the-internet-has-been-essential-during-thecovid-19-outbreak/. 

123 Id. 

disparities are partially a result of 

economic hardship but are also caused 

by inequitable access to housing with 

proper insulation, up to date heating, 

cooling, and ventilation systems, and 

functioning and up to date lighting and 

appliances.118 While programs that 

address the effects of energy hardships, 

like the Low-Income Home Energy 

Assistance Program (LIHEAP), are 

critical, weatherization attempts to 

address root causes by addressing issues 

that lead to energy insecurities. 

4. Internet access or digital literacy 

assistance. The interim final rule 

included an enumerated eligible use for 

assistance to households for internet 

access or digital literacy assistance. This 

enumerated eligible use, which 

responds to the negative economic 

impacts of the pandemic on a household 

by providing assistance that helps them 

secure internet access or increase their 

ability to use computers and the 

internet, is separate from the eligible use 

category for investments in broadband 

infrastructure, under Sections 

602(c)(1)(D) and 603(c)(1)(D), which is 

used to build new broadband networks 

through infrastructure construction or 

modernization. For discussion of 

broadband infrastructure investment in 

the final rule, see section Broadband 

Infrastructure in Infrastructure. 

Background: The COVID–19 public 

health emergency has underscored the 

importance of universally available, 

high-speed, reliable, and affordable 

broadband coverage as millions of 

Americans rely on the internet to 

participate in, among other critical 

activities, school, healthcare, and work. 

Recognizing the need for such 

connectivity, SLFRF funds can be used 

to make necessary investments in 

broadband infrastructure that increase 

access over the long term, as well as the 

necessary supports to purchase internet 

access or gain digital literacy skills 

needed to complete activities of daily 

living during the pandemic. 

The National Telecommunications 

and Information Administration (NTIA) 

highlighted the growing necessity of 

broadband in daily lives through its 

analysis of NTIA internet Use Survey 

data, noting that Americans turn to 

broadband internet service for every 

facet of daily life including work, study, 

and healthcare.119 With increased use of 

technology for daily activities and the 

movement by many businesses and 

schools to operating remotely during the 

pandemic, broadband has become even 

more critical for people across the 

country to carry out their daily lives. 

However, even in areas where 

broadband infrastructure exists, 

broadband access may be out of reach 

for millions of Americans because it is 

unaffordable, as the United States has 

some of the highest broadband prices in 

the Organisation for Economic Cooperation and Development (OECD).120

According to a 2021 Pew Research 

Center study, 20 percent of nonbroadband users say that the monthly 

cost of home broadband is the primary 

reason they do not have broadband at 

home, and 40 percent say that cost is 

one reason for their lack of home 

broadband.121 Further, according to 

another survey, 22 percent of parents 

with homebound schoolchildren during 

the COVID–19 pandemic say that it is 

very or somewhat likely that their 

children will have to rely on public wifi to finish their schoolwork because 

there is no reliable internet connection 

at home; this percentage nearly doubles 

for lower-income parents, 40 percent of 

whom noted that their children will 

have to rely on public wi-fi.122 The 

same survey showed that 36 percent of 

lower-income parents with homebound 

children say their child will not be able 

to complete their schoolwork because 

they do not have access to a computer 

at home.123

Public Comment: Many commenters 

highlighted the importance of 

broadband access during the pandemic, 

including for remote work and 

education, and argued that affordability 

presents a major barrier to broadband 

adoption by households; in other words, 

many households live in areas that have 

broadband infrastructure and service 

available but are unable to purchase 

service for their household due to the 

high cost. These commenters argued 

that broadband must be affordable to be 

accessible. 

Commenters proposed several 

potential responses to affordability 

concerns. Some commenters 

recommended that building ‘‘gap 

networks,’’ or broadband networks built 

at low cost to provide affordable service 

in areas where it is lacking, be eligible 

as assistance to households to respond 

to the negative economic impacts of the 

pandemic, even if they do not meet the 

technical standards for eligibility under 

the eligible use category of broadband 

infrastructure investment, especially the 

required speed standards for new 

service. These commenters argued that 

the networks have shown promise as a 

timely means to expand access to 

affordable broadband internet during 

the pandemic, even if they may not 

provide service speeds needed for more 

intensive internet uses. Another 

commenter requested eligible uses 

include funding cellular towers to 

decrease costs. One commenter 

recommended that affordability should 

be addressed through other programs 

but not SLFRF given that affordability 

and availability may require nuanced 

solutions that would be complex to 

combine. 

Treasury Response: The interpretive 

framework and enumerated eligible uses 

allow recipients flexibility to address 

identified pandemic impacts, including 

through solutions that take into account 

the particularized issues in their 

community. Given extensive commenter 

feedback on the importance of 

affordability to achieving broadband 

access, and the centrality of broadband 

to participating in work, education, 

healthcare, and other activities during 

the pandemic, affordability programs 

are an appropriate eligible use to 

respond to the negative economic 

impacts of the pandemic and Treasury 

is maintaining the enumerated eligible 

use for assistance to households for 

internet access and digital literacy 

programs in the final rule. 

Building or constructing new 

broadband networks is an infrastructure 

investment and is governed by a 

separate clause in the statute. Treasury 

has addressed comments on ‘‘gap 

networks’’ that require infrastructure 

build-out in the section Broadband 

Infrastructure in Infrastructure. 


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124Amy Finkelstein & Matthew J Notowidigdo, 

Take-Up and Targeting: Experimental Evidence 

from SNAP, The Quarterly Journal of Economics, 

vol 134(3), pages 1505–1556 (2019), https://

www.nber.org/papers/w24652. 

Public Comment: Some commenters 

also use the term ‘‘gap networks’’ to 

refer to equipment installed as part of 

wi-fi systems, such as routers, repeaters, 

and access points; this equipment 

provides consumer access to an existing 

broadband network and does not require 

new network build-out or construction. 

These commenters recommended that 

Treasury permit, as assistance to 

households for internet access, 

investments in public wi-fi networks, 

free wi-fi in public housing 

communities, and other equipment that 

offers internet access to end users by 

utilizing existing broadband networks. 

Other commenters recommended that 

eligible uses in this category include 

providing devices and equipment 

necessary to access the internet, like 

computers and routers, directly to lowincome households. 

Treasury Response: Treasury has 

determined that these services, which 

expand internet access without 

constructing new networks, are an 

appropriate enumerated eligible use as 

assistance to households to respond to 

a negative economic impact, and they 

are permitted under the final rule. 

Treasury is clarifying that eligible uses 

under this category can also include a 

wide range of programs and services to 

expand internet access and digital 

literacy, such as subsidies for the cost of 

internet service, other programs that 

support adoption of internet service 

where available, digital literacy 

programs, or programs that provide 

devices and equipment to access the 

internet (e.g., programs that provide 

equipment like tablets, computers, or 

routers) to households. Recipients 

seeking to use funds for equipment 

should refer to the section Capital 

Expenditures in General Provisions: 

Other for additional eligibility standards 

that apply to uses of funds for capital 

expenditures (e.g., equipment, property, 

and facilities). 

5. Cash assistance. The interim final 

rule included as an enumerated eligible 

use cash assistance and provided that 

cash transfers must be ‘‘reasonably 

proportional’’ to the negative economic 

impact they address and may not be 

‘‘grossly in excess of the amount needed 

to address’’ the impact. In assessing 

whether a transfer is reasonably 

proportional, recipients may ‘‘consider 

and take guidance from the per person 

amounts previously provided by the 

Federal Government in response to the 

COVID–19 crisis,’’ and transfers 

‘‘grossly in excess of such amounts’’ are 

not eligible. 

Public Comment: Several commenters 

expressed support for this eligible use, 

noting that this is a common policy tool 

for some governments to support the 

well-being of households and 

individuals in their communities. Some 

commenters requested that Treasury set 

a specific dollar amount for permissible 

cash transfers, and Treasury has also 

received recipient questions on whether 

specific types of transfers, such as those 

to a substantial share of the population 

in the jurisdiction, would be a 

permissible use of funds. 

Treasury Response: Treasury is 

maintaining this enumerated eligible 

use in the final rule, in line with 

commenters’ recommendations. Because 

the final rule is intended to provide 

flexibility to recipients to respond to the 

particularized pandemic impacts in 

their communities, which may vary in 

type and intensity, setting a specific 

dollar threshold for eligible cash 

transfers would fail to recognize the 

particularized needs of communities 

and limit recipients’ flexibility to tailor 

their response to those needs. 

To provide greater clarity, Treasury is 

elaborating on the analysis that 

recipients may undertake to assess the 

eligibility of specific cash assistance 

programs or transfers. Cash transfers, 

like all eligible uses in this category, 

must respond to the negative economic 

impacts of the pandemic on a household 

or class of households. For the reasons 

discussed above, recipients may 

presume that low- and moderate-income 

households (as defined in the final rule), 

as well as households that experienced 

unemployment, food insecurity, or 

housing insecurity, experienced a 

negative economic impact due to the 

pandemic. 

Recipients may also identify other 

households or classes of households 

that experienced a negative economic 

impact of the pandemic and provide 

cash assistance that is reasonably 

proportional to, and not grossly in 

excess of, the amount needed to address 

the negative economic impact. For 

example, in the ARPA, Congress 

authorized Economic Impact Payments 

to households at certain income levels, 

identifying and responding to a negative 

economic impact of the pandemic on 

these households. 

Finally, Treasury has reiterated in the 

final rule that responses to negative 

economic impacts should be reasonably 

proportional to the impact that they are 

intended to address. Uses that bear no 

relation or are grossly disproportionate 

to the type or extent of harm 

experienced would not be eligible uses. 

Reasonably proportional refers to the 

scale of the response compared to the 

scale of the harm. It also refers to the 

targeting of the response to beneficiaries 

compared to the amount of harm they 

experienced; for example, it may not be 

reasonably proportional for a cash 

assistance program to provide assistance 

in a very small amount to a group that 

experienced severe harm and in a much 

larger amount to a group that 

experienced relatively little harm. 

6. Survivor’s benefits. The interim 

final rule included an enumerated 

eligible use for survivor’s benefits to 

surviving family members of 

individuals who have died from 

COVID–19, including cash assistance to 

widows, widowers, or dependents. 

Public Comment: Treasury did not 

receive any comments on the inclusion 

of survivor’s benefits as an enumerated 

use for impacted households in the 

interim final rule. 

Treasury Response: This use of funds 

remains eligible under the final rule. 

Consistent with the general 

reorganization noted above, the final 

rule organizes survivor’s benefits under 

assistance to households to clarify that 

households are the intended 

beneficiaries of survivor’s benefits. 

7. Assistance accessing or applying 

for public benefits or services. 

Recognizing that eligible households 

often face barriers to accessing public 

benefits or services that improve health 

and economic outcomes, the interim 

final rule included as an enumerated 

eligible use in disproportionately 

impacted communities, public benefits 

navigators to assist community members 

with navigating and applying for 

available federal, state, and local public 

benefits or services. Treasury also 

clarified in subsequent guidance after 

the interim final rule that this eligible 

use category would include outreach 

efforts to increase uptake of the Child 

Tax Credit. 

Background: The under-enrollment of 

eligible households in social assistance 

programs is a well-recognized and 

persistent challenge. There are many 

reasons why a household may not be 

receiving a particular benefit even 

though they are eligible. For many 

federal programs, enrollment processes 

vary from state-to-state. Sometimes, 

households are simply unaware that 

they are eligible for a particular 

benefit.124 For example, despite having 

one of the highest rates of participation 

of any benefits program, nearly 20 

percent of eligible individuals do not 

participate in the Supplementary 

Nutritional Assistance Program 


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125United States Department of Agriculture, 

Trends in Supplemental Nutrition Assistance 

Program Participation Rates: Fiscal Year 2016 to 

Fiscal Year 2018 (May 2021), https://fns-prod.

azureedge.net/sites/default/files/resource-files/ 

Trends2016-2018.pdf. 

126 Jeremy Barofsky et al., Spreading Fear: The 

Announcement Of The Public Charge Rule Reduced 

Enrollment In Child Safety-Net Programs, Health 

Affairs (October 2020), https://www.health

affairs.org/doi/full/10.1377/hlthaff.2020.00763. 

127See, e.g., U.S. Department of the Treasury, By 

ZIP Code: Number of Children under Age 18 with 

a Social Security Number Who Are Not Found on 

a Tax Year 2019 or 2020 Tax Return but who 

Appear on a Tax Year 2019 Form 1095 and 

Associated Number of Policy Holders (June 2021), 

https://home.treasury.gov/system/files/131/ 

Estimated-Counts-of-Children-Unclaimed-for-CTCby-ZIP-Code-2019.pdf. 

128Women have carried a larger share of 

childcare responsibilities than men during the 

COVID–19 crisis. See, e.g., Gema Zamarro & Mar( ́a 

J. Prados, Gender differences in couples’ division of 

childcare, work and mental health during COVID– 

19, Rev. Econ. Household 19:11–40 (2021), 

available at https://link.springer.com/article/ 

10.1007/s11150-020-09534-7; Titan Alon et al., The 

Impact of COVID–19 on Gender Equality, National 

Bureau of Economic Research Working Paper 26947 

(April 2020), available at https://www.nber.org/ 

papers/w26947. 

129See, e.g., Center For The Study Of Child Care 

Employment (CSCCE), Child Care Sector Jobs: BLS 

Analysis (November 8, 2021), https://cscce.

berkeley.edu/child-care-sector-jobs-bls-analysis/; 

Emma K. Lee, and Zachary Parolin. The Care 

Burden during COVID–19: A National Database of 

Child Care Closures in the United States, Socius 

(January 2021), doi:10.1177/23780231211032028. 130 Jason Furman, Melissa Schettini Kearney, and 

Wilson Powell, The Role of Childcare Challenges in 

the US Jobs Market Recovery During the COVID– 

19 Pandemic, NBER Working Paper No. 28934 (June 

2021), https://www.nber.org/papers/w28934. 

131U.S. Census Bureau, Phase 3.2 Household 

Pulse Survey: Table 2. Childcare Arrangements in 

the Last 4 Weeks for Children Under 5 Years Old, 

by Selected Characteristics, (Washington: 2021), 

available at https://www.census.gov/programssurveys/household-pulse-survey/data.html. 

132 Id. 

133N. Kalluri, C. Kelly, & A. Garg, Child Care 

During the COVID–19 Pandemic: A Bad Situation 

Made Worse. Pediatrics (2021), https://doi.org/ 

10.1542/peds.2020-041525. 

134National Association for the Education of 

Young Children, Am I Next? Sacrificing to Stay 

Open, Child Care Providers Face a Bleak Future 

Without Relief (December 2020), https://

www.naeyc.org/sites/default/files/globally-shared/ 

downloads/PDF. 

135 G. G. Weisenfeld, Impacts of Covid-19 on 

Preschool Enrollment and Spending, New 

Brunswick, NJ: National Institute for Early 

Education Research (2021), https://nieer.org/wpcontent/uploads/2021/03/NIEER_Policy_Brief_

Impacts-of-Covid-19on_Preschool_Enrollment_and_

Spending_3_16_21.pdf. 

136Heather Long, ‘The pay is absolute crap’: 

Child-care workers are quitting rapidly, a red flag 

for the economy, Washington Post (September 19, 

2021), https://www.washingtonpost.com/business/ 

2021/09/19/childcare-workers-quit/. 

137Monash University, The emotional toll of 

COVID–19 among early childhood educators 

(August 5, 2020) https://lens.monash.edu/@

education/2020/08/05/1381001/the-emotional-tollof-covid-19-among-early-childhood-educators. 

138 Daphna Bassok and Anna Shapiro, 

Understanding COVID–19-era enrollment drops 

Continued 

(SNAP).125 In other cases, policies like 

public charge and asset testing can 

discourage otherwise eligible 

households.126 While the gap between 

households that need assistance and the 

number of households participating in 

public benefit programs has always 

existed, narrowing that gap and 

ensuring households receive the support 

they need is critical in mitigating the 

negative economic impacts of the 

pandemic. 

Public Comment: Treasury has also 

received feedback from recipients and 

stakeholders noting the need to increase 

awareness and uptake of assistance 

programs, including gaps that remain in 

enrollment of eligible households in 

programs to address the negative 

economic impacts of the pandemic.127

Treasury Response: Treasury has 

determined that this impact of the 

pandemic is widely experienced across 

many jurisdictions and programs or 

services to increase awareness and 

uptake of assistance programs would 

respond to the pandemic’s negative 

economic impact in all communities. As 

such, in the final rule, this use is eligible 

for any impacted household or class of 

households, not only in 

disproportionately impacted 

communities. 

8. Promoting healthy childhood 

environments. The interim final rule 

included programs and services that 

promote healthy childhood 

environments as an enumerated eligible 

use for disproportionately impacted 

households. The interim final rule listed 

three programs or services included 

under this use: Childcare; programs to 

provide home visits by health 

professionals, parent educators, and 

social service professionals to 

individuals with young children to 

provide education and assistance for 

economic support, health needs, or 

child development; and services for 

child welfare-involved families and 

foster youth to provide support and 

education on child development, 

positive parenting, coping skills, or 

recovery for mental health and 

substance use. The interim final rule 

also included an enumerated eligible 

use for early learning services in 

disproportionately impacted 

communities, to address disparities in 

education. 

Public Comment: Childcare and Early 

Learning: Treasury received multiple 

comments that were supportive of the 

provision of childcare. Treasury has also 

received multiple comments and 

questions indicating that recipients have 

identified a need for childcare for a 

broader range of households and 

communities, for example those that 

may need childcare in order to return to 

work, in addition to households and 

communities disproportionately 

impacted by the pandemic. Several 

commenters expressed uncertainty 

about how childcare facilities should 

interact with the boundaries of a QCT. 

Finally, one commenter recommended 

that pre-K or early learning services 

encompass care for infants and toddlers, 

arguing that these types of care are often 

more expensive or challenging to access 

for families. 

Background: Childcare and Early 

Learning: As daycares and schools 

closed in-person activities during the 

pandemic, many working families were 

left without childcare during the day.128

Although daycare centers and schools 

have since reopened in many 

communities, there remains a persistent 

childcare shortage as childcare 

employment levels have not fully 

rebounded since the sharp decline in 

childcare employment at the beginning 

of the pandemic.129 As a result, working 

parents in communities across the 

country, and more specifically women, 

may face challenges entering or 

reentering the labor force.130

Low-income households are also more 

likely to lose access to quality 

childcare.131 The widespread closure of 

childcare centers combined with a lack 

of access to paid family leave means 

parents in low-income households are 

more likely to experience a reduction of 

income or leave their jobs due to a lack 

of childcare options.132

Additionally, childcare providers 

serving primarily low-income families 

were less likely to remain open during 

the pandemic because of tighter profit 

margins and general community 

financial insecurity, compared to 

childcare providers serving primarily 

high-income families.133 134

In addition to disruptions to 

childcare, early learning services were 

also significantly impacted by the 

pandemic, and the disruption of these 

services had widespread ramifications 

for learning loss, parental support, and 

equity. Early learning centers have seen 

declined enrollment across the board, 

though there was a larger dip in 

enrollment for low-income 

households.135 This lower enrollment 

coincides with a diminishing workforce, 

as similarly to childcare, early 

childhood educators have been leaving 

the profession due to long hours, low 

pay,136 and health and safety 

concerns.137 As a result, children’s 

school readiness has suffered, leading to 

potential long-term impacts on life 

outcomes.138 The impact also extended 


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among early-grade public school students, 

Brookings Institution (February 22, 2021), https://

www.brookings.edu/blog/brown-center-chalkboard/ 

2021/02/22/understanding-covid-19-eraenrollment-drops-among-early-grade-public-schoolstudents/. 

139Centers for Disease Control and Prevention, 

Pregnant and Recently Pregnant People, https://

www.cdc.gov/coronavirus/2019-ncov/need-extraprecautions/pregnant-people.html (last visited 

November 9, 2021). 

140 Id. 

141Sarah Javaid, Sarah Barringer, Sarah D 

Compton, Elizabeth Kaselitz, Maria Muzik, Cheryl 

A. Moyer, The impact of COVID–19 on prenatal 

care in the United States: Qualitative analysis from 

a survey of 2519 pregnant women, Midwifery, 

Volume 98, 2021, 102991, ISSN 0266–6138, https:// 

doi.org/10.1016/j.midw.2021.102991. 

142A Basu, HH Kim, R Basaldua, KW Choi, L 

Charron, et al., A cross-national study of factors 

associated with women’s perinatal mental health 

and wellbeing during the COVID–19 pandemic, 

PLOS ONE 16(4): e0249780, (2021), https://doi.org/ 

10.1371/journal.pone.0249780. 

143Amanda Taub, A New Covid-19 Crisis: 

Domestic Abuse Rises Worldwide, New York Times 

(April 6, 2020), https://www.nytimes.com/2020/04/ 

06/world/coronavirus-domestic-violence.html. 

144 Xenia Shih Bion, Efforts to Reduce Black 

Maternal Mortality Complicated by COVID–19, 

California Health Care Foundation (April 20, 2020), 

https://www.chcf.org/blog/efforts-reduce-blackmaternal-mortality-complicated-covid-19/. 

145U.S. Department of Health and Human 

Services, Home Visiting Evidence of Effectiveness, 

https://homvee.acf.hhs.gov/outcomes/maternal%20

health/In%20Brief. 

146National Conference of State Legislatures, 

Criminal Justice System Responses to COVID–19 

(November 16, 2020), https://www.ncsl.org/ 

research/civil-and-criminal-justice/criminal-justiceand-covid-19.aspx. 

147 John Burton Advocates for Youth, The 

Cumulative Impact of the Pandemic on Youth Who 

Have Been in Foster Care or Homeless (May 2020) 

https://jbay.org/wp-content/uploads/2021/04/JBAYCOVID-19-Impact.pdf. 

148 John Kelly, Next Week, Thousands of Foster 

Youth Will Age Out on the Same Day (September 

21, 2021), https://imprintnews.org/subscribercontent/thousands-of-foster-youth-will-age-out-onthe-same-day/59006. 

149Conrad-Hiebner, Aislinn, and Elizabeth 

Byram, The Temporal Impact of Economic 

Insecurity on Child Maltreatment: A Systematic 

Review. Trauma, Violence, & Abuse, vol. 21, no. 1, 

Jan. 2020, pp. 157–178, doi:10.1177/ 

1524838018756122. 

to parents. Parents, especially mothers, 

may face challenges reentering or 

remaining in the workforce if early 

learning services are unavailable. 

Treasury Response: Childcare and 

Early Learning Services: Treasury agrees 

with commenters’ analysis that 

challenges accessing or affording 

childcare have been widespread during 

the pandemic, affecting many 

jurisdictions and populations across the 

country. Disruptions to early care and 

learning services similarly have had 

broad impact and likely result in 

negative impacts for young children and 

their parents. As such, these 

enumerated eligible uses are generally 

responsive to the negative economic 

impacts of the pandemic in all 

communities, not just in 

disproportionately impacted 

communities. Under the final rule, 

childcare and early learning services are 

available to impacted households or 

classes of households, not just those 

disproportionately impacted. These 

eligible uses can include new or 

expanded services, increasing access to 

services, efforts to bolster, support, or 

preserve existing providers and services, 

and similar activities. 

Further, Treasury is clarifying that 

improvements to or new construction of 

childcare, daycare, and early learning 

facilities are eligible capital 

expenditures. Recipients seeking to use 

funds for capital expenditures should 

refer to the section Capital Expenditures 

in General Provisions: Other for 

additional eligibility standards that 

apply to uses of funds for capital 

expenditures. 

Public Comment: Home Visiting: 

Treasury has also received questions 

about whether the provision of home 

visiting services would be responsive to 

the health and mental health needs of 

impacted new mothers, citing the 

positive mental health impacts shown 

on the mother as well as improved 

outcomes for children. 

Background: Home Visiting: Pregnant 

and recently pregnant individuals are at 

an increased risk for serious illness from 

COVID–19.139 Furthermore, pregnant 

individuals with COVID–19 are more 

likely to experience preterm birth 

(delivering the baby earlier than 37 

weeks).140 In addition to heightened 

health risks from COVID–19, pregnant 

individuals may have experienced 

significant changes to their prenatal care 

during the pandemic 141 or may also 

have experienced increased mental 

health challenges, including high levels 

of depression, anxiety, loneliness, and 

post-traumatic stress during the 

pandemic.142

Home visiting services provided to 

families, particularly new mothers and 

newborns, feature regular home visits 

from trained nurses, social workers, 

and/or counselors who provide health 

care, mental health resources, positive 

parenting support, support in making 

personal health decisions, and 

awareness of other potentially helpful 

services. These functions have become 

even more essential at mitigating 

negative factors associated with the 

pandemic. Home visits give 

professionals a chance to flag potential 

domestic violence, which has risen 

worldwide over the course of the 

pandemic.143 Racial health disparities 

can also be driven down by home visits. 

For example, Black women are more 

likely to avoid hospitals during the 

pandemic, and home visitors can help 

either assuage concerns around 

hospitals or give effective advice for 

alternative methods of childbirth.144

Given the disproportionate effect of the 

pandemic on people of color, home 

visits are an essential equity tool that 

tackle major negative effects of the 

pandemic. These are just a few 

selections from the evidence that 

suggests many home visiting models can 

have a positive effect on maternal 

physical and mental health.145

Treasury Response: Home Visiting: 

Given the widespread impact of 

COVID–19 on pregnant and recently 

pregnant individuals, Treasury is recategorizing home visiting services as an 

eligible use for impacted communities, 

not just disproportionately impacted 

communities. Under the final rule, these 

eligible uses are available to impacted 

households or classes of households. 

Public Comment: Child Welfare: 

While the interim final rule noted that 

certain types of assistance, particularly 

around child development and 

parenting, were eligible for child 

welfare-involved families, Treasury has 

received some recipient questions 

asking whether financial, educational, 

housing, or other supports and services 

are eligible uses for foster youth, 

including those aging out of the system, 

and child welfare-involved families. 

Other commenters asked about whether 

funding for kinship care would be 

eligible. 

Background: Child Welfare: The 

COVID–19 pandemic placed meaningful 

strain on the child welfare and foster 

care system. Court hearings were 

delayed,146 essential mental health care 

was shifted to a virtual environment, 

and attendance and performance in 

school among foster children dropped 

sharply.147 Additionally, there was a 

nationwide rise of new children 

entering the foster care system and 

many states placed temporary moratoria 

on children aging out of the foster care 

system.148 As these temporary moratoria 

expire, additional support will be 

needed to assist children exiting the 

system. 

Additionally, financial and material 

hardship are causal factors in the 

increase of new children entering the 

foster care system, whether through loss 

of a caregiver, domestic violence,149 or 

other associated costs of the pandemic. 

Therefore, support to decrease these 

hardships will support families and 

increase positive outcomes for youth 


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150 Verlenden JV, Pampati S, Rasberry CN, et al. 

Association of Children’s Mode of School 

Instruction with Child and Parent Experiences and 

Well-Being During the COVID–19 Pandemic— 

COVID Experiences Survey, United States, October 

8–November 13, 2020. MMWR Morb Mortal Wkly 

Rep 2021;70:369–376. DOI: http://dx.doi.org/ 

10.15585/mmwr.mm7011a1external icon. 

151U.S. Department of Education, Strategies for 

Using American Rescue Plan Funding to Address 

the Impact of Lost Instructional Time, August 2021. 

Retrieved from https://www2.ed.gov/documents/ 

coronavirus/lost-instructional-time.pdf. 

152Consumer Financial Protection Bureau, 

Housing insecurity and the COVID–19 pandemic 

Continued 

and families that may otherwise become 

involved in the child welfare system. 

Treasury Response: In the final rule, 

Treasury is clarifying that services to 

foster youth, including those aging out 

of the system, and child welfareinvolved families may encompass a 

wide array of financial, educational, 

child development, or health supports, 

or other supports necessary, including 

supports for kinship care. 

9. Addressing the impacts of lost 

instructional time. 

Public Comment: The interim final 

rule included an enumerated eligible 

use to address educational disparities in 

disproportionately impacted 

communities, recognizing that 

underserved students have been more 

severely impacted by the pandemic and 

including responsive services for early 

learning, enhance funding to highpoverty districts, and providing 

evidence-based services to address the 

academic, social, emotional, and mental 

health needs of students. Some 

commenters expressed concerns that 

learning loss or the negative impacts of 

lost instructional time due to school 

closures or remote education during the 

pandemic had affected a significant 

share of students in grades kindergarten 

through twelve (K–12), including 

students who may not fall within a 

disproportionally impacted group. 

Background: The COVID–19 

pandemic resulted in the widespread 

closure of schools across the nation. 

While many schools and districts 

reopened to in-person instruction or 

implemented remote learning, the shift 

was not immediate or without 

consequence. Children who received 

virtual only or combined remote and inperson instruction were more likely to 

report experiencing negative mentaland physical health outcomes than 

children who received in-person 

instruction.150

Treasury Response: Under the final 

rule, addressing the impact of lost 

instructional time and/or learning loss 

is an enumerated eligible use for 

impacted households. When providing 

services to address lost instructional 

time, recipients may presume that any 

K–12 student who lost access to inperson instruction for a significant 

period of time has been impacted by the 

pandemic and is thus eligible for 

responsive services. 

Interventions or services that address 

the impact of lost instructional time 

may include offering high-quality 

tutoring and other extended learning 

opportunities, providing differentiated 

instruction, implementing activities to 

meet the comprehensive needs of 

students, expanding and improving 

language access for parents and families, 

providing information and assistance to 

parents and families on how they can 

effectively support students, including 

in a distance learning environment, 

improving student engagement in 

distance education, and administering 

and using high-quality assessments to 

assess students’ academic progress, 

among others. In designing services 

under this eligible use, recipients may 

wish to reference guidance from the 

Department of Education on strategies 

for addressing lost instructional time.151

The final rule also maintains a 

separate enumerated eligible use for 

addressing educational disparities in 

disproportionately impacted 

communities. This eligible use includes 

services to address disparities in 

educational outcomes that predate the 

pandemic and amplified its impact on 

underserved students; these include, for 

example, enhanced funding to highpoverty districts and providing 

evidence-based services to address the 

academic, social, emotional, and mental 

health needs of students. 

Finally, as described in the section 

Public Health, recipients can provide a 

broad range of behavioral health 

services, including services for children 

and youth in schools, to respond to the 

impacts of the pandemic on mental 

health and other behavioral health 

issues. When providing behavioral 

health services, recipients may presume 

that the general public was impacted by 

the pandemic and provide behavioral 

health services to members of the 

general public, including children and 

youth in schools, without any further 

analysis of impacts of the pandemic on 

those individuals and whether the 

service is responsive. 

10. Promoting long-term housing 

security: affordable housing and 

homelessness. Under the interim final 

rule, recipients may use SLFRF funds to 

provide a set of housing services to 

communities that have been 

disproportionately impacted by the 

pandemic. Specifically, the interim final 

rule provided that programs or services 

that address housing insecurity, lack of 

affordable housing, or homelessness, 

were responsive to the negative 

economic impacts of the pandemic 

when provided to disproportionately 

impacted households and communities. 

The enumerated uses included 

supportive housing or other programs or 

services to improve access to stable, 

affordable housing among individuals 

who are homeless and development of 

affordable housing to increase supply of 

affordable and high-quality living units. 

Many recipients have already 

announced plans to use SLFRF funds 

for affordable housing interventions in 

all of these categories. Treasury received 

many comments asking for additional 

clarity or flexibility in these uses. 

As detailed below, based on multiple 

public comments and questions and 

Treasury’s subsequent analysis, 

Treasury has determined that 

supportive housing or other programs or 

services to improve access to stable, 

affordable housing among individuals 

who are homeless, and the development 

of affordable housing to increase supply 

of affordable and high-quality living 

units are responsive to the needs of 

impacted populations, not only 

disproportionately impacted 

populations. This final rule reflects this 

clarification and builds on the 

objectives stated in the interim final rule 

to improve access to stable, affordable 

housing, including through 

interventions that increase the supply of 

affordable and high-quality living units, 

improve housing security, and support 

durable and sustainable 

homeownership. 

Finally, note that ‘‘emergency housing 

assistance,’’ or assistance for responses 

to the immediate negative economic 

impacts of the pandemic through 

services like financial assistance for 

rental arrears or mortgage payments, is 

also an eligible use category for 

assistance to households under the final 

rule; see the eligible use for ‘‘emergency 

housing assistance’’ above. The 

provision of housing vouchers and 

assistance relocating to neighborhoods 

with higher levels of economic 

opportunity remains an eligible use 

under assistance to disproportionately 

impacted households; for discussion, 

see the eligible use for ‘‘housing 

vouchers and assistance relocating’’ 

below. 

Background: Affordable Housing: It is 

clear that the ongoing pandemic and 

resulting economic crisis are having a 

profound, long-term negative effect on 

the pre-existing affordable housing 

crisis facing low-income households.152


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(March 2020), https://files.consumerfinance.gov/f/ 

documents/cfpb_Housing_insecurity_and_the_

COVID-19_pandemic.pdf. 

153 Joint Center For Housing Studies Of Harvard 

University, The State of the Nation’s Housing (June 

2021), https://www.jchs.harvard.edu/sites/default/ 

files/reports/files/Harvard_JCHS_State_Nations_

Housing_2021.pdf. 

154 Davin Reed and Eileen Divringi, Household 

Rental Debt During COVID–19: Update for 2021, 

Federal Reserve Bank of Philadelphia (2020), 

available at: https://www.philadelphiafed.org/ 

community-development/housing-andneighborhoods/household-rental-debt-during-covid19-update-for-2021. Further, some research suggests 

that liquidity may be a more important predictor of 

default than other factors, including income or 

equity. See Trading Equity for Liquidity (June 

2019), available at https://www.jpmorganchase.

com/content/dam/jpmc/jpmorgan-chase-and-co/ 

institute/pdf/institute-trading-equity-forliquidity.pdf. 

The combination of a large number of 

higher-income households who have 

weathered the pandemic without 

significant income losses, low interest 

rates, and housing supply constraints 

exacerbated by the pandemic, have 

driven a sharp increase in the sale price 

of homes.153 Meanwhile, many lowincome renters and homeowners are 

struggling with lost employment and 

income and are behind on their housing 

payments.154

Public Comment: Affordable Housing 

Outside of Low-Income Geographies: A 

major theme in comments was that 

affordable housing interventions, 

especially development of affordable 

housing, should be allowed outside of 

QCTs, as concentrating the supply of 

affordable housing in low-income 

geographies can have the effect of 

increasing both concentrated poverty 

and racial and economic segregation, 

while locking lower-income households 

in need of housing support out of highopportunity neighborhoods with access 

to employment and amenities. 

Treasury Response: Affordable 

Housing Outside Low-Income 

Geographies: As previously stated, 

affordable housing is not confined to 

low-income geographies under the 

interim final rule. As discussed 

elsewhere, the interim final rule 

presumed that QCTs, as well as 

communities served by Tribal 

governments, were disproportionately 

impacted for administrative 

convenience, but recipients may 

identify other populations, households, 

or geographic areas with disparate 

impacts of COVID–19 and provide 

affordable housing services to them. For 

example, under the interim final rule, a 

city could determine that its lowincome residents faced disproportionate 

impacts of COVID–19 and develop 

affordable housing targeted to these 

households. Such a scenario could 

include, for example, affordable projects 

in higher-income neighborhoods that 

would allow residents to live closer to 

jobs and well-resourced schools. 

Additionally, as noted above, 

Treasury is finalizing the rule with some 

changes to the treatment of affordable 

housing development designed to 

clarify that permanent supportive 

housing or other programs or services to 

improve access to stable, affordable 

housing among individuals who are 

homeless, and the development of 

affordable housing to increase supply of 

affordable and high-quality living units, 

are responsive to individuals and 

households that were impacted by the 

pandemic in addition to those that were 

disproportionately impacted. This shift 

is in line with commenters’ 

recommendations and consistent with 

the facts described above, which 

demonstrate that lack of supply of 

affordable housing units contributed to 

the pandemic’s impact on housing 

insecurity and unsustainable housing 

cost burdens and that these impacts 

were experienced broadly across the 

country. 

Public Comment: Eligible Activities: 

Many commenters asked for clarity on 

what types of activities (e.g., land 

acquisition, construction, preconstruction costs, operating costs, etc.) 

are eligible uses of SLFRF, and what 

affordability criteria must be applied to 

affordable housing development. 

Commenters encouraged Treasury to 

allow the full array of affordable 

housing activities, including particular 

requests for broad flexibility for Tribal 

communities, and to specify that 

‘‘development’’ should include 

construction, preservation, 

rehabilitation, and operation. Other 

commenters requested clarification 

about permissible program 

administration approaches for 

affordable housing, such as contracting 

methods and distribution of funds. 

Some commenters asked that 

Treasury require SLFRF funds to be 

focused on the lowest-income 

households, who suffer the most severe 

rent burdens and risks of housing 

instability, and whose housing situation 

has left them particularly vulnerable to 

COVID–19. For example, one 

commenter argued that SLFRF funds 

should only be used to support 

affordable housing for households 

making 50 percent of AMI or less and 

that recipients should be required to set 

aside significant portions of any 

developments for renters making 30 

percent of AMI or less and persons with 

physical and sensory disabilities. Other 

commenters requested a more flexible 

approach to affordable housing 

definitions. 

Treasury Response: Eligible Activities: 

The final rule clarifies eligibility of 

affordable housing development for 

recipients; these uses were eligible 

under the interim final rule, but 

Treasury is providing further guidance 

to enhance clarity and respond to 

recipient and commenter questions. 

As with all interventions to address 

the negative economic impacts of the 

pandemic, affordable housing projects 

must be responsive and proportional to 

the harm identified. This test may be 

met by affordable housing development 

projects—which may involve large 

expenditures and capital investments— 

if the developments increase the supply 

of long-term affordable housing for lowincome households. While there may be 

less costly (or non-capital) alternatives 

to affordable housing development, a 

comprehensive response to the 

widespread housing challenges 

underscored by the pandemic will 

require the production of additional 

affordable homes, and targeted 

affordable housing development is a 

cost-effective and proportional response 

to this need. 

For purposes of this test, Treasury 

will presume that any projects that 

would be eligible for funding under 

either the National Housing Trust Fund 

(HTF) or the Home Investment 

Partnerships Program (HOME) are 

eligible uses of SLFRF funds. Note that 

these programs use different income 

limits than the definition of low- and 

moderate-income adopted by Treasury. 

Given the severity of the affordable 

housing shortage, and the ways in 

which the pandemic has exacerbated 

the need for affordable, high-quality 

dwelling units, Treasury has determined 

that the households served by these 

federal housing programs have been 

impacted by the pandemic and its 

negative economic impacts and that 

development of affordable housing 

consistent with these programs is a 

related and reasonably proportional 

response to those impacts. Additionally, 

affordable housing projects provided by 

a Tribal government are eligible uses of 

SLFRF if they would be eligible for 

funding under the Indian Housing Block 

Grant program, the Indian Community 

Development Block Grant program, or 

the Bureau of Indian Affairs Housing 

Improvement Program. Alignment with 

these programs, which define 

‘‘affordable housing’’ in a manner 

consistent with a proportionate 

response to the affordable housing 

challenges faced by low- and moderateincome households as a result of the 

negative economic impacts of the 

pandemic, is intended to give recipients 

comfort and clarity as they design a 


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155Stefan Pichler, Katherine Wen, and Nicolas R. 

Ziebarth, COVID–19 Emergency Sick Leave Has 

Helped Flatten The Curve In The United States: 

Study examines the impact of emergency sick leave 

on the spread of COVID–19, Health Affairs 39, no. 

12 (2020): 2197–2204, https://www.health

affairs.org/doi/10.1377/hlthaff.2020.00863. 

156Scott Brown et al., Employee and Worksite 

Perspectives of the Family and Medical Leave Act: 

Results from the 2018 Surveys, Abt Associates (July 

2020), https://www.dol.gov/sites/dolgov/files/ 

OASP/evaluation/pdf/WHD_FMLA2018Survey

Results_FinalReport_Aug2020.pdf. 

157 Id. 

158Ann P. Bartel et al., Racial and ethnic 

disparities in access to and use of paid family and 

medical leave: evidence from four nationally 

representative datasets, U.S. Bureau of Labor 

Statistics (BLS) (January 2019), https://www.bls.gov/ 

opub/mlr/2019/article/racial-and-ethnicdisparities-in-access-to-and-use-of-paid-familyandmedical-leave.htm. 

Continued 

wide variety of affordable housing 

interventions, including production, 

rehabilitation, and preservation of 

affordable rental housing and, in some 

cases, affordable homeownership units. 

These programs allow the financing of 

a wide range of affordable housing 

activities and set clear eligibility criteria 

that many recipients are already familiar 

with. 

Finally, to further support sustainable 

and durable homeownership, recipients 

may consider offering down payment 

assistance, such as through 

contributions to a homeowner’s equity 

at origination or that establish a postclosing, mortgage reserve account on 

behalf of the borrower that may be 

utilized to make a missed or partial 

mortgage payment at any point during 

the life of the loan (e.g., if the borrower 

faces financial stress). Homeownership 

assistance that would be eligible under 

the Community Development Block 

Grant (at 24 CFR 507.201(n)) is also an 

eligible use of SLFRF funds. 

Public Comment: Permanent 

Supportive Housing: Treasury has 

received comments encouraging the use 

of SLFRF funds for permanent 

supportive housing. This is an eligible 

use under the interim final rule: Both 

the development of affordable housing 

(including operating subsidies) and 

wraparound services such as behavioral 

health services, employment services, 

and other supportive services, are 

eligible responses to the public health 

crisis or its negative economic impacts. 

Treasury Response: The final rule 

maintains the eligibility of permanent 

supportive housing as an enumerated 

use. Treasury is also clarifying that 

other affordable housing developments 

targeted to specialized populations are 

also eligible, for example recovery 

housing for individuals in recovery from 

substance use. 

Public Comment: Operating Expenses: 

Commenters specifically asked that 

Treasury allow the use of SLFRF funds 

for operating expenses of affordable 

housing units, as operating subsidies are 

typically required to reach extremely 

low-income households, whose 

affordable rents may be lower than the 

ongoing cost of operating their unit. 

Treasury Response: Operating 

expenses for eligible affordable housing 

were an eligible use of funds under the 

interim final rule and the final rule 

maintains this treatment. This may 

include capitalized operating reserves. 

Rehabilitation and repair of public 

housing will also be considered an 

eligible use of SLFRF funds. 

Public Comment: Affordable Housing 

Loans and Revolving Loan Funds: Some 

commenters requested that loans with 

maturities beyond the period of 

performance or revolving loan funds 

that revolve beyond the period of 

performance be eligible uses of SLFRF 

funds if used for affordable housing. 

Some commenters pointed out that forprofit developers of low-income housing 

through the Low-Income Housing Tax 

Credit (LIHTC) may be deterred from 

accepting grants to bridge funding gaps 

in current LIHTC deals by the treatment 

of grants to for-profit entities in the 

calculation of eligible basis for the 

LIHTC. 

Treasury Response: The final rule 

does not change the treatment of loans 

from the interim final rule. For more 

details see section Treatment of Loans 

in Program Administration Provisions. 

Similarly, the final rule does not change 

the treatment of grants to support 

affordable housing development, 

including developments supported by 

the LIHTC: such grants are an eligible 

use of funds. 

Additional enumerated eligible uses 

for assistance to impacted households. 

As noted above, the interim final rule 

posed a question on what other types of 

services or costs Treasury should 

consider as eligible uses to respond to 

the negative economic impacts of 

COVID–19. In response, commenters 

proposed a wide variety of additional 

recommended enumerated eligible uses 

to assist households, ranging from 

general categories of services (e.g., legal 

and social services) to services that 

respond to needs widely experienced 

across the country (e.g., access to and 

affordability of health insurance) to 

services that are most applicable to the 

particularized needs of certain 

populations or geographic areas of the 

United States (e.g., senior citizens, 

SNAP recipients, immigrants, formerlyincarcerated individuals, responding to 

environmental issues in certain 

geographic regions). Other commenters 

generally requested a high degree of 

flexibility to respond to the particular 

needs of their communities. 

Treasury Response: Given the large 

number and diversity of SLFRF 

recipients, Treasury’s approach to 

assistance to households in the final 

rule aims to clarify additional 

enumerated eligible uses that respond to 

negative economic impacts of the 

pandemic experienced widely in many 

jurisdictions across the country, making 

it clear and simple for recipients to 

pursue these enumerated eligible uses 

under the final rule. In the final rule, 

Treasury is clarifying several additional 

uses, which generally respond to 

pandemic impacts experienced broadly 

across jurisdictions and populations, are 

eligible under the interim final rule as 

assistance to households and continue 

to be so under the final rule, as outlined 

below. 

11. Paid sick, medical, or family 

leave. 

Public Comment: Some commenters 

argued that the pandemic increased the 

need for paid sick or medical leave, as 

staying home when ill is recommended 

by the CDC to prevent spread of the 

virus but lack of access to paid sick 

leave often prevents workers from 

staying home. Other commenters 

recommended paid family leave as an 

eligible use, arguing that shortages in 

access to childcare or home health 

assistance, as well as school closures, 

may increase the need for family 

members to serve as caretakers. 

Background: The COVID–19 

pandemic highlighted the importance of 

paid leave as well as the number of 

workers who do not have access to paid 

sick and/or family leave. When workers 

have access to paid leave, they are less 

likely to report to work sick, and 

therefore less likely to spread illnesses 

in the workplace: One study 

demonstrates that the emergency sick 

leave provision of the Families First 

Coronavirus Response Act (FFCRA) 

reduced the spread of COVID–19.155

The lack of paid leave exacerbates 

financial hardships experienced as a 

result of the public health emergency. A 

2018 survey by the Department of Labor 

found that two-thirds of employees that 

took unpaid or partial-paid leave 

experienced financial hardship.156

Furthermore, because the Family and 

Medical Leave Act (FMLA) excludes 

small employers, part-time workers, and 

workers who have been with their 

employer for less than a year, 44 percent 

of workers do not have access to even 

unpaid leave.157 Workers of color and 

workers with lower incomes are less 

likely to have access to paid leave.158 159


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159U.S. Bureau of Labor Statistics, Employee 

Benefits in the United States (March 2019), https:// 

www.bls.gov/ncs/ebs/benefits/2019/ownership/ 

civilian/table31a.pdf. 

160Maya Rossin-Slater et al., Local exposure to 

school shootings and youth antidepressant use, 

Proceedings of the National Academy of Sciences, 

vol 117(38), pages 23484–23489 (2020), https://

www.pnas.org/content/117/38/23484; Ariel Marek 

Pihl and Gaetano Basso, Did California Paid Family 

Leave Impact Infant Health?, Journal of Policy 

Analysis and Management, https://onlinelibrary.

wiley.com/doi/abs/10.1002/pam.2210. 

161 J.C. Jacobs, A. Laporte, C.H. Van Houtven, P.C. 

Coyte, Caregiving intensity and retirement status in 

Canada. Social Science & Medicine, 102, 74–82 

(2014), https://www.sciencedirect.com/science/ 

article/abs/pii/S0277953613006631. 

162E. Lightfoot, R.P. Moone, Caregiving in times 

of uncertainty: Helping adult children of aging 

parents find support during the COVID–19 

outbreak, Journal of Gerontological Social Work, 

63(6–7), 542–552 (2020), https://www.tandfon

line.com/doi/abs/10.1080/01634372.2020.1769793. 

163Note: ‘‘Caregiving intensity’’ is defined as the 

amount and type of care provided by informal 

caregivers; ‘‘Caregiving burden’’ is defined as the 

impacts on physical and mental health, and healthrelated quality of life of informal caregivers. 

164SA Cohen, ZJ Kunicki, MM Drohan, ML 

Greaney, Exploring Changes in Caregiver Burden 

and Caregiving Intensity due to COVID–19, 

Gerontology and Geriatric Medicine (January 2021), 

doi:10.1177/2333721421999279. 

165 Id. 

166 Jennifer Tolbert et al., Key Facts about the 

Uninsured Population, Kaiser Family Foundation 

(November 6, 2020), https://www.kff.org/uninsured/ 

issue-brief/key-facts-about-the-uninsuredpopulation/. 167 Joshua Aarons et. al., As the COVID–19 

Recession Extended into the Summer of 2020, More 

Than 3 Million Adults Lost Employer-Sponsored 

Health Insurance Coverage and 2 Million Became 

Uninsured, Urban Institute (September 18, 2020), 

https://www.urban.org/research/publication/covid19-recession-extended-summer-2020-more-3- 

million-adults-lost-employer-sponsored-healthinsurance-coverage-and-2-million-becameuninsured. 

168Centers for Medicare and Medicaid Services, 

Medicaid and CHIP Enrollment Trends Snapshot 

through September 2020 (Washington: 2021), 

available at https://www.medicaid.gov/sites/ 

default/files/2021-01/september-medicaid-chipenrollment-trend-snapshot.pdf. 169Centers for Medicare and Medicaid Services, 

2021 Federal Health Insurance Exchange Weekly 

Enrollment Snapshot: Final Snapshot (January 12, 

2021) available at https://www.cms.gov/newsroom/ 

fact-sheets/2021-federal-health-insuranceexchange-weekly-enrollment-snapshot-finalsnapshot. 170Sara R. Collins, Munira Z. Gunja, and 

Gabriella N. Aboulafia, U.S. Health Insurance 

Coverage in 2020: A Looming Crisis in Affordability 

(New York: Commonwealth Fund, 2020), available 

at https://www.commonwealthfund.org/ 

publications/issue-briefs/2020/aug/looming-crisishealth-coverage-2020-biennial. 171 Id. 

172Federal Deposit Insurance Corporation, FDIC 

National Survey of Unbanked and Underbanked 

Households (2015), https://www.fdic.gov/household

survey/2015/2015execsumm.pdf. 

173Federal Deposit Insurance Corporation, How 

America Banks: Household Use of Banking and 

Financial Services 2019 FDIC Survey, https://

www.fdic.gov/analysis/household-survey/ 

2019report.pdf. 

For workers that are also caregivers 

for children, seniors, or other family 

members, there may be a similar need 

for—and benefits of—paid family leave. 

For example, some workers may have 

struggled during the pandemic to 

balance caring for children, as schools 

and daycares closed, and working. For 

new parents, paid parental leave results 

in fewer infant hospitalizations, 

lowering parental stress, increasing 

parental involvement, and improving 

the overall health of parent and child.160

COVID–19 has also increased the levels 

of ‘‘caregiving intensity’’ 161 and 

‘‘caregiving burden’’ 162 for those 

providing care to seniors or older family 

members.163 164 When surveyed, more 

than half of caregivers reported that 

COVID–19 increased both the amount of 

caregiving responsibilities they had as 

well as the negative physical and mental 

impacts their caregiving responsibilities 

had on themselves.165

Treasury Response: Treasury agrees 

that these constitute impacts of the 

pandemic, and accordingly, under the 

final rule, creating, expanding, or 

financially supporting paid sick, 

medical, or family leave programs is an 

enumerated eligible use of funds to 

respond to the negative economic 

impacts of the pandemic. 

12. Health insurance. 

Public Comment: Several commenters 

recommended that uses of funds to 

expand access to health insurance be 

enumerated eligible uses; commenters 

believed that the heightened risk of 

illness or hospitalization due to COVID– 

19 had increased the negative economic 

impacts of lacking health insurance. 

Background: In 2019, prior to the 

pandemic, it was estimated that 11 

percent of nonelderly adults lacked 

health insurance.166 By mid-2020, job 

loss had resulted in an estimated 3.3 

million people losing their employer 

sponsored insurance, resulting in an 

additional 2 million uninsured 

adults.167 Participation in Medicaid, the 

Children’s Health Insurance Program 

(CHIP), and the Affordable Care Act 

(ACA) marketplace played an important 

role in minimizing the number of 

people who completely lost health 

insurance during the early phases of the 

pandemic; Medicaid and CHIP 

enrollment increased by 9 percent from 

February to September 2020 168 and 8.3 

million people enrolled in insurance 

through the ACA marketplace.169

Although the ACA, CHIP, and 

Medicaid have significantly reduced the 

number of uninsured Americans 

through the pandemic and the economic 

downturn, adequate coverage and 

affordability still remains an issue for 

many. In 2020, 21 percent of workingage adults were inadequately insured, 

meaning even if they had insurance, 

they incurred a significant amount of 

out-of-pocket costs.170 Additionally, 37 

percent of adults reported struggling 

with medical bills or medical debt and 

71 percent of adults who did not 

purchase insurance cited affordability as 

the main factor.171

Treasury Response: Treasury agrees 

that loss of health insurance, increased 

financial risk from lacking health 

insurance, or excessive out-of-pocket 

healthcare costs constitute negative 

economic impacts of the pandemic. 

Under the final rule, programs or 

services to expand access to health 

insurance coverage are an enumerated 

eligible use as assistance to households, 

for example, subsidies for health 

insurance premiums or expansion of a 

recipient’s health insurance plan to 

cover additional employees who 

currently lack coverage. 

13. Services for the unbanked and 

underbanked. 

Public Comment: One commenter 

expressed support for the inclusion of 

services to increase banking access as an 

allowable expense under SLFRF. The 

commenter recommended that states be 

encouraged to offer opportunities for 

consumers to open safe and affordable 

accounts capable of receiving direct 

payments. The commenter emphasized 

that allowing unbanked and 

underbanked households to receive 

funds securely through no-fee, direct 

deposit will help connect or reconnect 

consumers to the mainstream financial 

system. 

Background: Banking inequities can 

make it difficult for unbanked or 

underbanked households to access 

housing, jobs, and other important 

economic opportunities. Being 

unbanked or underbanked can also 

make it challenging for households to 

apply for and receive financial 

assistance, including services like 

pandemic emergency housing 

assistance. 

Safe, affordable, and accessible 

financial services play a critical role in 

assisting households in the United 

States in managing income volatility 

and cash flow shortages.172 Currently, 

over 5 percent of families, or 7 million 

households are ‘‘unbanked,’’ meaning 

they do not have a bank account.173

Low-income households, non-white 

households, and households with 

individuals with disabilities were even 

more likely to be unbanked. In 2019, 16 

percent of Native American households, 

14 percent of Black households, and 12 

percent of Hispanic households were 

unbanked, compared to 2.5 percent of 

white households. Additionally, 


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174Board of the Governors of the Federal Reserve 

System, Report on the Economic Well-Being of U.S. 

Households in 2018–May 2019, https://www.federal

reserve.gov/publications/2019-economic-well-beingof-us-households-in-2018-banking-and-credit.htm. 

175Zaheer Allam, The Forceful Reevaluation of 

Cash-Based Transactions by COVID–19 and Its 

Opportunities to Transition to Cashless Systems in 

Digital Urban Networks. Surveying the Covid-19 

Pandemic and its Implications (2020): 107–117. 

doi:10.1016/B978–0–12–824313–8.00008–5. 

176Bureau of Labor Statistics, Labor Force 

Statistics from the Current Population Survey: 

Concepts and Definitions, https://www.bls.gov/cps/ 

definitions.htm (last visited November 9, 2021). 177 Id. 

underbanked households—those that 

have a bank account but rely on 

alternative financial services, such as 

money orders, payday loans, and check 

cashing services— account for 16 

percent of all households in the United 

States.174 As a result of the COVID–19 

pandemic, new social distancing 

protocols have, in some instances, made 

it more difficult to perform financial 

transactions with paper instruments, 

like banknotes, coinage, paper checks, 

or money orders. Households 

constrained to these payment methods 

may face challenges receiving 

government assistance. Additionally, 

businesses have transitioned to cashless 

payments systems to promote 

contactless payments.175 As a result, 

unbanked individuals may face 

additional challenges conducting 

financial transactions. 

Treasury Response: Recognizing these 

challenges, Treasury is clarifying that 

recipients may use SLFRF funds to 

provide financial services that facilitate 

the delivery of federal, state, or local 

benefits (e.g., Child Tax Credit, Earned 

Income Tax Credit, tax refunds, or 

emergency housing or food assistance 

funds). The following includes a nonexhaustive list of uses to provide 

financial services to unbanked and 

underbanked households: 

• Provide low or no cost financial 

services, including in conjunction with 

administration of benefits, such as prepaid debit cards, e.g., via Economic 

Impact Payment or General Purpose 

Reloadable pre-paid cards or for the 

development of public banking 

infrastructure that can support benefit 

delivery. 

• Provide transitional services to 

facilitate long-term access to banking 

and financial services. 

• Provide financial literacy programs 

and conduct community outreach and 

deploy engagement resources to 

increase awareness about low-cost, nooverdraft fee accounts, pilot new 

strategies and approaches that help 

overcome barriers to banking access and 

support the gathering and sharing of 

information in ways that improve 

equity, such as community meetings, 

partnerships with community-based 

organizations, online surveys, focus 

groups, human-centered design 

activities, and other community 

engagement activities. 

Assistance to Unemployed and 

Underemployed Workers 

The interim final rule included 

assistance to unemployed workers as an 

enumerated eligible use, including 

‘‘services like job training to accelerate 

rehiring of unemployed workers.’’ 

Treasury provided further guidance, 

based on recipient questions after the 

interim final rule, that eligible uses 

under this section also include ‘‘other 

efforts to accelerate rehiring and thus 

reduce unemployment, such as 

childcare assistance, assistance with 

transportation to and from a jobsite or 

interview, and incentives for newly 

employed workers[,]’’ as well as 

assistance to unemployed workers 

seeking to start small businesses. 

Finally, further guidance also provided 

that ‘‘public jobs programs, subsidized 

employment, combined education and 

on-the-job training programs, or job 

training to accelerate rehiring or address 

negative economic or public health 

impacts experienced due to a worker’s 

occupation or level of training’’ are all 

enumerated eligible uses as assistance to 

unemployed or underemployed 

workers. 

The interim final rule defined eligible 

beneficiaries of assistance as 

‘‘individuals who want and are 

available for work, including those who 

have looked for work sometime in the 

past 12 months or who are employed 

part time but who want and are 

available for full-time work.’’ This 

definition is based on definitions used 

by the Bureau of Labor Statistics to 

define individuals currently 

unemployed, as well as persons 

marginally attached to the labor force 

and working part-time for economic 

reasons.176 The latter two classifications 

are types of labor underutilization, or 

‘‘underemployed’’ workers.177 Finally, 

the interim final rule specified that 

assistance to unemployed workers 

included both workers who lost their 

job during the pandemic and resulting 

recession and workers unemployed 

when the pandemic began who saw 

further deterioration of their economic 

prospects due to the pandemic. 

Public Comment: Commenters 

generally supported the inclusion of this 

enumerated eligible use. One 

commenter recommended including 

assistance for underemployed workers 

who took jobs due to the pandemic that 

did not fully utilize their skillset or did 

not provide the hours, wages, or job 

quality desired. Treasury has also 

received recipient questions on whether 

job fairs or grants to businesses to hire 

underserved workers are eligible uses 

under this category. Another commenter 

recommended flexibility in eligible 

workforce development programs, 

arguing that rural areas may face 

particular challenges. 

Treasury Response: Treasury is 

maintaining this eligible use in the final 

rule, including the enumerated eligible 

services in the interim final rule and 

subsequent guidance. Treasury is also 

confirming that job fairs or grants to 

businesses to hire underserved workers 

are eligible uses under this section. 

Treasury is also enumerating that job 

and workforce training centers are 

eligible capital expenditures, so long as 

they adhere to the standards and 

presumptions detailed in the section 

Capital Expenditures in General 

Provisions: Other. 

The final rule maintains the definition 

of eligible beneficiaries, which is 

aligned with the Bureau of Labor 

Statistics’ definitions of unemployed 

workers and other labor 

underutilization, using a common, 

widely known definition that 

incorporates a broad group of 

individuals both unemployed or whose 

skills are otherwise underutilized in the 

labor market. 

In addition, recognizing that the 

pandemic has generated broad 

workforce disruption, in the final rule, 

Treasury is making clear that recipients 

may provide job training or other 

enumerated types of assistance to 

individuals that are currently employed 

but are seeking to move to a job that 

provides better opportunities for 

economic advancement, such as higher 

wages or more opportunities for career 

advancement. 

Recipient Unemployment Insurance 

Trust Funds and Related Expenses 

Under the interim final rule, a 

recipient may use funds to make 

deposits into its account of the 

Unemployment Trust Fund established 

under section 904 of the Social Security 

Act (42 U.S.C. 1104) up to the level 

needed to restore the pre-pandemic 

balance of such account as of January 

27, 2020 or to pay back advances 

received under Title XII of the Social 

Security Act (42 U.S.C. 1321) for the 

payment of benefits between January 27, 

2020 and May 17, 2021. These costs 

support the solvency of the 

unemployment insurance system and, 

ultimately, unemployment insurance 

benefits provided to unemployed 


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178Note that, while the economic harm being 

addressed accrued before March 3, 2021, the cost 

incurred to address the harm occurs after March 3, 

2021 and provides assistance to unemployed 

workers, an eligible use of SLFRF funds. 

179See, e.g., U.S. Department of the Treasury, 

More Information on the Conclusion of the Public 

Comment Period and the Interim Final Rule on the 

Coronavirus State and Local Fiscal Recovery Funds, 

https://home.treasury.gov/system/files/136/IFRExplainer.pdf. 

workers during the pandemic.178 The 

interim final rule also posed the 

question of what, if any, conditions 

should be considered to ensure that 

funds used under this eligible use 

category repair economic impacts of the 

pandemic and strengthen 

unemployment insurance systems. 

Public Comment: Inclusion as an 

Eligible Use and Conditions: 

Commenters expressed mixed 

perspectives on this eligible use 

category. Some commenters supported 

its inclusion, arguing that 

unemployment insurance systems have 

faced significant costs to support 

unemployed workers during the 

pandemic and that this constitutes a 

negative economic impact that SLFRF 

funds should be able to address. Other 

commenters opposed this eligible use 

category, arguing that funds used under 

this category may not ultimately support 

unemployed workers. Some 

commenters noted that unemployment 

insurance taxes on businesses 

automatically increase when trust fund 

balances are low and suggested that 

permitting the deposit of funds into 

unemployment insurance trust funds 

prevents a tax increase on businesses, 

some of which may not have faced 

negative economic impacts from the 

pandemic, rather than providing 

assistance to unemployed workers. 

Other comments suggested that deposits 

are better thought of as savings for 

future needs than assistance to 

unemployed workers in the near term. 

Responding to the interim final rule’s 

question, several commenters suggested 

that, if Treasury maintains this eligible 

use, the final rule should require 

detailed reporting on funds used under 

this category or place conditions on this 

category to increase the likelihood that 

funds ultimately support unemployed 

workers. For example, some 

commenters suggested that recipients 

that deposit SLFRF funds into their trust 

fund should be barred from cutting 

unemployment insurance benefits for 

workers during the period of 

performance or from erecting new 

barriers to accessing benefits (e.g., 

through the application process and 

ongoing requirements to receive 

benefits). One commenter, noting that 

unemployment insurance benefits often 

provide low rates of wage replacement 

and do not cover some types of 

unemployed workers, argued that 

recipients should not be permitted to 

deposit funds into the trust fund unless 

the recipient concurrently expands 

benefits. Finally, one commenter 

suggested a cap on the amount of funds 

that can be used for this purpose. 

Treasury Response: Inclusion as an 

Eligible Use and Conditions: In the final 

rule, Treasury is maintaining the 

inclusion of this eligible use category. 

Because unemployment insurance trust 

funds directly fund benefits to 

unemployed workers, maintaining the 

solvency of the trust fund is critical to 

the continued provision of assistance to 

unemployed workers. Further, funds 

deposited into the trust fund must be 

used as assistance to unemployed 

workers, an eligible use of SLFRF funds. 

Finally, while, in the absence of the 

SLFRF, trust fund deposits would likely 

be funded through increases on 

employer payroll taxes, the eligibility of 

uses of SLFRF funds does not depend 

on how obligations would otherwise be 

satisfied if the SLFRF were not available 

for this use. 

While deposits to unemployment 

insurance trust funds generally serve as 

assistance to unemployed workers, 

recipients that make deposits but also 

cut unemployment insurance benefits to 

workers substantially decrease the 

likelihood that the deposited funds will 

assist unemployed workers. In other 

words, SLFRF funds deposited into an 

unemployment insurance trust fund 

generally serve as assistance to 

unemployed workers, unless recipients 

take policy actions that substantially 

decrease the extent to which SLFRF 

funds would flow to unemployed 

workers. As such, through December 31, 

2024, recipients that deposit SLFRF 

funds into an unemployment insurance 

trust fund or use SLFRF funds to repay 

principal on Title XII advances, may not 

take action to reduce benefits available 

to unemployed workers by changing the 

computation method governing regular 

unemployment compensation in a way 

that results in a reduction of average 

weekly benefit amounts or the number 

of weeks of benefits payable (i.e., the 

maximum benefit entitlement). 

Finally, until the final rule becomes 

effective on April 1, 2022, the interim 

final rule remains binding and 

effective.179 These requirements were 

not in effect under the interim final rule 

and do not apply to funds used (i.e., 

obligated or expended) under the 

interim final rule while it is in effect. In 

addition, recognizing that some 

recipients have taken significant steps 

toward making a trust fund deposit or 

repaying principal on Title XII advances 

under the interim final rule, such as the 

legislative appropriation of funds for 

this purpose, even if a formal obligation 

has not occurred, Treasury will exercise 

enforcement discretion to not pursue 

violations of this final rule provision 

(i.e., the requirement not to reduce 

benefits) for recipients that have 

appropriated funds for this purpose 

prior to the date of adoption of the final 

rule consistent with the laws and 

procedures in their jurisdiction. 

Recipients should refer to Treasury’s 

Statement Regarding Compliance with 

the Coronavirus State and Local Fiscal 

Recovery Funds Interim Final Rule and 

Final Rule, which provides additional 

detail on these issues. 

Public Comment and Treasury 

Response: Technical Corrections and 

Amendments: Following the interim 

final rule, Treasury received recipient 

questions on whether paying interest on 

advances received under Title XII of the 

Social Security Act (42 U.S.C. 1321) is 

an eligible use of SLFRF funds; Treasury 

is clarifying that such use is 

permissible, consistent with Treasury’s 

treatment of the eligibility of interest on 

Title XII advances under the 

Coronavirus Relief Fund. 

Treasury is further clarifying that 

recipients may only use SLFRF funds 

for contributions to unemployment 

insurance trust funds and repayment of 

the principal amount due on advances 

received under Title XII of the Social 

Security Act up to an amount equal to 

(i) the difference between the balance in 

the recipient’s unemployment insurance 

trust fund as of January 27, 2020 and the 

balance of such account as of May 17, 

2021, plus (ii) the principal amount 

outstanding as of May 17, 2021 on any 

advances received under Title XII of the 

Social Security Act between January 27, 

2020 and May 17, 2021. Further, 

recipients may use SLFRF funds for the 

payment of any interest due on such 

Title XII advances. In other words, 

excluding interest due on Title XII 

advances, the magnitude of the decrease 

of the balance in the unemployment 

insurance trust fund plus the principal 

outstanding on any Title XII borrowings 

made from the beginning of the public 

health emergency to the date of 

publication of the SLFRF interim final 

rule sets a cap on the amount of SLFRF 

funds a recipient may use for trust fund 

contributions and repayment of 

principal on Title XII advances. Further, 

a recipient that deposits SLFRF funds 

into its unemployment insurance trust 

fund to fully restore the pre-pandemic 

balance may not draw down that 


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180U.S. Department of Health and Human 

Services, COVID–19 and Economic Opportunity: 

Inequities in the Employment Crisis, April 2021. 

Retrieved from https://aspe.hhs.gov/sites/default/ 

files/migrated_legacy_files//199901/covideconomic-equity-brief.pdf. 

181Adelle Simmons et al., Health disparities by 

race and ethnicity during the COVID–19 pandemic: 

Current evidence and policy approaches. U.S. 

Department of Health and Human Services https:// 

aspe.hhs.gov/sites/default/files/migrated_legacy_

files//199516/covid-equity-issue-brief.pdf. 

182Perry, Brea L., Brian Aronson, and Bernice A. 

Pescosolido, Pandemic precarity: COVID–19 is 

exposing and exacerbating inequalities in the 

American heartland, National Academy of Sciences 

(Febuary 2021), https://www.pnas.org/content/118/ 

8/e2020685118. 

183 Id. 

184 Jesse Bennet & Rakesh Kochhar, Two 

Recessions, Two Recoveries, Pew Research Center 

(December 13, 2019), https://www.pewresearch.org/ 

social-trends/2019/12/13/two-recessions-tworecoveries-2/. 

185 Darrick Hamilton et al., Building an Equitable 

Recovery: The role of Race, Labor Markets, and 

Education, The New School’s Institute on Race and 

Political Economy (February 2021). 

186Adhikari S, Pantaleo NP, Feldman JM, 

Ogedegbe O, Thorpe L, Troxel AB. Assessment of 

Community-Level Disparities in Coronavirus 

Disease 2019 (COVID–19) Infections and Deaths in 

Large US Metropolitan Areas. JAMA Netw Open. 

2020;3(7):e2016938. doi:10.1001/ 

jamanetworkopen.2020.16938. 

balance and deposit more SLFRF funds, 

back up to the pre-pandemic balance. 

Enumerated Eligible Uses for 

Disproportionately Impacted 

Households 

Background 

The COVID–19 pandemic has had 

disproportionally negative impacts on 

many households and communities that 

were already experiencing inequality 

related to race, gender, age, or income 

before the pandemic. People of color, 

low-income workers, and women 

disproportionately lost their jobs during 

the COVID–19 pandemic and 

experienced disproportionate rates of 

negative health outcomes.180 181

These disproportionate negative 

impacts experienced by systemically 

underserved communities are not novel 

to the COVID–19 pandemic and the 

economic downturn. Research shows 

that historically underserved 

communities that are experiencing 

economic and social disparities 

typically experience disproportionate 

impacts of economic downturns and 

natural disasters.182 This pattern held 

true for the effects of COVID–19 and the 

economic downturn: Historically 

undeserved groups experienced 

amplified negative impacts, further 

widening inequality.183

Many communities facing systemic 

barriers had not yet recovered from the 

impact of the Great Recession before 

experiencing the impacts of COVID–19 

and the economic downturn. For 

example, in 2009, at the end of the Great 

Recession, households without a high 

school diploma had an average annual 

income of $32,300 (measured in 2018 

dollars). By 2018, nine years into the 

economic recovery, those same 

households saw their average income 

increase by $600. During that same time 

period, households with a bachelor’s 

degree saw an increase in their average 

household income of $6,100 (measured 

in 2018 dollars).184

The impact pre-existing inequalities 

have on a household or community’s 

ability to recover is intersectional. 

Research shows that pre-existing racial 

and gender disparities exacerbated the 

disproportionate economic and health 

impact COVID–19 and the economic 

downturn had on workers of color, and 

specifically, women of color.185 Another 

study found that during the first six 

months of the pandemic counties that 

were both high-poverty and majority 

non-white experienced COVID–19 

infection rates eight times higher than 

high-poverty, majority white 

counties.186 Many residents in these 

communities are still coping with the 

negative health and economic impacts. 

Summary of the Interim Final Rule and 

Final Rule Structure 

As described previously, the interim 

final rule provided a broader list of 

enumerated eligible uses to respond to 

the pandemic in disproportionately 

impacted communities, in recognition 

that pre-existing health, economic, and 

social disparities contributed to 

disproportionate pandemic impacts in 

certain communities and that 

addressing the root causes of those 

disparities constitutes responding to the 

public health and negative economic 

impacts of the pandemic. The interim 

final rule described eligible uses in 

disproportionately impacted 

communities in four categories, spread 

across public health and negative 

economic impacts: (1) Addressing 

disparities in public health outcomes, 

(2) building stronger communities 

through investments in housing and 

neighborhoods, (3) addressing 

educational disparities, and (4) 

promoting healthy childhood 

environments. As described above, 

Treasury has moved eligible uses related 

to community violence intervention, 

assistance accessing or applying to 

public benefits and services, affordable 

housing development, healthy 

childhood environments, and 

addressing lost instructional time in K– 

12 schools into the category ‘‘assistance 

to impacted households,’’ recognizing 

that these pandemic impacts were 

widely shared across the country. 

This section discusses enumerated 

eligible uses to address health 

disparities, to build stronger 

communities through investments in 

neighborhoods, to address educational 

disparities, to provide rental assistance 

vouchers or assistance relocating to 

areas of greater economic opportunity, 

and additional eligible uses to respond 

to negative economic impacts in 

disproportionately impacted 

communities. While many of these 

services impact both health and 

economic outcomes, Treasury has 

consolidated them into a single section 

for simplicity and clarity and to reflect 

the intertwined nature of these issues. 

As a reminder, recipients can 

presume these uses are eligible when 

provided in a QCT, to families and 

individuals living in QCTs, by Tribal or 

territorial governments, or to lowincome households or communities. As 

provided in section Standards: 

Designating Other Disproportionately 

Impacted Classes, recipients can also 

provide these services to other 

populations, households, or geographic 

areas disproportionately impacted by 

the pandemic. Recipients may also 

identify additional disproportionate 

impacts of the pandemic and design an 

appropriate response to address that 

harm. For details on eligibility 

standards and presumed eligible 

populations, see section General 

Provisions: Structure and Standards. 

Enumerated Eligible Uses for 

Disproportionately Impacted 

Households 

1. Addressing health disparities. 

Public Comment: General: In general, 

commenters supported eligible uses to 

address health disparities and support 

health equity; several commenters 

highlighted the disparities faced by 

communities of color and low-income 

populations, as well as the importance 

of community engagement in 

developing effective programs to serve 

disproportionately impacted 

communities. Many commenters 

recommended additional enumerated 

eligible uses to address health 

disparities; these are discussed further 

below in this section. 

Treasury Response: In line with 

commenters’ recommendations, the 

final rule maintains several enumerated 

eligible uses to address health 

disparities, specifically: 

a. Community health workers. 

Treasury received few comments on 

community health workers, though one 


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4372 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 

187See, e.g., Centers for Disease Control and 

Prevention, Community Health Worker (CHW) 

Toolkit, https://www.cdc.gov/dhdsp/pubs/toolkits/ 

chw-toolkit.htm (last visited November 9, 2021). 

188Environmental Protection Agency, 40 CFR 

141.80(c)(1), https://www.ecfr.gov/current/title-40/ 

chapter-I/subchapter-D/part-141/subpart-I/section141.80. 

189See, e.g., Opportunity Insights, Creating Moves 

To Opportunity (August 2019), https://

opportunityinsights.org/policy/cmto/. 

190U.S. Department of Health and Human 

Services, Neighborhood and Built Environment, 

https://health.gov/healthypeople/objectives-anddata/browse-objectives/neighborhood-and-builtenvironment#cit1 (last visited November 9, 2021). 

191Social determinants of health are ‘‘the 

conditions in the places where people live, learn, 

work, and play that affect a wide range of health 

risks and outcomes.’’ Centers for Disease Control 

and Prevention, About Social Determinants of 

Health (SDOH), https://www.cdc.gov/social

determinants/about.html (last visited November 9, 

2021). 

192 In public health, this is referred to as ‘‘built 

environment,’’ or the man-made physical aspects of 

a community (e.g., homes, buildings, streets, open 

spaces, and infrastructure). 

requested further clarification on their 

role.187 Treasury is maintaining this 

eligible use in the final rule. 

b. Remediation of lead paint or other 

lead hazards. The interim final rule 

included remediation of lead paint or 

other lead hazards as an enumerated 

eligible use to address health 

disparities. 

Public Comment: Treasury received 

several comments asking for 

clarification on the eligibility of a 

particular use that would indirectly 

address lead pollution. For example, a 

commenter requested the ability to fund 

remedial actions, such as filtration and 

plumbing procedures to help address 

lead pollution. One commenter 

requested that private wells be eligible 

for funding to address contamination 

with substances such as lead. Other 

commenters requested that Treasury 

allow replacement of lead pipes as an 

eligible use of funds. 

Treasury Response: Recipients may 

make a broad range of water 

infrastructure investments under section 

602(c)(1)(d) and 603(c)(1)(d), which can 

include lead service line replacement 

and other activities to identify and 

remediate lead in water. These uses are 

discussed in greater detail in section 

Water and Sewer Infrastructure of this 

Supplemental Information. 

Treasury has further determined that 

several of the services identified by 

commenters are appropriate responses 

to address health disparities in 

disproportionately impacted 

households. These services were eligible 

under the interim final rule and 

continue to be so under the final rule. 

These services include remediation to 

address lead-based public health risk 

factors, outside of lead in water, 

including evaluation and remediation of 

lead paint, dust, or soil hazards; testing 

for blood lead levels; public outreach 

and education; and emergency 

protection measures, like bottled water 

and water filters, in areas with an action 

level exceedance for lead in water in 

accordance with the Environmental 

Protection Agency’s Lead and Copper 

Rule.188

Further, Treasury had determined that 

certain capital expenditures, including 

improvements to existing facilities to 

remediate lead contaminants (e.g., 

removal of lead paint), are eligible 

responses, although this does not 

include construction of new facilities 

for the purpose of lead remediation. 

Recipients should make sure that all 

capital expenditures adhere to the 

standards and presumptions detailed in 

section Capital Expenditures in General 

Provisions: Other. 

c. Medical facilities. Treasury 

received a few comments from 

recipients seeking to use SLFRF funds 

to build new medical facilities, such as 

hospitals or public health clinics, to 

serve disproportionately impacted 

communities. Given the central role of 

access to high-quality medical care in 

reducing health disparities and 

addressing the root causes that led to 

disproportionate impact COVID–19 

health impacts in certain communities, 

the final rule recognizes that medical 

equipment and facilities designed to 

address disparities in public health 

outcomes are eligible capital 

expenditures. This includes primary 

care clinics, hospitals, or integrations of 

health services into other settings. 

Recipients should make sure that all 

capital expenditures adhere to the 

standards and presumptions detailed in 

section Capital Expenditures in General 

Provisions: Other. 

2. Housing vouchers and assistance 

relocating. In addition to other housing 

services, the interim final rule permitted 

a variety of rental assistance approaches 

to support low-income households in 

securing stable, long-term housing, 

including housing vouchers, residential 

counseling, or housing navigation 

assistance to facilitate household moves 

to neighborhoods with high levels of 

economic opportunity and mobility for 

low-income residents. Examples could 

include SLFRF-funded analogues to 

Section 8 Housing Choice vouchers; 

other kinds of rent subsidies, including 

shallow subsidies; and programs to help 

residents move to areas with higher 

levels of economic mobility.189 Treasury 

did not receive public comments on 

these enumerated eligible uses. 

Treasury Response: Treasury 

maintains the eligibility of vouchers and 

relocation assistance in the final rule. 

3. Building strong, healthy 

communities through investments in 

neighborhoods. While the interim final 

rule included a category of enumerated 

eligible uses for ‘‘building stronger 

communities through investments in 

housing and neighborhoods,’’ the 

examples of services provided generally 

focused on housing uses. In response to 

questions following release of the 

interim final rule, Treasury issued 

further guidance clarifying that 

‘‘investments in parks, public plazas, 

and other public outdoor recreation 

spaces may be responsive to the needs 

of disproportionately impacted 

communities by promoting healthier 

living environments.’’ 

Public Comment: General: A 

significant theme across many public 

comments was the importance of 

neighborhood environment to health 

and economic outcomes and the 

potential connections between 

residence in an underserved 

neighborhood and disproportionate 

impacts from the pandemic. Many 

commenters highlighted the connection 

between neighborhoods and health 

outcomes, including citing public health 

research linking neighborhood traits to 

health outcomes. For example, the CDC 

states that ‘‘neighborhoods people live 

in have a major impact on their health 

and well-being.’’ 190 As such, CDC 

identifies ‘‘neighborhoods and built 

environment’’ as one of five key social 

determinants of health 191 and includes 

‘‘creat[ing] neighborhoods and 

environments that promote health and 

safety’’ as one of the agency’s goals for 

social determinants of health outcomes. 

a. Neighborhood features that 

promote improved health and safety 

outcomes. 

Public Comment: Commenters argued 

that neighborhoods impact physical 

health outcomes in several ways. First, 

some commenters reasoned that the 

physical environment and amenities in 

a community 192 influence a person’s 

level of physical activity, with features 

like parks, recreation facilities, and safe 

sidewalks promoting increased physical 

activity that improves health outcomes. 

Conversely, commenters argued that a 

lack of these features in a neighborhood 

could dampen physical activity and 

contribute to health conditions like 

obesity that are risk factors for more 

severe COVID–19 health outcomes. 

Second, some commenters also 

suggested that access to healthy food in 

a neighborhood impacts health 

outcomes. These commenters reasoned 


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Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4373 

193 J Beaulac, E Kristjansson, S Cummins, A 

systematic review of food deserts, 1966–2007, Prev 

Chronic Dis 2009;6(3):A105, http://www.cdc.gov/ 

pcd/issues/2009/jul/08_0163.htm. 

194See, e.g., Yijun Zhang et al. The Association 

between Green Space and Adolescents’ Mental 

Well-Being: A Systematic Review. International 

journal of environmental research and public health 

vol. 17,18 6640 (Sep. 11 2020), doi:10.3390/ 

ijerph17186640; EC South, BC Hohl, MC Kondo, JM 

MacDonald, CC Branas, Effect of Greening Vacant 

Land on Mental Health of Community-Dwelling 

Adults: A Cluster Randomized Trial, JAMA Netw 

Open. 2018;1(3):e180298 (2018), available at: 

doi:10.1001/jamanetworkopen.2018.0298. 

195See, e.g., Yanqing Xu, Cong Fu, Eugene 

Kennedy, Shanhe Jiang, Samuel Owusu-Agyemang, 

The impact of street lights on spatial-temporal 

patterns of crime in Detroit, Michigan, Cities, 

Volume 79, Pages 45–52, ISSN 0264–2751 (2018), 

https://doi.org/10.1016/j.cities.2018.02.021. 

196A. Chalfin, B. Hansen, J. Lerner et al., 

Reducing Crime Through Environmental Design: 

Evidence from a Randomized Experiment of Street 

Lighting in New York City, Journal of Quantitative 

Criminology (2021), https://doi.org/10.1007/s10940- 

020-09490-6. 

197See, e.g., American Public Health Association, 

Improving Health and Wellness through Access to 

Nature (November 5, 2013), https://www.apha.org/ 

policies-and-advocacy/public-health-policystatements/policy-database/2014/07/08/09/18/ 

improving-health-and-wellness-through-access-tonature. 

198LR Larson et al., Urban Park Use During the 

COVID–19 Pandemic: Are Socially Vulnerable 

Communities Disproportionately Impacted?, Front. 

Sustain. Cities 3:710243 (2021), https://doi.org/ 

10.3389/frsc.2021.710243. 

199 JP Despre ́s, Severe COVID–19 outcomes—the 

role of physical activity. Nat Rev Endocrinol 17, 

451–452 (2021). https://doi.org/10.1038/s41574- 

021-00521-1. 

200Caroline George and Adie Tomer, Beyond 

‘food deserts’: America needs a new approach to 

mapping food, Brookings Institution (August 17, 

2021), https://www.brookings.edu/research/beyondfood-deserts-america-needs-a-new-approach-tomapping-food-insecurity/. 

201However, Treasury cautions recipients that 

general infrastructure development, including street 

or road construction, remains a generally ineligible 

use of funds under the final rule. Sidewalks and 

pedestrian safety should be the predominant 

component of uses of funds in this category. While 

projects may include ancillary construction needed 

to execute the predominant component, a project 

that predominantly involves street construction or 

repair to benefit vehicular traffic would be 

ineligible. 

that lacking adequate access to 

affordable, healthy food or living in a 

‘‘food desert’’ may contribute to 

disparities in diet that influence health 

outcomes, including contributing to preexisting conditions that increased risk 

for severe COVID–19 outcomes. These 

commenters cited public health research 

finding ‘‘clear evidence for disparities in 

food access in the United States by 

income and race.’’ 193

Some commenters also suggested that 

neighborhood environment is connected 

to other public health outcomes, like 

mental health and public safety. For 

example, some research suggests that 

living in neighborhoods with green 

space and tree cover correlates with 

improved mental health outcomes.194

Finally, some commenters argued that 

activities like installing streetlights, 

greening or cleanup of public spaces or 

land, and other efforts to revitalize 

public spaces would support improved 

public safety.195 196

These commenters recommended that 

Treasury include as an enumerated 

eligible use in disproportionately 

impacted communities projects to 

develop neighborhood features that 

promote improved health and safety 

outcomes, such as parks, green spaces, 

recreational facilities, sidewalks, 

pedestrian safety features like 

crosswalks, projects that increase access 

to healthy foods, streetlights, 

neighborhood cleanup, and other 

projects to revitalize public spaces. 

Background: Investments in 

neighborhood features, including parks, 

recreation facilities, sidewalks, and 

healthy food access, can work to 

improve physical and mental health 

outcomes. Allowing people access to 

nature, including parks, has been 

connected to decreased levels of 

mortality and illness and increased 

well-being.197 Urban park use during 

the COVID–19 pandemic may have 

declined among lower-income 

individuals.198 Encouraging physical 

activity can also play a role in health 

outcomes, as a sedentary lifestyle is a 

risk factor for chronic diseases and more 

severe COVID–19 outcomes.199 Parks, 

recreation facilities, and sidewalks can 

promote healthier living environments 

by allowing for safe and socially 

distanced recreation during the COVID– 

19 pandemic. 

Additionally, food insecurity rates, 

which are higher among lower-income 

households and households of color, 

doubled among all households and 

tripled among households with children 

during the onset of COVID–19 from 

February 2020 to May 2020.200

Improving healthy food access supports 

public health, particularly among lowerincome households and households of 

color that face disproportionate 

outcomes. 

Treasury Response: Treasury 

recognizes the connection between 

neighborhood built environment and 

physical health outcomes as discussed 

in the research and analysis provided by 

commenters, including risk factors that 

may have contributed to 

disproportionate COVID–19 health 

impacts in low-income communities. 

The final rule also recognizes that the 

public health impacts of the pandemic 

are broader than just the COVID–19 

disease itself and include substantial 

impacts on mental health and public 

safety challenges like rates of violent 

crime, which are correlated with a 

neighborhood’s built environment and 

features. As such, neighborhood features 

that promote improved health and 

safety outcomes respond to the preexisting disparities that contributed to 

COVID–19’s disproportionate impacts 

on low-income communities. 

The final rule includes enumerated 

eligible uses in disproportionately 

impacted communities for developing 

neighborhood features that promote 

improved health and safety outcomes, 

such as parks, green spaces, recreational 

facilities, sidewalks, pedestrian safety 

features like crosswalks,201 projects that 

increase access to healthy foods, 

streetlights, neighborhood cleanup, and 

other projects to revitalize public 

spaces. Recipients seeking to use funds 

for capital expenditures should refer to 

the section Capital Expenditures in 

General Provisions: Other, which 

describes additional eligibility 

standards that apply to uses of funds for 

capital expenditures. 

b. Vacant or abandoned properties. 

As discussed above, the interim final 

rule included enumerated eligible uses 

for building stronger communities 

through investments in housing and 

neighborhoods in disproportionately 

impacted communities. The interim 

final rule also posed a question of 

whether other potential uses in this 

category, specifically ‘‘rehabilitation of 

blighted properties or demolition of 

abandoned or vacant properties,’’ 

address the public health or economic 

impacts of the pandemic. 

Public Comment: Several commenters 

argued that programs or services to 

address vacant or abandoned property 

would respond to the public health and 

negative economic impacts of the 

pandemic in disproportionately 

impacted communities. Some 

commenters cited research suggesting 

that living near such property is 

correlated with worse physical health 

and mental health outcomes, noted that 

such properties pose an environmental 

hazard, or argued that such properties 

present a barrier to economic recovery. 

These commenters suggested that 

renovation or demolition of vacant or 

abandoned property could benefit 

community health and raise property 

values. Other commenters 

recommended that Treasury include an 

enumerated eligible use for the 

operation of land banks that redevelop 

or renew vacant properties and land. 

Treasury Response: As noted 

throughout the final rule, the pandemic 

underscored the importance of safe, 

affordable housing and healthy 


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4374 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 

202A state or locality may use its existing 

classifications of what is considered vacant or 

abandoned property under state law and local 

ordinances, as well as any corresponding processes 

for demolition, for these eligible uses. A recipient 

without a definition of vacant or abandoned 

property may refer to definitions used in the 

Department of Housing and Urban Development’s 

Neighborhood Stabilization Program (available at 

the citations below); however, recipients should be 

aware that other federal, state, or local requirements 

may apply such as compliance with the Uniform 

Relocation Act (see U.S. Department of Housing and 

Urban Development, Real Estate Acquisition and 

Relocation Overview in HUD Programs, https://

www.hudexchange.info/programs/relocation/ 

overview/#overview-of-the-ura (last visited 

November 9, 2021) and other state and local 

requirements like condemnation and code 

enforcement. U.S. Department of Housing and 

Urban Development, What is the definition of 

vacant properties as referenced in NSP Eligible Use 

E—Redevelop Demolished or Vacant Properties? 

(October 2012), https://www.hudexchange.info/ 

faqs/programs/neighborhood-stabilization-programnsp/redevelopment/what-is-the-definition-ofvacant-properties-as-referenced-in-nsp-eligible/. 

U.S. Department of Housing and Urban 

Development, What are the definitions of 

abandoned and foreclosed? (October 2012), https:// 

www.hudexchange.info/faqs/programs/ 

neighborhood-stabilization-program-nsp/programrequirements/eligible-activitiesuses/what-are-thedefinitions-of-abandoned-and-foreclosed/. 

203For analysis of vacancy rates considered low 

or high, see, e.g., page 12 of Alan Mallach, The 

Empty House Next Door, Lincoln Institute (May 

2018), https://www.lincolninst.edu/publications/ 

policy-focus-reports/empty-house-next-door#

:∼:text=%E2%80%9CAlan%20Mallach%20is%20

the%20sage,through%20data%20and%20

model%20 practices. Recipients may determine the 

appropriate geographic unit for which to analyze 

vacancy rates (e.g., county, census tract) based on 

their circumstances. As needed, recipients may 

refer to the Current Population Survey/Housing 

Vacancy Survey data series on Housing Vacancies 

and Homeownership as one data source to assess 

vacancy rates. See https://www.census.gov/housing/ 

hvs/index.html. Other data sources include the 

American Community Survey five-year estimates, 

for smaller geographic areas, or tabulations by the 

Department of Housing and Urban Development 

based on United States Postal Service Vacancy Data. 

See, respectively, https://data.census.gov/cedsci/ 

table?q=DP04&tid=ACSDP5Y2019.DP04&

hidePreview=true or https://www.huduser.gov/ 

portal/datasets/usps.html. 

204See U.S. Environmental Protection Agency, 

Large-Scale Residential Demolition, https://

www.epa.gov/large-scale-residential-demolition 

(last visited November 9, 2021) for a primer on 

requirements that may apply. 

neighborhood environments to public 

health and economic outcomes. 

Treasury agrees with commenters that 

high rates of vacant or abandoned 

properties in a neighborhood may 

exacerbate public health disparities, for 

example through environmental 

contaminants that contribute to poor 

health outcomes or by contributing to 

higher rates of crime. As such, certain 

services for vacant or abandoned 

properties are eligible to address the 

public health and negative economic 

impacts of the pandemic on 

disproportionately impacted households 

or communities. Eligible activities 

include: 

• Rehabilitation, renovation, 

maintenance, or costs to secure vacant 

or abandoned properties to reduce their 

negative impact 

• Costs associated with acquiring and 

securing legal title of vacant or 

abandoned properties and other costs to 

position the property for current or 

future productive use 

• Removal and remediation of 

environmental contaminants or hazards 

from vacant or abandoned properties, 

when conducted in compliance with 

applicable environmental laws or 

regulations 

• Demolition or deconstruction of 

vacant or abandoned buildings 

(including residential, commercial, or 

industrial buildings) paired with 

greening or other lot improvement as 

part of a strategy for neighborhood 

revitalization 

• Greening or cleanup of vacant lots, 

as well as other efforts to make vacant 

lots safer for the surrounding 

community 

• Conversion of vacant or abandoned 

properties to affordable housing 

• Inspection fees and other 

administrative costs incurred to ensure 

compliance with applicable 

environmental laws and regulations for 

demolition, greening, or other 

remediation activities 

Vacant or abandoned properties are 

generally those that have been 

unoccupied for an extended period of 

time or have no active owner.202 Such 

properties may be in significant 

disrepair (e.g., major structural defects; 

lack of weather tight conditions; or lack 

of useable plumbing, kitchen facilities, 

electricity, or heating infrastructure (not 

to include utilities currently out of 

service or disconnected but able to be 

reconnected and used)), or may be 

declared unfit for inhabitants by a 

government authority. 

As noted above, demolition and 

greening (or other structure or lot 

remediation) of vacant or abandoned 

properties, including residential, 

commercial, or industrial buildings, is 

an eligible use of funds. Treasury 

encourages recipients to undertake these 

activities as part of a strategy for 

neighborhood revitalization and to 

consider how the cleared property will 

be used to benefit the disproportionately 

impacted community. Activities under 

this eligible use should benefit current 

residents and businesses, who 

experienced the pandemic’s impact on 

the community. 

Treasury encourages recipients to be 

aware of potential impacts of demolition 

of vacant or abandoned residential 

properties. Demolition activities that 

exacerbate the pandemic’s impact on 

housing insecurity or lack of affordable 

housing are not eligible uses of funds. 

This risk is generally more acute in 

jurisdictions with low or reasonable 

vacancy rates and less acute in 

jurisdictions with high or hypervacancy.203

Treasury presumes that demolition of 

vacant or abandoned residential 

properties that results in a net reduction 

in occupiable housing units for low- and 

moderate-income individuals in an area 

where the availability of such housing is 

lower than the need for such housing 

would exacerbate the impacts of the 

pandemic on disproportionately 

impacted communities and that use of 

SLFRF funds for such activities would 

therefore be ineligible. This includes 

activities that convert occupiable 

housing units for low- and moderateincome individuals into housing units 

unaffordable to current residents in the 

community. Recipients may assess 

whether units are ‘‘occupiable’’ and 

what the housing need is for a given 

area taking into account vacancy rates 

(as described above), local housing 

market conditions (including conditions 

for different types of housing like multifamily or single-family), and applicable 

law and housing codes as to what units 

are occupiable. Recipients should also 

take all reasonable steps to minimize the 

displacement of persons due to 

activities under this eligible use 

category, especially the displacement of 

low-income households or longtime 

residents. 

Recipients engaging in these activities 

and other construction activities with 

SLFRF funds should be mindful of the 

provisions of the Uniform Relocation 

Assistance and Real Property 

Acquisition Policies Act of 1970, as 

amended, 42 U.S.C. 4601, and the 

Department of Transportation’s 

implementing regulations, 49 CFR part 

24, that apply to projects funded with 

federal financial assistance, such as 

SLFRF funds. Recipients should also be 

aware of federal, state, and local laws 

and regulations, outside of SLFRF 

program requirements, that apply to this 

activity. Recipients must comply with 

the applicable requirements of the 

Uniform Guidance regarding 

procurement, contracting, and conflicts 

of interest and must follow the 

applicable laws and regulations in their 

jurisdictions. Recipients must also 

comply with all federal, state, and local 

public health and environmental laws 

or regulations that apply to activities 

under this eligible use category,204 for 

example, requirements around the 


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handling and disposal of asbestoscontaining materials, lead paint, and 

other harmful materials may apply, as 

well as environmental standards for any 

backfill materials used at demolition 

sites. Treasury encourages recipients to 

consult and apply best practices from 

the Environmental Protection Agency as 

well. 

Recipients must evaluate each 

subrecipient’s risk of noncompliance 

with federal statutes, regulations, and 

the terms and conditions of the 

subaward related to safely and properly 

conducting activities under this eligible 

use. This may include checking for any 

past violations recorded by state or local 

environmental, workplace safety, 

licensing, and procurement agencies, as 

well as regular reviews for suspensions, 

debarments, or stop work orders. 

Recipients must establish rigorous 

oversight and internal controls 

processes to monitor compliance with 

any applicable requirements, including 

compliance by subrecipients. 

4. Addressing educational disparities. 

The interim final rule included an 

enumerated eligible use for addressing 

educational disparities in 

disproportionately impacted 

communities and outlined some 

enumerated eligible services under this 

use. These enumerated uses included 

early learning services, assistance to 

high-poverty school districts to advance 

equitable funding across districts and 

geographies, and educational and 

evidence-based services to address the 

academic, social, emotional, and mental 

health needs of students. Addressing the 

many dimensions of resource equity— 

including equitable and adequate school 

funding; access to a well-rounded 

education; well-prepared, effective, and 

diverse educators and staff; and 

integrated support services—can also 

begin to mitigate the impact of COVID– 

19 on schools and students and can 

close long-standing gaps in educational 

opportunity. As discussed above, in the 

final rule, early learning services and 

addressing the impacts of lost 

instructional time for K–12 students are 

enumerated eligible uses for impacted 

communities, not just 

disproportionately impacted 

communities. 

Public Comment: Treasury received 

some comments in this category. 

Generally, commenters expressed 

agreement with the elements of the 

interim final rule regarding use of funds 

for addressing educational disparities. 

Some commenters had questions about 

whether a few specific uses of funds 

qualified under this category. For 

example, commenters inquired about 

whether the funds could be used for 

behavioral health in a school setting or 

cultural language classes. 

Treasury Response: Treasury is 

maintaining these enumerated eligible 

uses in the final rule, which are now 

organized under the heading of 

‘‘services to address educational 

disparities.’’ Treasury reiterates that 

these uses include addressing 

educational disparities exacerbated by 

COVID–19, including but not limited to: 

increasing resources for high-poverty 

school districts, educational services 

like tutoring or afterschool programs, 

summer education and enrichment 

programs, and supports for students’ 

social, emotional, and mental health 

needs. This also includes responses 

aimed at addressing the many 

dimensions of resource equity— 

including equitable and adequate school 

funding; access to a well-rounded 

education; well-prepared, effective, and 

diverse educators and staff; and 

integrated support services—in order to 

close long-standing gaps in educational 

opportunity. 

Further, Treasury is clarifying that 

improvements or new construction of 

schools and other educational facilities 

or equipment are eligible capital 

expenditures for disproportionately 

impacted communities. Recipients 

seeking to use funds for capital 

expenditures should refer to the section 

Capital Expenditures in General 

Provisions: Other for additional 

eligibility standards that apply to uses 

of funds for capital expenditures. 

Treasury notes that services to 

promote healthy childhood 

environments, including childcare, 

early learning services, and home 

visiting programs that serve infants and 

toddlers, is a separate category of 

enumerated eligible uses for households 

impacted by the pandemic (see eligible 

uses for ‘‘promoting healthy childhood 

environments’’). Similarly, education 

services to address the impact of lost 

instructional time during the pandemic 

are a separate eligible use category for 

households impacted by the pandemic; 

when providing these services, 

recipients may presume that any K–12 

student who lost access to in-person 

instruction for a significant period of 

time has been impacted by the 

pandemic and is thus eligible for 

responsive services (see eligible uses for 

‘‘addressing the impact of lost 

instructional time’’). 

Proposed Additional Enumerated 

Eligible Uses Not Incorporated 

The interim final rule posed a 

question on what other types of services 

or costs Treasury should consider as 

eligible uses to respond to the 

disproportionate public health or 

negative economic impacts of COVID– 

19 on low-income populations and 

communities. 

In response, commenters proposed a 

wide variety of additional 

recommended enumerated eligible uses 

to assist disproportionately impacted 

households, ranging from general 

categories of services (e.g., long-term 

investments to remediate long-term 

disparities) to highly specific examples 

of services (e.g., a specific type of 

healthcare equipment). As discussed 

above, Treasury is including several 

additional categories of enumerated 

eligible uses in the final rule in response 

to public comments. 

Given the large number and diversity 

of SLFRF recipients, Treasury’s 

approach to assistance to households in 

disproportionately impacted 

communities in the final rule aims to 

provide enumerated eligible uses that 

respond to disproportionate impacts of 

the pandemic experienced widely in 

many jurisdictions across the country 

and are intended to simplify and clarify 

these enumerated eligible uses. At the 

same time, Treasury recognizes that the 

impacts of the pandemic vary over time, 

by jurisdiction, and by population; as 

such, the final rule provides flexibility 

for recipients to identify additional 

disproportionate impacts to additional 

households or classes of households and 

pursue programs and services that 

respond to those disproportionate 

impacts. 

In the final rule, Treasury has not 

chosen to include as enumerated uses 

all uses proposed by commenters; given 

the significant range, and in some cases 

highly specific nature, of the proposed 

uses Treasury was not able to assess that 

the proposed uses would respond to 

disproportionate impacts experienced in 

many jurisdictions across the country, 

supporting an enumerated eligible use 

available to all recipients 

presumptively. However, the final rule 

continues to provide a framework to 

allow recipients to identify and respond 

to additional disproportionate impacts 

(for details, see section General 

Provisions: Structure and Standards). 

Some types of proposed additional 

enumerated eligible uses for assistance 

to households in disproportionately 

impacted communities were 

recommended by several commenters: 

• Capital expenditures. Many 

commenters recommended that capital 

expenditures on many different types of 

public and private facilities be 

enumerated eligible uses. For clarity, 

Treasury has addressed all comments on 

the eligibility of capital expenditures on 

property, facilities, or equipment in one 


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4376 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 

205Board of Governors of the Federal Reserve 

System, Monetary Policy Report (June 12, 2020), 

https://www.federalreserve.gov/monetarypolicy/ 

2020-06-mpr-summary.htm. 

206U.S. Small Business Administration, Office of 

Advocacy, Small Businesses Generate 44 Percent of 

U.S. Economic Activity (Jan. 30, 2019), https://

advocacy.sba.gov/2019/01/30/small-businessesgenerate-44-percent-of-u-s-economic-activity/. 

207 Joseph R. Biden, Remarks by President Biden 

on Helping Small Businesses (Feb. 22, 2021), 

https://www.whitehouse.gov/briefing-room/ 

speechesremarks/2021/02/22/remarks-by-presidentbidenon-helping-small-businesses/. 

208 Daniel Wilmoth, U.S. Small Business 

Administration Office of Advocacy, The Effects of 

the COVID–19 Pandemic on Small Businesses, Issue 

Brief No. 16 (Mar. 2021), available at https://

cdn.advocacy.sba.gov/wp-content/uploads/2021/ 

03/02112318/COVID-19-Impact-On-SmallBusiness.pdf. 

209U.S. Census Bureau, Small Business Pulse 

Survey, https://portal.census.gov/pulse/data/ (last 

visited December 7, 2021). 

210Olivia S. Kim et al., Revenue Collapses and 

the Consumption of Small Business Owners in the 

Early Stages of the COVID–19 Pandemic (Nov. 

2020), https://www.nber.org/papers/w28151. 

211See, e.g., Board of Governors of the Federal 

Reserve System, Report to Congress on the 

Availability of Credit to Small Businesses (Sept. 

2017), available at https://www.federalreserve.gov/ 

publications/2017-september-availability-of-creditto-small-businesses.htm. 

212Alexander W. Bartik et al., The Impact of 

COVID–19 on small business outcomes and 

expectations, PNAS 117(30): 17656–66 (July 28, 

2020), available at https://www.pnas.org/content/ 

117/30/17656. 

213Robert Fairlie, The impact of COVID–19 on 

small business owners: Evidence from the first 

3 months after widespread social-distancing 

restrictions, Journal of economics & management 

strategy (August 27, 2020), https://doi.org/10.1111/ 

jems.12400. 

214U.S. Small Business Administration, The 

Effects of the COVID–19 Pandemic on Small 

Businesses (March 2021), https://cdn.advocacy.

sba.gov/wp-content/uploads/2021/03/02112318/ 

COVID-19-Impact-On-Small-Business.pdf. 

215Robert Fairlie, supra note 213. 

216Federal Reserve Bank of Atlanta. 2019. Small 

Business Credit Survey 2019 Report on MinorityOwned Firms. December. fedsmallbusiness.org/ 

survey/2019/report-on-minority-owned-firms. 

217 Ding, Lei, and Alvaro Sanchez. 2020. What 

Small Businesses Will Be Impacted by COVID–19? 

Federal Reserve Bank of Philadelphia. 

philadelphiafed.org/covid-19/covid-19-equity-inrecovery/what-small-businesses-will-be-impacted. 

218Lucas Misera, An Uphill Battle: COVID–19’s 

Outsized Toll on Minority-Owned Firms, Federal 

Reserve Bank of Cleveland (October 8, 2020), 

https://www.clevelandfed.org/newsroom-andevents/publications/community-developmentbriefs/db-20201008-misera-report.aspx. 

219Robert Fairlie, A. Robb, D. Robinson, Black 

and White: Access to Capital among MinorityOwned Startups, NBER Working Paper 28154 

(November 2020), https://www.nber.org/papers/ 

w28154. 

section (see section Capital 

Expenditures in General Provisions: 

Other). 

• Equity funds. Several commenters 

recommended that Treasury permit 

SLFRF funds to be deposited into an 

equity fund to support long-term racial 

and economic equity investments. The 

eligibility of such use would depend on 

the specific structure and uses of funds. 

Under the statute, SLFRF funds can 

only support costs incurred until 

December 31, 2024; see section 

Timeline for Use of SLFRF Funds in 

Program Administration Provisions. 

Further, recipients may calculate the 

cost incurred with respect to 

investments in revolving loan funds 

based on the methodology described in 

section Treatment of Loans in Program 

Administration Provisions. Projects 

funded by a revolving loan fund using 

SLFRF funds would also need to be 

eligible uses of SLFRF funds. 

• Environmental quality and climate 

resilience. Several commenters 

recommended eligible uses to enhance 

environmental quality, remediate 

pollution, promote recycling or 

composting, or increase energy 

efficiency or electrical grid resilience. 

Whether these projects respond to the 

disproportionate impacts of the 

pandemic on certain communities 

would depend on the specific issue they 

address and its nexus to the public 

health and economic impacts of the 

pandemic. 

b. Assistance to Small Businesses 

Background 

The pandemic has severely impacted 

many businesses, with small businesses 

hit especially hard. Small businesses 

make up nearly half of U.S. privatesector employment 205 and play a key 

role in supporting the overall economic 

recovery as they are responsible for twothirds of net new jobs.206 Since the 

beginning of the pandemic, however, 

400,000 small businesses have closed, 

with many more at risk.207 Sectors with 

a large share of small business 

employment have been among those 

with the most drastic drops in 

employment.208 The negative outlook 

for small businesses has continued: As 

of November 2021, approximately 66 

percent of small businesses reported 

that the pandemic has had a moderate 

or large negative effect on their 

business, and over a third expect that it 

will take over 6 months for their 

business to return to their normal level 

of operations.209

This negative outlook is likely the 

result of many small businesses having 

faced periods of closure and having seen 

declining revenues as customers stayed 

home.210 In general, small businesses 

can face greater hurdles in accessing 

credit,211 and many small businesses 

were already financially fragile at the 

outset of the pandemic.212

While businesses everywhere faced 

significant challenges during the 

pandemic, minority-owned and very 

small businesses have faced additional 

obstacles. Between February and April 

2020, the number of actively selfemployed Black business owners 

decreased by 41 percent.213 During that 

same time period, Asian and Latino 

business owners decreased by 26 and 32 

percent, respectively, compared to a 17 

percent decrease in white business 

owners.214 Female business owners also 

saw significant impacts, with businesses 

owned by women falling by 25 

percent.215

Many of the disparities in how 

minority business owners experienced 

the pandemic are rooted in systemic 

issues present even before the 

pandemic. For example, before the 

economic downturn, only 12 percent of 

Black-owned businesses and 19 percent 

of Hispanic-owned businesses had 

annual earnings of over $1 million 

compared to 31 percent of white-owned 

businesses.216 Minority-owned 

businesses were also overrepresented in 

industries hit hardest by the economic 

downturn (e.g., services, transportation 

and warehousing, healthcare and social 

assistance, administrative and support 

and waste management, and 

accommodation and food services).217

Approximately 22 percent of all 

minority-owned business fell into the 

hardest hit industries compared to 13 

percent of nonminority-owned 

businesses.218

Although disparities in annual 

revenue are not a direct indication of a 

business’s ability to weather an 

economic downturn, they do highlight 

other disparities that make it more 

challenging for these businesses to 

survive the effects of the pandemic. 

Black-owned startups, for example, face 

larger challenges in raising capital, 

including securing business loans.219

Summary of the Interim Final Rule and 

Final Rule Structure 

Summary of Interim Final Rule: As 

discussed above, small businesses faced 

significant challenges in covering 

payroll, mortgages or rent, and other 

operating costs as a result of the public 

health emergency and measures taken to 

contain the spread of the virus. Under 

Sections 602(c)(1)(A) and 603(c)(1)(A), 

recipients may ‘‘respond to the public 

health emergency or its negative 

economic impacts,’’ by, among other 

things, providing ‘‘assistance to . . . 

small businesses.’’ Accordingly, the 

interim final rule allowed recipients to 

provide assistance to small businesses 

to address the negative economic 

impacts faced by those businesses. A 


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‘‘small business’’ is defined as a 

business concern or other organization 

that: 

(1) Has no more than 500 employees 

or, if applicable, the size standard in 

number of employees established by the 

Administrator of the Small Business 

Administration for the industry in 

which the business concern or 

organization operates; and 

(2) Is a small business concern as 

defined in section 3 of the Small 

Business Act (15 U.S.C. 632). 

Specifically, the interim final rule 

provided that recipients may provide 

assistance to small businesses to adopt 

safer operating procedures, weather 

periods of closure, or mitigate financial 

hardship resulting from the COVID–19 

public health emergency, including: 

• Loans or grants to mitigate financial 

hardship such as declines in revenues 

or impacts of periods of business 

closure; 

• Loans, grants, or in-kind assistance 

to implement COVID–19 prevention or 

mitigation tactics; and 

• Technical assistance, counseling, or 

other services to assist with business 

planning needs. 

The interim final rule further 

provided that recipients may consider 

additional criteria to target assistance to 

businesses in need, including small 

businesses. Such criteria may include 

businesses facing financial insecurity, 

substantial declines in gross receipts 

(e.g., comparable to measures used to 

assess eligibility for the Paycheck 

Protection Program), or other economic 

harm due to the pandemic, as well as 

businesses with less capacity to weather 

financial hardship, such as the smallest 

businesses, those with less access to 

credit, or those serving underserved 

communities. The interim final rule also 

indicated that recipients should 

consider local economic conditions and 

business data when establishing such 

criteria. Finally, the interim final rule 

posed a question on whether there are 

other services or costs that Treasury 

should consider as eligible uses to 

respond to the disproportionate impacts 

of COVID–19 on low-income 

populations and communities. 

Final Rule Structure: Consistent with 

the interim final rule approach, the final 

rule provides a non-exhaustive list of 

enumerated eligible uses for assistance 

to small businesses that are impacted or 

disproportionately impacted by the 

pandemic. Further, within Assistance to 

Small Business, a recipient may also 

identify a negative economic impact 

experienced by small businesses and 

design and implement a response to that 

negative economic impact, beyond the 

uses specifically enumerated in the final 

rule, according to the standard 

described in the section Standards: 

Identifying a Negative Economic Impact. 

A recipient may also identify small 

businesses that have been 

disproportionately impacted by the 

public health emergency and design and 

implement a program that responds to 

the source of that disproportionate 

impact. 

Consistent with other eligible use 

categories to respond to the public 

health and economic impacts of the 

pandemic, recipients may identify and 

serve small businesses that experienced 

a negative economic impact or 

disproportionate impact due to the 

pandemic, as described in the section 

Standards for Identifying Other Eligible 

Populations. For example, to identify 

impacted small businesses, a recipient 

may consider whether the small 

businesses faced challenges in covering 

payroll, mortgage or rent, or other 

operating costs as a result of the public 

health emergency and measures taken to 

contain the spread of the virus. In order 

to ease administrative burden, the final 

rule presumes that small businesses 

operating in QCTs, small businesses 

operated by Tribal governments or on 

Tribal Lands, and small businesses 

operating in the U.S. territories were 

disproportionately impacted by the 

pandemic. 

Reorganizations and CrossReferences: As detailed above, Treasury 

has re-categorized some uses of funds in 

the final rule to provide greater clarity. 

For discussion of assistance to small 

businesses and impacted industries to 

implement COVID–19 mitigation and 

prevention strategies, see section 

COVID–19 Mitigation and Prevention in 

Public Health. 

Small Businesses Eligible for Assistance 

Public Comment: Treasury received 

many comments about the general 

benefits or drawbacks of use of SLFRF 

funds to provide assistance to small 

businesses. Some commenters suggested 

that SLFRF funds should be available to 

assist all small businesses, rather than 

only businesses that experienced direct 

negative economic impacts due to the 

public health emergency. Other 

commenters argued that aid to small 

businesses should be narrowed in the 

final rule, asserting that SLFRF funds 

should instead focus on assistance to 

households or building public sector 

capacity. 

Treasury also received comments 

requesting clarification of the types of 

small businesses eligible for assistance. 

For example, some commenters 

requested clarification about whether 

microbusinesses were included in the 

definition of small business. Comments 

also suggested that self-employed 

individuals and Tribal enterprises be 

classified as small businesses, 

respectively. Commenters argued that 

these types of small businesses are more 

common among low-income and 

minority businessowners and serve as 

important institutions in underserved 

communities. 

Finally, some commenters suggested 

that Treasury permit broader 

enumerated eligible uses to assist small 

businesses in disproportionately 

impacted communities and generally 

strengthen economic growth in these 

communities. These commenters 

recommended that Treasury presume 

small businesses operating in QCTs are 

disproportionately impacted and 

eligible for broader enumerated uses. 

Treasury Response: As discussed in 

the section Designating a Negative 

Economic Impact, in the final rule, 

recipients must identify an economic 

harm caused or exacerbated by the 

pandemic on a small business or class 

of small businesses to provide services 

that respond. 

As discussed above, programs or 

services in this category must respond 

to a harm experienced by a small 

business or class of small businesses as 

a result of the public health emergency. 

To identify impacted small businesses 

and necessary response measures, 

recipients may consider impacts such as 

lost revenue or increased costs, 

challenges covering payroll, rent or 

mortgage, or other operating costs, the 

capacity of a small business to weather 

financial hardships, and general 

financial insecurity resulting from the 

public health emergency. 

Recognizing the difficulties faced by 

small businesses in certain 

communities, the final rule presumes 

that small businesses operating in QCTs, 

small businesses operated by Tribal 

governments or on Tribal Lands, and 

small businesses operating in the U.S. 

territories were disproportionately 

impacted by the pandemic. This 

presumption parallels the final rule’s 

approach to assistance to households, 

reflecting the more severe pandemic 

impacts in underserved communities 

and creating a parallel structure across 

different categories of eligible uses to 

make the structure simpler for 

recipients to understand and navigate. 

Treasury notes that recipients may 

also designate a class of small 

businesses that experienced a negative 

economic impact or disproportionate 

negative economic impact (e.g., 

microbusinesses, small businesses in 

certain economic sectors), design an 

intervention to fit the impact, and 


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220 In regard to counting employees, businesses 

owned and controlled by a Tribal government are 

not considered affiliates of the Tribal government 

and are not considered affiliates of other businesses 

owned by the Tribal government because of their 

common ownership by the Tribal government or 

common management, as described in 13 CFR 

121.103(b)(2). This definition is consistent with the 

Small Business Administration (SBA) HUBZone 

definition of a ‘‘small business concern’’ relating to 

Tribal governments as well as how Tribal 

enterprises are defined for the State Small Business 

Credit Initiative (SSBCI). 

document that the individual entity is a 

member of the class. Additional 

information about this framework is 

included in the section General 

Provisions: Structure and Standards. 

Further, Treasury is maintaining the 

interim final rule definition of ‘‘small 

business,’’ which used the Small 

Business Administration’s (SBA) 

definition of fewer than 500 employees, 

or per the standard for that industry, as 

defined by SBA. This definition 

includes businesses with very few 

employees, self-employed individuals, 

and Tribally owned businesses.220

Finally, Treasury notes that recipients 

may award SLFRF funds to many 

different types of organizations, 

including small businesses, to function 

as a subrecipient in carrying out eligible 

uses of funds on behalf of a recipient 

government. In this case, a small 

business need not have experienced a 

negative economic impact in order to 

serve as a subrecipient. See section 

Distinguishing Subrecipients versus 

Beneficiaries for more detailed 

discussion of interactions with 

subrecipients, in contrast to 

beneficiaries of assistance. 

Enumerated Eligible Uses for Assistance 

to Small Businesses 

Public Comment: Treasury received 

comments requesting clarification of the 

types of assistance available to small 

businesses. For example, one 

commenter suggested that outdoor 

dining be an eligible use for SLFRF 

funds as assistance to small businesses. 

Other commenters asked for 

clarification about how SLFRF funds 

could be used to support new 

businesses and start-ups. 

Several commenters requested 

clarification of whether and how 

recipients may provide services to 

business districts or downtown areas, 

particularly those that exist in whole or 

in part within a QCT, and requested 

reduced documentation of the specific 

negative economic impact for the 

businesses operating within those areas. 

These commenters argued in favor of 

allowing redevelopment or other 

support, including capital investments, 

in business districts that were 

negatively impacted by COVID–19. 

Several commenters also argued that 

funds should be available to support 

and grow microbusinesses, or 

businesses with five or fewer 

employees, which are more likely to be 

owned by women and people of color. 

Treasury Response: In the final rule, 

Treasury is maintaining and clarifying 

the enumerated eligible uses of funds 

for assistance to small businesses that 

are impacted or disproportionately 

impacted by the pandemic. 

Impacted small businesses. 

Specifically, Treasury is maintaining 

enumerated eligible uses from the 

interim final rule for assistance to 

impacted small businesses. These 

include but are not limited to: 

• Loans or grants to mitigate financial 

hardship such as declines in revenues 

or impacts of periods of business 

closure, for example by supporting 

payroll and benefits costs, costs to retain 

employees, mortgage, rent, or utilities 

costs, and other operating costs; 

• Loans, grants, or in-kind assistance 

to implement COVID–19 prevention or 

mitigation tactics (see section Public 

Health for details on these eligible uses); 

and 

• Technical assistance, counseling, or 

other services to assist with business 

planning needs. 

Treasury acknowledges a range of 

potential circumstances in which 

assisting small businesses could be 

responsive to the negative economic 

impacts of COVID–19, including for 

small businesses startups and 

microbusinesses and individuals 

seeking to start small or 

microbusinesses. For example: 

• As noted above, a recipient could 

assist small business startups or 

microbusinesses with additional costs 

associated with COVID–19 mitigation 

tactics; see section Public Health for 

details on these eligible uses. 

• A recipient could identify and 

respond to a negative economic impact 

of COVID–19 on new small business 

startups or microbusinesses; for 

example, if small business startups or 

microbusinesses in a locality faced 

greater difficulty accessing credit than 

prior to the pandemic or faced increased 

costs to starting the business due to the 

pandemic or if particular small 

businesses or microbusinesses had lost 

expected startup capital due to the 

pandemic. 

• The interim final rule also 

discussed, and the final rule maintains, 

eligible uses that provide support for 

individuals who have experienced a 

negative economic impact from the 

COVID–19 public health emergency, 

including uses that provide job training 

for unemployed individuals. These 

initiatives also may support small 

business start-ups, microbusinesses, and 

individuals seeking to start small or 

microbusinesses. 

Disproportionately impacted small 

businesses. Additionally, Treasury 

agrees with commenters that 

disproportionately impacted small 

businesses may benefit from additional 

assistance to address the sources of that 

disparate impact. 

As such, the final rule provides a 

broader set of enumerated eligible uses 

for disproportionately impacted small 

businesses and/or small businesses in 

disproportionately impacted business 

districts. Recipients may use SLFRF 

funds to assist these businesses with 

certain capital investments, such as 

rehabilitation of commercial properties, 

storefront improvements, and fac ̧ade 

improvements. Recipients may also 

provide disproportionately impacted 

microbusinesses additional support to 

operate the business, including 

financial, childcare, and transportation 

supports. 

Recipients could also provide 

technical assistance, business 

incubators, and grants for start-ups or 

expansion costs for disproportionately 

impacted small businesses. Note that 

some of these types of assistance are 

similar to those eligible to respond to 

small businesses that experienced a 

negative economic impact (‘‘impacted’’ 

small businesses). However, because the 

final rule presumes that some small 

businesses were disproportionately 

impacted, these enumerated eligible 

uses can be provided to those 

businesses without any specific 

assessment of whether they individually 

experienced negative economic impacts 

or disproportionate impacts due to the 

pandemic. 

Cross-References: Recipients 

providing assistance to small businesses 

for capital expenditures (i.e., 

expenditures on property, facilities, or 

equipment) should also review the 

section Capital Expenditures in General 

Provisions: Other, which describes 

eligibility standards that apply to capital 

expenditures. Recipients should also 

note that services to address vacant or 

abandoned commercial or industrial 

properties are addressed in section 

Vacant or Abandoned Properties in 

Assistance to Households. 

Loans to Small Businesses 

Public Comment: Treasury received 

many comments requesting clarification 

on using SLFRF funds to establish funds 

that provide loans to small businesses. 

For example, commenters sought 

clarification of how eligible use 


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221See, e.g., Federal Reserve Bank of San 

Francisco, Impacts of COVID–19 on Nonprofits in 

the Western United States (May 2020), https://

www.frbsf.org/community-development/files/ 

impact-of-covid. 

222Philanthropy and COVID–19: Measuring one 

year of giving, Candid and the Center for Disaster 

Philanthropy. (2021), https://www.issuelab.org/ 

resources/38039/38039.pdf. 

223 Id. 

224Elizabeth T. Boris et al., Nonprofit Trends and 

Impacts 2021, Urban Institute (October 7, 2021), 

https://www.urban.org/research/publication/ 

nonprofit-trends-and-impacts-2021/view/full_

report. 

225 Id. 

226Chelsea Newhouse, COVID–19 JOBS UPDATE, 

NOVEMBER 2021: Nonprofits add just 5,000 jobs in 

November, Center for Civil Society Studies at Johns 

Hopkins University (December 10, 2021), http://

ccss.jhu.edu/november-2021-jobs/. 

227Elizabeth T. Boris et al. supra note 224 at p. 

38. 

228 § 35.3 Definitions. 

229The ARPA also states under ‘‘Transfer 

Authority’’ that a Recipient may transfer funds to 

a private nonprofit organization such as those 

defined in paragraph (17) of section 401 of the 

McKinney-Vento Homeless Assistance Act (42 

U.S.C. 11360(17). See 602 & 603(c)(3) of the Social 

Security Act. See section Transfers of Funds for 

additional information on other types of entities, 

including other forms of nonprofits, that may 

receive transfers. 

230While not stated specifically in the interim 

final rule, the Department does not require or have 

a preference as to the payment structure for 

recipients that transfer funds to subrecipients (e.g., 

advance payments, reimbursement basis, etc.). 

Ultimately, recipients must comply with the 

eligible use requirements and any other applicable 

laws or requirements and are responsible for the 

actions of their subrecipients or beneficiaries. 

requirements and applicable dates for 

SLFRF funds would apply to third party 

organizations (like economic 

development organizations) who receive 

SLFRF funds in order to establish a loan 

fund. In addition, commenters 

requested clarification on what 

requirements apply to loan programs 

with available funds remaining after 

December 31, 2024. 

Treasury Response: SLFRF funds may 

be used to make loans, including to 

small businesses, provided that the loan 

is an eligible use, and the cost of the 

loan is tracked and reported in 

accordance with Treasury’s Compliance 

and Reporting Guidance. Funds that are 

unobligated after December 31, 2024 

must be returned to Treasury. See 

section Treatment of Loans for more 

information about using SLFRF funds 

for loan programs. 

c. Assistance to Nonprofits 

Background: Nonprofits have faced 

significant challenges because of the 

pandemic, including increased demand 

for services and changing operational 

needs.221 Prior to the pandemic, the 

median U.S. nonprofit reported that it 

had six months of cash on hand.222 This 

varied by sector, however, with some 

sectors like disaster relief organizations 

reporting a median of 17 months cash 

on hand, and others, like mental health 

and crisis intervention organizations 

reporting only three months.223

Evidence suggests that the pandemic 

has damaged the financial health of 

nonprofits, with small nonprofits, 

which tend to rely more heavily on 

donations than large nonprofits, 

reporting relatively larger declines in 

donations — 42 percent versus 29 

percent, respectively.224 Among 

nonprofits that collect fees for services, 

the median revenue amount collected 

from such fees fell by 30 percent from 

2019 to 2020, with arts organization 

experiencing a 50 percent decline.225

Nonprofits also experienced significant 

job losses. While employment in the 

nonprofit sector has recovered from its 

low point in 2020, as of November 2021, 

the sector remained 485,000 jobs below 

its pre-pandemic level.226 In addition, 

some nonprofits may have experienced 

declines in volunteer staffing during the 

pandemic.227

At the same time, nonprofits provide 

a host of services for their communities, 

including helping Americans weather 

the multitude of challenges presented 

by the pandemic. The ARPA and the 

interim final rule recognized this 

dichotomy—nonprofits as entities that 

have themselves been negatively 

impacted by the pandemic and as 

entities that provide services that 

respond to the public health and 

negative economic impacts of the 

pandemic on households and others 

—by creating two roles for nonprofits. 

First, under Sections 602(c)(1)(A) and 

603(c)(1)(A), recipients may ‘‘respond to 

the public health emergency or its 

negative economic impacts,’’ by, among 

other activities, providing ‘‘assistance to 

. . . nonprofits.’’ The interim final rule 

defined assistance to nonprofits to 

include ‘‘loans, grants, in-kind 

assistance, technical assistance or other 

services, that responds to the negative 

economic impacts of the COVID–19 

public health emergency,’’ and 

‘‘nonprofit’’ to mean a tax-exempt 

organization under Section 501(c)(3) of 

the U.S. Internal Revenue Code.228

Second, as discussed above, ARPA 

and the interim final rule provided that 

nonprofit organizations may also receive 

funds as subrecipients of a recipient 

government (i.e., a government that 

received SLFRF funds); subrecipients 

carry out an eligible use of SLFRF funds 

on behalf of a recipient government 

(e.g., a recipient government that would 

like to provide food assistance to 

impacted households may grant funds 

to a nonprofit organization to carry out 

that eligible use). Recipients generally 

have wide latitude to award funds to 

many types of organizations, including 

nonprofit or for-profit organizations, as 

subrecipients to carry out eligible uses 

of funds on their behalf. For further 

information on distinguishing between 

beneficiaries and subrecipients, as well 

as the impacts of the distinction on 

reporting and other requirements, see 

section Transfers of Funds and section 

Distinguishing Subrecipients versus 

Beneficiaries under the Public Health 

and Negative Economic Impacts eligible 

use category.229

Reorganization and Cross-References: 

Under the interim final rule, assistance 

to disproportionately impacted 

communities was a separate, standalone category. The final rule 

reorganizes the disproportionate impact 

analysis within the sections Assistance 

to Households, Assistance to Small 

Business, and Assistance to Nonprofits 

to better articulate how recipients can 

serve disproportionately impacted 

beneficiaries in each of those categories. 

As detailed above in the Public Health 

subsection, in response to public 

comments describing uncertainty on 

which eligible use category should be 

used to assess different potential uses of 

funds, Treasury has re-categorized some 

uses of funds in the final rule to provide 

greater clarity. For discussion of 

assistance to nonprofits to implement 

COVID–19 mitigation and prevention 

strategies, see section COVID–19 

Mitigation and Prevention in Public 

Health. 

Recipients providing assistance via 

nonprofits involving capital 

expenditures (i.e., expenditures on 

property, facilities, or equipment) 

should also review the section Capital 

Expenditures in General Provisions: 

Other, which describes eligibility 

standards for these expenditures. 

Recipients providing assistances in the 

form of loans should review the section 

Treatment of Loans. 

Public Comment: Eligible Assistance 

to Impacted and Disproportionately 

Impacted Nonprofits: A few 

commenters asked Treasury to be more 

explicit in the final rule that recipients 

may use funds to provide relief directly 

to nonprofit organizations and to 

explain how nonprofits might qualify 

themselves for assistance and what 

expenses SLFRF funds may be used to 

cover.230 Commenters requested that 

Treasury note that the pandemic is 


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231Note, this response is meant to clarify the 

difference between nonprofits as beneficiaries and 

nonprofits as subrecipients. It is not meant to limit 

the types of relationships that a recipient may enter 

into with a nonprofit as permitted under the 

Uniform Guidance. 

232See sections 602(c)(3) and 603(c)(3) of the 

Social Security Act. See also Section 401 of the 

McKinney-Vento Homeless Assistance Act (42 

U.S.C. 11360(17), which defines a ‘‘private 

nonprofit organization.’’ 

leading to a changing financial 

landscape for nonprofits. 

Treasury Response: Eligible 

Assistance to Impacted and 

Disproportionately Impacted 

Nonprofits: The interim final rule 

provided for, and the final rule 

maintains, the ability for recipients to 

provide direct assistance to nonprofits 

that experienced public health or 

negative economic impacts of the 

pandemic. Specifically, recipients may 

provide direct assistance to nonprofits if 

the nonprofit has experienced a public 

health or negative economic impact as 

a result of the pandemic. For example, 

if a nonprofit organization experienced 

impacts like decreased revenues or 

increased costs (e.g., through reduced 

contributions or uncompensated 

increases in service need), and a 

recipient provides funds to address that 

impact, then it is providing direct 

assistance to the nonprofit as a 

beneficiary under Subsection (c)(1) of 

Sections 602 and 603. Direct assistance 

may take the form of loans, grants, inkind assistance, technical assistance, or 

other services that respond to the 

negative economic impacts of the 

COVID–19 public health emergency. 

A recipient may identify a negative 

economic impact experienced by a 

nonprofit, or class of nonprofits, and 

design and implement a response to that 

negative economic impact, see section 

Standards: Designating a Negative 

Economic Impact. The final rule 

provides a non-exhaustive list of 

enumerated eligible uses for assistance 

to nonprofits that are impacted or 

disproportionately impacted by the 

pandemic. 

A recipient may also identify a class 

of nonprofits that have been 

disproportionately impacted by the 

public health emergency and design and 

implement a program that responds to 

the source of that disproportionate 

impact. For example, a recipient may 

determine that nonprofits offering afterschool programs within its jurisdiction 

were disproportionately impacted by 

the pandemic due to the previous inperson, indoors nature of the work and 

the nonprofits’ reliance on fees received 

for services (e.g., attendance fees). The 

recipient might then design an 

intervention to assist those nonprofits in 

adapting their programming (e.g., to 

outdoor or online venues), their revenue 

structure (e.g., adapting the fee for 

service structure or developing expertise 

in digital donation campaigns), or both. 

Additional information about this 

framework is included in General 

Provisions: Structure and Standards. In 

order to ease administrative burden, the 

final rule presumes that nonprofits 

operating in QCTs, operated by Tribal 

governments or on Tribal Lands, or 

operating in the U.S. territories were 

disproportionately impacted by the 

pandemic. 

To summarize, a recipient may 

determine that certain nonprofits were 

impacted by the pandemic or were 

disproportionately impacted by the 

pandemic and provide responsive 

services. 

Public Comment: Beneficiaries and 

Subrecipients: As noted elsewhere in 

this final rule, Treasury received 

multiple comments expressing 

uncertainty on how to categorize a 

particular activity in the eligible use 

categories. For instance, some 

commenters requested that recipients be 

able to use SLFRF funds for certain 

expenses incurred by nonprofits (e.g., 

unemployment charges) as a response to 

a public health or negative economic 

impact to that nonprofit; others asked if 

nonprofits providing certain services 

(e.g., social services) made them eligible 

for direct assistance. Commenters also 

requested that Treasury acknowledge 

that engagement directly with nonprofit 

organizations in low-income 

communities and communities of color 

may allow the recipient to better assess 

economic harms in these areas. 

Treasury Response: Beneficiaries and 

Subrecipients: Treasury recognizes that 

many nonprofits play important roles in 

their communities, and some may have 

experienced public health or negative 

economic impacts during the pandemic. 

As such, under the interim final rule 

and the final rule, nonprofits may be 

impacted by the pandemic and receive 

assistance as a beneficiary, as described 

above, and/or be a subrecipient 

providing services on behalf of a 

recipient.231

Specifically, the interim final rule 

also allowed for, and the final rule 

maintains, the ability for the recipient to 

transfer, e.g., via grant or contract, funds 

to nonprofit entities to carry out an 

eligible use on behalf of the recipient. 

Treasury notes that recipients may 

award SLFRF funds to many different 

types of organizations to carry out 

eligible uses of funds and serve 

beneficiaries on behalf of a recipient 

government (e.g., assisting in a 

vaccination campaign, operating a job 

training program, developing affordable 

housing). When a recipient provides 

funds to an organization to carry out 

eligible uses of funds and serve 

beneficiaries, the organization becomes 

a subrecipient. In this case, a nonprofit 

need not have experienced a negative 

economic impact in order to serve as a 

subrecipient. 

In the context of SLFRF, nonprofits of 

all types may be subrecipients. Treasury 

is not restricting the types of nonprofits 

that can operate as subrecipients, rather 

allowing recipients to decide what form 

best meets the needs of their 

community. Therefore, a ‘‘nonprofit’’ 

that is acting as subrecipient could 

include, but is not limited to, a 

nonprofit as that term is defined in 

paragraph (17) of section 401 of the 

McKinney-Vento Homeless 

Assistance.232 See section 

Distinguishing Subrecipients versus 

Beneficiaries for further information. 

Additional guidance on determining 

subrecipient status may be found in the 

Uniform Guidance.233

Recipients may transfer funds to 

subrecipients in several ways, including 

advance payments and on a 

reimbursement basis. Ultimately, 

recipients must comply with the eligible 

use requirements and any other 

applicable laws or requirements and are 

responsible for the actions of their 

subrecipients or beneficiaries. 

As part of accepting the Award Terms 

and Conditions for SLFRF, each 

recipient agreed to maintain a conflictof-interest policy consistent with 2 CFR 

200.318(c) that is applicable to all 

activities funded with the SLFRF award. 

Pursuant to this requirement, decisions 

concerning SLFRF funds must be free of 

undisclosed personal or organizational 

conflicts of interest, both in fact and in 

appearance. Recipients may avoid 

conflicts of interest in providing 

assistance to nonprofits or making 

subrecipient awards by, inter alia, 

making aid available to nonprofits on 

generally applicable terms or utilizing a 

competitive grant process, respectively. 

A recipient may not use control over 

SLFRF funds for their own private gain. 

Furthermore, no employee, officer, or 

agent may participate in the selection, 

award, or administration of a contract 

supported by a federal award if he or 

she has a real or apparent conflict of 

interest. 

Public Comment: Definition of 

Nonprofit: Treasury also received 

several requests to expand the definition 

of nonprofits so that other tax-exempt 

entities (e.g., 501(c)(7)s, 501(c)(9)s, 

501(c)(19)s, nonprofits with ‘‘historical 


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234 § 35.3 Definitions. 

235Treasury considered expanding the definition 

of nonprofit to include 501(c)(6) organizations, as 

Congress later did in the Coronavirus Response and 

Consolidated Appropriations Act of 2021, but 

ultimately decided to retain the original CARES Act 

definition. To the extent impacted by the pandemic, 

501(c)(6) organizations may be eligible to receive 

funds to support eligible uses that align with their 

overall purpose (e.g., tourism promotion in aid of 

an impacted industry). 

236Coronavirus State and Local Fiscal Recovery 

Funds, 86 FR at 26795. 

237For a definition of ‘‘Tribal development 

districts,’’ please see FAQ 2.9 at the following: 

Coronavirus State and Local Fiscal Recovery Funds, 

Frequently Asked Questions, as of July 19, 2021; 

https://home.treasury.gov/system/files/136/ 

SLFRPFAQ.pdf. 

significance’’) could be eligible for 

direct assistance as beneficiaries. 

Treasury Response: Definition of 

Nonprofit: The final rule expands the 

definition of nonprofits to mean 

501(c)(3) organizations and 501(c)(19) 

organizations.234 The 501(c)(3) 

classification includes a wide range of 

organizations with varying charitable or 

public service-oriented goals (e.g., 

housing, food assistance, job training). 

As discussed above, these nonprofit 

organizations often experienced 

hardship due to increased needs for 

services combined with decreased 

donations and other sources of funding. 

In response to comments, Treasury has 

expanded the definition of nonprofit to 

include 501(c)(19) organizations, which 

includes veterans’ organizations, to 

provide recipients more flexibility and 

in alignment with the definition of 

nonprofit adopted by the CARES Act, 

wherein 501(c)(3)s and 501(c)(19)s were 

eligible for assistance.235

Public Comment: Reporting 

Requirements: One commenter asked 

Treasury to clarify if nonprofits that 

receive direct assistance as beneficiaries 

are required to comply with guidelines 

and reporting requirements. 

Treasury Response: Reporting 

Requirements: Nonprofits that receive 

direct assistance as beneficiaries are not 

subrecipients under SLFRF and are 

therefore not required to comply with 

SLFRF reporting requirements. 

However, the recipient must comply 

with SLFRF reporting requirements, 

which would require reporting 

obligations and expenditures for 

assistance to nonprofits. The recipient 

may also choose to establish other forms 

of reporting or accountability as a part 

of the recipient’s direct assistance 

program. 

A nonprofit entity that receives a 

transfer from a recipient is a 

subrecipient. Per the Uniform Guidance, 

subrecipients must adhere to the same 

requirements as recipients. Therefore, a 

nonprofit subrecipient may only receive 

funds to carry out an eligible use of 

SLFRF funds and must comply with any 

reporting and compliance requirements. 

Note that recipients are ultimately 

responsible for reporting information to 

Treasury and must collect any necessary 

information from their subrecipients to 

complete required reporting. 

d. Aid to Impacted Industries 

The interim final rule allowed for 

‘‘aid to tourism, travel, and hospitality, 

and other impacted industries’’ that 

responds to the negative economic 

impacts of the COVID–19 public health 

emergency. In designating other 

impacted industries, Treasury specified 

that recipients should consider the 

‘‘extent of the economic impact as 

compared to tourism, travel, and 

hospitality’’ and ‘‘whether impacts were 

due to the COVID–19 pandemic, as 

opposed to longer-term economic or 

industrial trends unrelated to the 

pandemic.’’ 236 Treasury identified 

declines in employment and revenue as 

possible metrics to compare the 

economic impact on a particular 

industry relative to the tourism, travel, 

and hospitality industries. 

Treasury further provided that aid 

should be limited to businesses, 

attractions, business districts, and Tribal 

development districts 237 that were 

operating prior to the pandemic and 

affected by required closures and other 

efforts to contain the pandemic. 

Examples of eligible aid include 

assistance to implement COVID–19 

mitigation and infection prevention 

measures, aid to support safe reopening 

of businesses in these industries, as well 

as aid for a planned expansion or 

upgrade of tourism, travel, and 

hospitality facilities delayed due to the 

pandemic. The interim final rule and 

Treasury’s subsequent Compliance and 

Reporting Guidance also required 

governments to publicly report 

assistance provided to private-sector 

businesses under this eligible use and 

maintain records of their assessments to 

facilitate transparency and 

accountability. 

Reorganization and Cross-References: 

As detailed above, Treasury has recategorized some uses of funds in the 

final rule to provide greater clarity. In 

the interim final rule, aid to impacted 

industries to implement COVID–19 

mitigation and prevention strategies was 

categorized under Aid to Impacted 

Industries; the final rule addresses these 

items under the section COVID–19 

Mitigation and Prevention in Public 

Health. Recipients should also be aware 

of the difference between beneficiaries 

of assistance and subrecipients when 

working with impacted industries; for 

further information, see section 

Distinguishing Subrecipients versus 

Beneficiaries. 

Designating an Impacted Industry 

Public Comment: Many commenters 

requested greater clarity on how to 

designate ‘‘other impacted industries’’ 

within their jurisdiction. Commenters 

requested greater specificity as to the 

metrics used to measure impact, with 

some suggesting metrics such as the 

change in the size of an industry’s 

workforce due to the pandemic, as well 

as consideration of whether and why 

employees are choosing to return to 

work at slower rates in certain 

industries. One commenter asked if this 

meant nearly every industry was 

‘‘disproportionately impacted.’’ Some 

commenters encouraged Treasury to 

focus on industries most negatively 

impacted by the pandemic, including 

disallowing across-the-board business 

subsidies to businesses that were not 

negatively impacted by the pandemic 

and saw revenue or profit growth. Other 

commenters asked for flexibility for 

recipients to determine impacted 

industries based on their local 

knowledge of the economic landscape. 

Treasury Response: The final rule 

maintains the interim final rule’s 

approach of allowing recipients to 

designate impacted industries outside 

the travel, tourism, and hospitality 

industries, and, in response to 

comments, provides greater clarity as to 

how recipients may designate such 

impacted industries. 

Sections 602(c)(1)(A) and 603(c)(1)(A) 

recognize that the tourism, travel, and 

hospitality industries are severely 

negatively impacted by the pandemic. 

Under the final rule, recipients may 

provide eligible aid (described in further 

detail herein) to the tourism, travel, and 

hospitality industries. Treasury 

considers Tribal development districts, 

which are commercial centers for Tribal 

hospitality, gaming, tourism, and 

entertainment and can include Tribal 

enterprises, as part of the tourism, 

travel, and hospitality industries that 

have been severely hit by the pandemic. 

Therefore, Treasury reaffirms that Tribal 

development districts are considered 

impacted industries and recipients may 

provide eligible aid to them. 

To identify other industries 

comparably impacted to the tourism, 

travel, and hospitality industries, 

recipients should undertake a two-step 

process: Identifying an industry and 

determining whether that industry is 

comparably impacted. 


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238Once an industry is designated as impacted, 

aid should be generally broadly available to 

businesses in the industry that qualify. Recipients 

should document how they defined the scope of 

their industry and how they determined that the 

industry was impacted. For states and territories, 

this includes documenting their justification for 

defining a constituent industry with greater 

geographic precision than state or territory-wide. 

239National Leisure & Hospitality supersector 

employment data can be found on the U.S. Bureau 

of Labor Statistics website: U.S. Bureau of Labor 

Statistics, Leisure and Hospitality, https://

www.bls.gov/iag/tgs/iag70.htm (last visited 

December 7, 2021). 

First, recipients should identify an 

industry to be assessed. In identifying 

this industry, the final rule provides 

recipients the flexibility to define its 

substantive or geographic scope.238

Recipients may identify a broad sector 

that encompasses a number of subindustries, or they may identify a 

specific sub-industry to be assessed. For 

example, a recipient may identify 

‘‘personal care services’’ as an industry, 

or they may identify a more specific 

category within the ‘‘personal care 

services’’ industry (e.g., barber shops) as 

an industry. In defining the industry, 

Treasury encourages recipients to define 

narrow and discrete industries eligible 

for aid. Recipients are not required to 

follow, but may consider following, 

industry classifications under the North 

American Industry Classification 

System (NAICS). Treasury notes that the 

larger and more diverse the sector, the 

more difficult it may be to demonstrate 

that the larger and less specific sector is 

negatively impacted in the same way 

given the scale and diversity of 

businesses within it. 

State or territory recipients may also 

define a constituent industry with 

greater geographic precision than state 

or territory-wide. For example, a state 

may identify a particular industry in a 

certain region of the state that was 

negatively impacted by the pandemic, 

even if the same industry in the rest of 

the state did not see a meaningful 

negative economic impact from the 

pandemic. State recipients oversee large 

and diverse industries, sometimes with 

differences in economic activity 

between geographic regions. Allowing 

greater geographic precision allows 

recipients to target aid to those that 

need it most, ensuring that state 

averages do not conceal hard-hit areas 

in their state. 

Second, to determine whether the 

industry is ‘‘impacted,’’ recipients 

should compare the negative economic 

impacts of the public health emergency 

on the identified industry to the impacts 

observed on the travel, tourism, and 

hospitality industries. 

1. Simplified test. An industry is 

presumed to be impacted if the industry 

experienced employment loss of at least 

8 percent. 

Specifically, a recipient should 

compare the percent change in the 

number of employees of the recipient’s 

identified industry and the national 

Leisure & Hospitality sector in the three 

months before the pandemic’s most 

severe impacts began (a straight threemonth average of seasonally-adjusted 

employment data from December 2019, 

January 2020, and February 2020) with 

the latest data as of the final rule release 

(a straight three-month average of 

seasonally-adjusted employment data 

from September 2021, October 2021, 

and November 2021).239 The national 

Leisure & Hospitality sector largely 

represents the national travel, tourism, 

and hospitality industries enumerated 

in the statute. According to the Bureau 

of Labor Statistics, employment has 

fallen by approximately 8 percent for 

the national Leisure & Hospitality sector 

when comparing the most recent threemonth period available as of the date of 

adoption of the final rule to the threemonth period immediately before the 

public health emergency. Therefore, if 

the identified industry has suffered an 

employment loss of at least 8 percent, 

the final rule presumes the industry to 

be an ‘‘impacted industry.’’ 

For parity and simplicity, smaller 

recipients without employment data 

that measure industries in their specific 

jurisdiction may use data available for a 

broader unit of government for this 

calculation (e.g., a county may use data 

from the state in which it is located; a 

city may use data for the county, if 

available, or state in which it is located) 

solely for purposes of determining 

whether a particular industry is an 

impacted industry. 

2. If simplified test is not met. If an 

industry does not satisfy the test above 

or data are unavailable, the recipient 

may still designate the industry as 

impacted by demonstrating the 

following: 

a. The recipient can show that the 

totality of relevant major economic 

indicators demonstrate that the industry 

is experiencing comparable or worse 

economic impacts as the national 

tourism, travel, and hospitality 

industries at the time of the publication 

of the final rule, and that the impacts 

were generally due to the COVID–19 

public health emergency. Example 

economic indicators include gross 

output, GDP, net profits, employment 

levels, and projected time to restore 

employment back to pre-pandemic 

levels. Recipients may rely on available 

economic data, government research 

publications, research from academic 

sources, and other quantitative sources 

for this determination. 

If quantitative data is unavailable, the 

recipient can rely on qualitative data to 

show that the industry is experiencing 

comparable or worse economic impacts 

as the national tourism, travel, and 

hospitality industries, and the impacts 

were generally due to the COVID–19 

public health emergency. Recipients 

may rely on sources like community 

interviews, surveys, and research from 

relevant state and local government 

agencies. 

As the public health emergency and 

economic recovery evolves, recipients 

should assess how industry impacts 

shift over time. Impacted industries may 

recover in a short period of time and no 

longer face a negative economic impact; 

in those circumstances, the recipient 

should ensure that the extent and length 

of aid is reasonably proportional to the 

negative economic impact that is 

experienced, as detailed further below 

and in section General Provisions: 

Structure and Standards. Recipients 

may add to their list of impacted 

industries by showing that the negative 

economic impacts to the industry at the 

time of the designation are comparable 

to the negative economic impacts to the 

national tourism, travel, and hospitality 

sectors as of the date of the final rule 

adoption, as detailed herein. 

Eligible Aid 

Public Comment: Commenters asked 

for further clarification as to the 

definition of eligible aid to an impacted 

industry, with many requesting that a 

broad range of aid be eligible. Examples 

of aid that recipients asked to be 

considered eligible include aid to 

businesses to cover COVID–19 

mitigation costs and planned 

renovations or improvements to 

tourism, travel, and hospitality 

facilities, as well as marketing and inkind incentives to attract visitors. 

Commenters also asked about the 

eligibility of aid to broadly cover losses 

incurred by facilities such as convention 

centers and hotels due to the 

pandemic’s economic impact. 

Commenters also asked for further 

clarification about the requirements 

related to private-sector reporting. 

Further, some commenters asked for 

clarification about eligible aid to 

impacted industries owned and 

operated by Tribal governments, 

including for Tribal construction 

projects that have been delayed due to 

the pandemic’s economic impacts, and 

for deference to Tribal determinations of 

negative economic impacts. 


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240As part of accepting the Award Terms and 

Conditions for SLFRF, each recipient agreed to 

maintain a conflict-of-interest policy consistent 

with 2 CFR 200.318(c) that is applicable to all 

activities funded with the SLFRF award. Pursuant 

to this policy, decisions concerning SLFRF must be 

free of undisclosed personal or organizational 

conflicts of interest, both in fact and in appearance. 

Recipients may avoid conflicts of interest in 

awarding aid to impacted industries by, inter alia, 

making aid available to businesses in the industry 

on generally applicable terms or utilizing a 

competitive grant process. A recipient may not use 

control over SLFRF for their own private gain. 

Furthermore, no employee, officer, or agent may 

participate in the selection, award, or 

administration of a contract supported by a federal 

award if he or she has a real or apparent conflict 

of interest. 

Treasury Response: In response to 

commenters’ requests for clarification 

on eligible aid, the final rule requires 

that aid to impacted industries, 

including to Tribal development 

districts, be designed to address the 

harm experienced by the impacted 

industry. 

First, recipients should identify a 

negative economic impact, i.e., an 

economic harm, that is experienced by 

businesses in the impacted industry. 

Second, recipients should select a 

response that is designed to address the 

identified economic harm resulting from 

or exacerbated by the public health 

emergency. Responses must also be 

related and reasonably proportional to 

the extent and type of harm 

experienced; uses that bear no relation 

or are grossly disproportionate to the 

type or extent of harm experienced 

would not be eligible uses. Recipients 

should consider the further discussion 

of this standard provided in the sections 

Standards: Designating a Public Health 

Impact and Standards: Designating a 

Negative Economic Impact. 

These responses may take the form of 

direct spending by recipients to promote 

an industry or support for businesses 

within an ‘‘impacted’’ industry that 

experienced a negative economic impact 

(e.g., through a grant program). 

Examples of eligible responses include: 

• Aid to mitigate financial hardship 

due to declines in revenue or profits by 

supporting payroll costs and 

compensation of returning employees 

for lost pay and benefits during the 

COVID–19 pandemic, as well as support 

of operations and maintenance of 

existing equipment and facilities, such 

as rent, leases, and utilities; 

• Aid for technical assistance, 

counseling, and other services to assist 

with business planning needs; and 

• Aid to implement COVID–19 

mitigation and infection prevention 

measures, such as vaccination or testing 

programs, is broadly eligible for many 

types of entities, including travel, 

tourism, hospitality, and other impacted 

industries. Recipients providing aid to 

impacted industries for COVID–19 

public health measures should review 

the section Assistance to Businesses to 

Implement COVID–19 Strategies in 

Public Health, which describes types of 

eligible uses of funds in this category. 

To address the identified harms, 

responses (e.g., aid through a grant 

program) should be generally broadly 

available to all businesses within the 

impacted industry to avoid the risk of 

self-dealing, preferential treatment, and 

conflicts of interest.240 Treasury 

encourages recipients to design aid 

programs such that funds are first used 

for operational expenses that are 

generally recognized as ordinary and 

necessary for the recipient’s operation, 

such as payroll, before being used on 

other types of costs. As noted in the 

section General Standards: Structure 

and Standards, uses of funds that do not 

respond to the negative economic 

impacts of the pandemic, such as 

excessive compensation to employees, 

is ineligible. 

The final rule maintains the interim 

final rule’s requirement that aid may 

only be considered responsive to the 

negative economic impacts of the 

pandemic if it supports businesses, 

attractions, and Tribal development 

districts operating prior to the pandemic 

and affected by required closures and 

other efforts to contain the pandemic. 

Further, to facilitate transparency and 

accountability, the final rule maintains 

the interim final rule’s requirement that 

recipients publicly report assistance 

provided to private-sector businesses 

under this eligible use, including 

tourism, travel, hospitality, and other 

impacted industries, and its connection 

to negative economic impacts of the 

public health emergency. Recipients 

also should maintain records to support 

their assessment of how businesses 

receiving assistance were affected by the 

negative economic impacts of the public 

health emergency and how the aid 

provided responds to these impacts. 

Recipients providing aid to impacted 

industries for capital expenditures (i.e., 

expenditures on property, facilities, or 

equipment), including Tribal 

governments providing aid to Tribal 

development districts, should also 

review the section Capital Expenditures 

in General Provisions: Other, which 

describes eligibility standards that are 

applicable to these expenditures, 

depending on the type of aid. Recipients 

providing assistance in the form of loans 

should review the section Treatment of 

Loans in Program Administration 

Provisions. 

4. General Provisions: Other 

As noted above, the final rule 

consolidates into a General Provisions 

section several types of uses of funds; in 

the interim final rule, the eligibility of 

these uses of funds was discussed 

within specific categories of eligible 

uses for public health and negative 

economic impacts. Treasury anticipates 

that this re-organization will enhance 

recipient clarity in assessing eligible 

uses of funds. These General Provisions 

apply across all uses of funds under 

public health and negative economic 

impacts. 

Specifically, this section considers 

eligible uses for: 

• Public Sector Capacity and 

Workforce, which includes several 

separate and non-mutually exclusive 

categories articulated in the interim 

final rule: public health and safety staff; 

rehiring state, local, and Tribal 

government staff; expenses for 

administering COVID–19 response 

programs; expenses to improve the 

efficacy of public health or economic 

relief programs; and administrative 

expenses caused or exacerbated by the 

pandemic. Treasury recognizes that 

these are closely related and frequently 

overlapping categories. The final rule 

treats them as a single purpose, 

supporting public sector capacity, and 

provides coordinated guidance on the 

standards and presumptions that apply 

to them. 

• Capital Expenditures, which was 

addressed only under Public Health in 

the interim final rule. The final rule 

moves this expense to General 

Provisions and provides more clarity on 

the eligibility of capital expenditures 

across all aspects of the public health 

and negative economic impacts eligible 

use category. 

• Distinguishing Subrecipients versus 

Beneficiaries, which describes the 

differences between these two 

categories. Recipient governments 

responding to the public health and 

negative economic impacts of the 

pandemic may provide assistance to 

beneficiaries or execute an eligible use 

of funds through a subrecipient; some 

types of entities (e.g., nonprofits) could 

fit into either category depending on the 

specific purpose of the use of funds. 

• Uses Outside the Scope of this 

Category, which addresses uses of funds 

that are ineligible or generally ineligible 

under this eligible use category in the 

interim final rule. These uses of funds 

remain ineligible under the final rule, 

but Treasury has re-categorized where 

they are addressed, as described below. 


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241 In general, if an employee’s wages and salaries 

are an eligible use of SLFRF funds, recipients may 

treat the employee’s covered benefits as an eligible 

use of SLFRF funds. For purposes of SLFRF funds, 

covered benefits include costs of all types of leave 

(vacation, family-related, sick, military, 

bereavement, sabbatical, jury duty), employee 

insurance (health, life, dental, vision), retirement 

(pensions, 401(k)), unemployment benefit plans 

(federal and state), workers compensation 

insurance, and Federal Insurance Contributions Act 

(FICA) taxes (which includes Social Security and 

Medicare taxes). As described further in the section 

Deposits into Pension Funds in Restrictions on Use, 

that limitation on use does not apply to pension 

contributions that are part of regular payroll 

contributions for employees whose wages and 

salaries are an eligible use of SLFRF funds. 

242Note that the interim final rule adapted prior 

guidance issued for CRF that described these four 

categories of employees; however, when listing the 

specific occupations or types of employees in each 

of these categories, the guidance collapses health 

care and public health into one category titled 

‘‘public health.’’ Therefore, the presumption 

described around public health employees also 

covers health care employees. 

243Note that this category encompasses both 

public health and health care employees; both are 

treated as public health employees for the purposes 

of this eligible use category. 

This section also addresses enumerated 

eligible uses proposed by commenters 

that Treasury has not incorporated into 

the final rule. 

Recipients should also note that the 

Office of Management and Budget’s 

(OMB) Uniform Administrative 

Requirements, Cost Principles, and 

Audit Requirements for Federal Awards 

(commonly called the ‘‘Uniform 

Guidance’’) generally applies to SLFRF. 

a. Public Sector Capacity and Workforce 

Public Safety, Public Health, and 

Human Services Staff 

Summary of Interim Final Rule: 

Under the interim final rule, funds may 

be used for payroll and covered 

benefits 241 for public safety, public 

health, health care, human services, and 

similar employees 242 of a recipient 

government, for the portion of the 

employee’s time that is spent 

responding to COVID–19. For 

administrative convenience, the 

recipient may consider public health 

and safety employees to be entirely 

devoted to responding to COVID–19, 

and therefore their full payroll and 

covered benefits eligible to be covered, 

if the employee, or his or her operating 

unit or division, is ‘‘primarily 

dedicated’’ to responding to COVID–19, 

meaning that more than half of the 

employee, unit, or division’s time is 

dedicated to responding to COVID–19. 

Recipients may consider other 

presumptions for assessing the extent to 

which an employee, division, or 

operating unit is responding to COVID– 

19. Recipients must periodically 

reassess their determination and 

maintain records to support their 

assessment, such as payroll records, 

attestations from supervisors or staff, or 

regular work product or 

correspondence; recipients need not 

track staff hours. The interim final rule 

also posed a question on how long 

recipients should be able to use funds 

for staff responding to COVID–19 and 

what other measures or presumptions 

might Treasury consider to assess the 

extent to which public sector staff are 

engaged in COVID–19 response in an 

easily administrable manner. 

Treasury also provided further 

guidance on the types of employees 

covered by this category of eligible use, 

specifically: ‘‘Public safety employees 

would include police officers (including 

state police officers), sheriffs and deputy 

sheriffs, firefighters, emergency medical 

responders, correctional and detention 

officers, and those who directly support 

such employees such as dispatchers and 

supervisory personnel. Public health 

employees 243 would include employees 

involved in providing medical and other 

health services to patients and 

supervisory personnel, including 

medical staff assigned to schools, 

prisons, and other such institutions, and 

other support services essential for 

patient care (e.g., laboratory technicians, 

medical examiner, or morgue staff) as 

well as employees of public health 

departments directly engaged in matters 

related to public health and related 

supervisory personnel. Human services 

staff include employees providing or 

administering social services; public 

benefits; child welfare services; and 

child, elder, or family care, as well as 

others.’’ 

Public Comment: Measuring Time 

Spent on COVID–19 Response: Treasury 

received public comments on several 

components of this eligible use category. 

Many commenters argued that it poses 

an administrative burden to identify the 

extent to which staff are responding to 

COVID–19 and to maintain records to 

support that assessment. Largely citing 

administrative burden in assessing 

eligibility, several commenters 

recommended revisions to the 

administrative convenience that the full 

payroll and covered benefits for public 

health and safety staff ‘‘primarily 

dedicated’’ to responding to COVID–19 

may be paid with SLFRF funds. Some 

commenters recommended presuming 

that all public health and safety staff are 

primarily dedicated to COVID–19 

response, while others proposed that 

public health and safety workers who 

primarily serve QCTs or low- and 

moderate-income areas be presumed to 

be primarily dedicated to COVID–19 

response, given the disproportionate 

impacts of the pandemic in those 

communities. Similarly, Tribal 

communities recommended that their 

public health staff be presumed eligible 

due to the disproportionate impact of 

the pandemic on their communities. 

Some commenters proposed that they be 

able to use the administrative 

convenience for staff outside of public 

health and safety that are responding to 

COVID–19 (i.e., to be able to pay the full 

payroll and covered benefits for any 

staff ‘‘primarily dedicated’’ to COVID– 

19 response). 

Treasury Response: In the final rule, 

Treasury is maintaining the approach in 

the interim final rule, including 

elaborations issued in further guidance, 

but providing additional clarification on 

its application, including methods to 

apply the approach to minimize 

administrative burden. Treasury notes 

that recipients may assess the extent to 

which staff are dedicated to responding 

to COVID–19 through a variety of 

means, including establishing 

presumptions or assessing public health 

and safety staff at the division or 

operating unit level. For example, a 

recipient could consider the amount of 

time spent by employees in its public 

health department’s epidemiology 

division in responding to COVID–19 

and, if a majority of its employees are 

dedicated to responding to COVID–19, 

determine that the entire division is 

primarily dedicated to responding to 

COVID–19. Treasury also clarifies that 

recipients may use reasonable estimates 

to establish administrable 

presumptions; for example, a recipient 

could estimate, based on discussions 

with staff, the general share of time that 

employees in a specific role or type of 

position spend on COVID–19 related 

tasks and apply that share of time to all 

employees in that position. 

Recipients are generally required to be 

able to support uses of SLFRF funds as 

eligible, including, in this instance, 

maintenance of records to support an 

assessment that public health and safety 

staff are primarily dedicated to 

responding to COVID–19. As noted 

above, recipients may use reasonable 

estimates to implement this provision. 

Recipients should maintain records on 

how they developed these estimates and 

need not track staff hours. Treasury 

notes that records retained can include 

payroll records (e.g., the number and 

type of staff in various positions), 

attestations from supervisors or staff 

(e.g., self-attestation of share of time 

spent on COVID–19), or regular work 

product or correspondence (e.g., 

calendars, email correspondence, 

documents, and other electronic 


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records). Treasury anticipates that these 

types of records are generally retained 

in many government settings; recipients 

should also consult the Award Terms 

and Conditions for SLFRF funds for 

requirements on length of record 

retention. For example, a recipient 

could establish a reasonable 

presumption about the share of time 

that an employee, division, or operating 

unit is responding to COVID–19 and 

simply retain those employees’ 

electronic records as a record to support 

their assessment. 

Public Comment: Public Health and 

Safety Staff Primarily Dedicated to 

COVID–19 Response: Some commenters 

recommended expanding the 

administrative convenience for public 

health and safety staff primarily 

dedicated to COVID–19 response to 

further types of staff, to all public health 

and safety staff, or to public health and 

safety staff serving underserved areas. 

Treasury Response: The interim final 

rule recognized that COVID–19 response 

continues to require substantial staff 

resources and provides an 

administrative convenience to make it 

relatively simpler to identify the 

eligibility of the types of workers— 

public health and safety workers— 

generally most involved in COVID–19 

response. At the same time, many 

public health and safety workers 

perform roles unrelated to COVID–19; 

coverage of all roles would be overbroad 

compared to the workers responding to 

COVID–19 in actuality. For this reason, 

the final rule maintains the interim final 

rule’s approach to permitting SLFRF 

funds to be used for public health and 

safety staff primarily dedicated to 

responding to COVID–19. Finally, to the 

extent that a greater proportion of public 

health and safety staff time is needed to 

respond to COVID–19 in 

disproportionately impacted 

communities, the ‘‘primarily dedicated’’ 

approach recognizes this increased 

need. 

Public Comment: Eligible Types of 

COVID–19 Response: Some public 

commenters also sought further 

clarification on how to identify eligible 

types of ‘‘COVID–19 response.’’ For 

example, commenters requested 

clarification on delineating COVID–19 

response from general public health 

response and defining COVID–19 

response for public safety employees. 

Treasury Response: Treasury is 

clarifying that ‘‘responding to’’ COVID– 

19 entails work needed to respond to 

the public health or negative economic 

impacts of the pandemic, apart from the 

typical pre-pandemic job duties or 

workload of an employee in a 

comparable role, if one existed. For 

example, responding to COVID–19 for a 

public safety worker may entail working 

in an emergency operations center to 

coordinate pandemic-related supply 

distribution, responding to an increased 

volume of 911 calls, or implementing 

COVID–19 prevention and mitigation 

protocols in a carceral setting. 

Public Comment: Eligible Employees: 

Some commenters requested 

clarification on the types of eligible 

employees or expansion of eligible 

employees to include additional types 

of staff, including in behavioral health; 

administrative, management, or 

financial management positions; social 

services; morgue staff; and nonprofit 

staff supporting projects to undertake 

eligible uses of funds under SLFRF. 

Treasury Response: Treasury 

provided further guidance on eligible 

types of employees following the 

interim final rule, which expressly 

included social services and morgue 

staff, and incorporates that guidance 

into the final rule. In addition, Treasury 

is clarifying that public health 

‘‘employees involved in providing 

medical and other health services to 

patients and supervisory personnel’’ 

includes behavioral health services as 

well as physical health services. 

Treasury also is clarifying that this 

provision only addresses employees of 

the recipient government responding to 

COVID–19. For discussion of eligible 

expenses to administer SLFRF, 

including eligible costs for subrecipients 

performing eligible activities on behalf 

of a recipient government, see section 

Administrative Expenses in Program 

Administration Provisions. 

Finally, Treasury is clarifying that 

indirect costs for administrative, 

management, and financial management 

personnel to support public health and 

safety staff responding to COVID–19 are 

not permissible under this provision, 

given the relatively greater challenge of 

differentiating the marginal increase in 

staff time and workload due to 

pandemic response for indirect versus 

direct costs. 

Public Comment: Time Period: 

Finally, some commenters made 

recommendations on the time period 

during which this eligible use should be 

available. Some commenters 

recommended eligibility begin before 

March 3, 2021, the period when 

Treasury’s interim final rule permitted 

recipients to begin to incur costs using 

SLFRF funds; for discussion of this 

topic, see section Timeline for Use of 

SLFRF Funds in Program 

Administration Provisions. As noted 

above, Treasury also posed a question in 

the interim final rule asking for how 

long Treasury should maintain the 

administrative convenience that SLFRF 

funds may be used for the full payroll 

and covered benefits of public health 

and safety staff primarily dedicated to 

COVID–19 response. Several 

commenters recommended that 

Treasury maintain this approach 

throughout the program or through 

December 31, 2024. Other commenters 

requested clarification on whether 

eligibility for this use of funds was tied 

to the length of the state of emergency 

or whether a jurisdiction has an active 

state of emergency. 

Treasury Response: In the final rule, 

Treasury is clarifying that recipients 

will be permitted to fund the full 

payroll and covered benefits of public 

health and safety staff primarily 

dedicated to COVID–19 response 

throughout the period of performance 

for the SLFRF program, though 

recipients should periodically reassess 

their determination of primarily 

dedicated staff, including as the public 

health emergency and response evolves. 

Government Employment and Rehiring 

Public Sector Staff 

The interim final rule permitted use 

of funds for costs associated with 

rehiring state, local, and Tribal 

government staff in order to bolster the 

government’s ability to effectively 

administer services. Specifically, 

recipients may pay for payroll, covered 

benefits, and other costs associated with 

the recipient increasing the number of 

its employees up to the pre-pandemic 

baseline, or the number of employees 

that the recipient government employed 

on January 27, 2020. 

Public Comment: Many commenters 

requested greater flexibility and 

additional clarification on the 

provision’s requirements, including the 

pre-pandemic baseline and re-hiring 

process. Some commenters requested 

that the final rule allow for hiring above 

the pre-pandemic baseline given 

historic underinvestment in the public 

sector workforce. Commenters suggested 

a number of adjustments to the prepandemic baseline, including adjusting 

based on population or revenue growth, 

while some recommended allowing 

recipients to set their own hiring levels. 

Others requested clarification on the 

definition of the baseline and the rehiring process, including whether the 

pre-pandemic baseline referred to 

budgeted or filled positions and 

whether new hires had to fill the same 

roles as the previous hires. Commenters 

also asked whether recipients need to 

show if the reduction in number of 

employees was due to the pandemic in 

order to qualify for funding and 

requested that workers dedicated to 


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244Recipients may determine that a portion of an 

FTE’s time is dedicated to responding to the 

COVID–19 public health emergency. Further, for 

administrative convenience, the recipient may 

consider public health and safety FTEs to be 

entirely devoted to mitigating or responding to the 

COVID–19 public health emergency if the FTE, or 

his or her operating unit of division, is primarily 

dedicated to responding to the COVID–19 public 

health emergency. Recipients may also consider 

other presumptions for assessing the extent to 

which an FTE, division, or operating unit is 

engaged in activities that respond to the COVID–19 

public health emergency, provided that the 

recipient reassesses periodically and maintains 

records to support its assessment, such as payroll 

records, attestations from supervisors or staff, or 

regular work product or correspondence 

demonstrating work on the COVID–19 response. 

COVID–19 response be exempted from 

the calculation of number of employees. 

Many commenters also requested an 

expanded set of eligible uses beyond 

restoring their workforce up to the prepandemic baseline. Commenters 

requested that funding be able to be 

used to avoid layoffs, provide back pay, 

retain employees through pay increases 

and other retention programs, or 

reimburse salaries and benefits already 

paid. Some commenters also requested 

clarification as to whether recipients 

can fund re-hired positions through the 

period of performance and on the 

definition of payroll and benefits. Other 

commenters requested preferential 

hiring for workers laid off, a strong 

commitment to equity, and a 

requirement that funds would not be 

used to pay for contract or temporary 

replacement workers during a labor 

dispute. 

Treasury Response: The final rule 

allows for an expanded set of eligible 

uses to restore and support public sector 

employment. Eligible uses include 

hiring up to a pre-pandemic baseline 

that is adjusted for historic 

underinvestment in the public sector, 

providing additional funds for 

employees who experienced pay cuts or 

were furloughed, avoiding layoffs, 

providing worker retention incentives, 

and paying for ancillary administrative 

costs related to hiring. 

Restoring pre-pandemic employment. 

In response to comments and 

recognizing underinvestment in public 

sector employment, the final rule 

expands the ability to use SLFRF funds 

to restore pre-pandemic employment. 

Treasury is also clarifying how, and the 

extent to which, recipients may use 

SLFRF funds to rehire public 

employees. 

The final rule provides two options to 

restore pre-pandemic employment, 

depending on recipient’s needs. Under 

the first and simpler option, recipients 

may use SLFRF funds to rehire staff for 

pre-pandemic positions that were 

unfilled or were eliminated due the 

pandemic without undergoing further 

analysis. Under the second option, the 

final rule provides recipients an option 

to hire above the pre-pandemic baseline, 

by adjusting the pre-pandemic baseline 

for historical growth in public sector 

employment over time, as well as 

flexibility on roles for hire. Recipients 

may choose between these options but 

cannot use both. 

To pursue the first option, recipients 

may use SLFRF funds to hire employees 

for the same positions that existed on 

January 27, 2020 but that were unfilled 

or eliminated as of March 3, 2021, 

without undergoing further analysis. For 

these employees, recipients may use 

SLFRF funds for payroll and covered 

benefit costs that are obligated by 

December 31, 2024 and expended by 

December 31, 2026, consistent with the 

Uniform Guidance’s Cost Principles at 2 

CFR part 200 Subpart E. This option 

provides administrative simplicity for 

recipients that would simply like to 

restore pre-pandemic positions and 

would not like to hire above the prepandemic baseline. 

To pursue the second option, 

recipients should undergo the analysis 

provided below. In short, this option 

allows recipients to pay for payroll and 

covered benefits associated with the 

recipient increasing its number of 

budgeted full-time equivalent 

employees (FTEs) up to 7.5 percent 

above its pre-pandemic employment 

baseline, which adjusts for the 

continued underinvestment in state and 

local governments since the Great 

Recession. State and local government 

employment as a share of population in 

2019 remained considerably below its 

share prior to the Great Recession in 

2007, which presented major risks to 

recipients mounting a response to the 

COVID–19 public health emergency. 

The adjustment factor of 7.5 percent 

results from estimating how much larger 

2019 state and local government 

employment would have needed to be 

for the share of state and local 

government employment to population 

in 2019 to have been back at its 2007 

level and is intended to correct for this 

gap. 

Recipients should complete the steps 

described below. Recipients may choose 

whether to conduct this analysis on a 

government-wide basis or for an 

individual department, agency, or 

authority. 

• Step One: Identify the recipient’s 

budgeted FTE level on January 27, 2020. 

This includes all budgeted positions, 

filled and unfilled. This is called the 

pre-pandemic baseline. 

• Step Two: Multiply the prepandemic baseline by 1.075 (that is, 1 

+ adjustment factor). This is called the 

adjusted pre-pandemic baseline. 

• Step Three: Identify the recipient’s 

budgeted FTE level on March 3, 2021, 

which is the beginning of the period of 

performance for SLFRF funds. 

Recipients may, but are not required to, 

exclude FTEs dedicated to responding 

to the COVID–19 public health 

emergency.244 This is called the actual 

number of FTEs. 

• Step Four: Subtract the actual 

number of FTEs from the adjusted prepandemic baseline to calculate the 

number of FTEs that can be hired and 

covered by SLFRF funds. 

Recipients may use SLFRF funds to 

cover payroll and covered benefit costs 

obligated by December 31, 2024, and 

expended by December 31, 2026, up to 

the number of FTEs calculated in Step 

Four, consistent with the Uniform 

Guidance’s Cost Principles at 2 CFR part 

200 Subpart E. Recipients may only use 

SLFRF funds for additional FTEs hired 

over the March 3, 2021 level of 

budgeted FTEs (i.e., the actual number 

of FTEs); note again that recipients may 

choose whether to conduct the analysis 

of FTEs that can be covered by SLFRF 

funds on a government-wide basis or for 

an individual department, agency, or 

authority. 

These FTEs must have begun their 

employment on or after March 3, 2021, 

which is the beginning of the period of 

performance. For administrative 

convenience, recipients do not need to 

demonstrate that the reduction in 

number of FTEs was due to the COVID– 

19 pandemic, as Treasury assumes the 

vast majority of employment reductions 

during this time were due to pandemic 

fiscal pressures on state and local 

budgets. Recipients do not need to hire 

for the same roles that existed prepandemic. 

For illustration, consider a 

hypothetical recipient with 1,000 

budgeted FTEs on January 27, 2020 (950 

filled FTE positions and 50 unfilled FTE 

positions). The recipient’s prepandemic baseline is 1000 FTEs; its 

adjusted pre-pandemic baseline is 1,000 

* 1.075 = 1075 FTEs. Now, assume that 

on March 3, 2021, the recipient had 800 

budgeted FTEs in total (795 filled FTE 

positions and 5 unfilled FTE positions), 

with 50 FTEs primarily dedicated to 

responding to the COVID–19 public 

health emergency. The recipient would 

have the option of using either 800 FTEs 

or 750 FTEs as its actual number of 

FTEs for the calculation; assuming it 

chooses the lower number, it would be 

able to fund up to 325 FTEs with SLFRF 

funds (that is, 1,075¥750 = 325 FTEs). 


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245As part of accepting the Award Terms and 

Conditions for SLFRF, each recipient agreed to 

maintain a conflict-of-interest policy consistent 

with 2 CFR 200.318(c)112 that is applicable to all 

activities funded with the SLFRF award. Pursuant 

to this policy, decisions concerning SLFRF must be 

free of undisclosed personal or organizational 

conflicts of interest, both in fact and in appearance. 

A recipient may not use control over SLFRF for 

their own private gain. Furthermore, no employee, 

officer, or agent may participate in the selection, 

award, or administration of a contract supported by 

a federal award if he or she has a real or apparent 

conflict of interest. 

Specifically, the recipient would be able 

to use SLFRF to fund payroll and 

covered benefits for up to 325 FTEs that 

begin their employment on or after 

March 3, 2021, for costs obligated by 

December 31, 2024, and expended by 

December 31, 2026, consistent with the 

Uniform Guidance’s Cost Principles, as 

long as SLFRF funds are used for 

additional FTEs hired over the 

recipient’s 750 FTE level (which is its 

March 3, 2021 budgeted FTE level). 

In hiring new employees, the final 

rule encourages recipients to ensure a 

diverse workforce. The final rule also 

prohibits recipients from using funds to 

temporarily fill positions during a labor 

dispute, as this would not constitute 

responding to the public health or 

negative economic impacts of the 

pandemic. Further, recipients must 

ensure that its hiring practices do not 

violate conflict-of-interest policies.245

Total compensation for a hired 

employee that is substantially in excess 

of typical compensation for employees 

of their experience and tenure within 

the recipient’s government, without a 

corresponding business case, may 

indicate a potential conflict-of-interest 

in fact or appearance. 

Providing additional funding for 

employees who experienced pay cuts 

and furloughs. In recognition of the 

economic hardship caused by pay cuts 

and furloughs, additional funds may be 

provided to employees who experienced 

pay cuts or were furloughed since the 

onset of the pandemic on January 27, 

2020. Recipients must be able to 

substantiate that the pay cut or furlough 

was substantially due to the public 

health emergency or its negative 

economic impacts (e.g., fiscal pressures 

on state and local budgets) and should 

document their assessment. As a 

reminder, this additional funding must 

be reasonably proportional to the 

negative economic impact of the pay cut 

or furlough on the employee, which 

would include taking into account 

unemployment insurance (UI) benefits 

that a furloughed employee may have 

received during the furloughed period. 

Treasury presumes that additional funds 

beyond the difference in pay had the 

employee not received a pay cut or been 

furloughed would not be reasonably 

proportional. 

Recipients may also provide premium 

pay to certain employees, as detailed 

further in section Premium Pay. 

Avoiding layoffs. Funds may be used 

to maintain current compensation 

levels, with adjustments for inflation, in 

order to prevent layoffs that would 

otherwise be necessary. Recipients must 

be able to substantiate that layoffs were 

likely in the absence of SLFRF funds 

and would be substantially due to the 

public health emergency or its negative 

economic impacts (e.g., fiscal pressures 

on state and local budgets) and should 

document their assessment. 

Retaining workers. Funds may be 

used to provide worker retention 

incentives, which are designed to 

persuade employees to remain with the 

employer as compared to other 

employment options. Recipients must 

be able to substantiate that the 

employees were likely to leave 

employment in the absence of the 

retention incentive and should 

document their assessment. For 

example, a recipient may determine that 

a retention bonus is necessary based on 

the presence of an alternative 

employment offer for an employee. 

All worker retention incentives must 

be narrowly tailored to need and should 

not exceed incentives traditionally 

offered by the recipient or compensation 

that alternative employers may offer to 

compete for the employees. Further, 

because retention incentives are 

intended to provide additional incentive 

to remain with the employer, they must 

be entirely additive to an employee’s 

regular rate of wages and other 

remuneration and may not be used to 

reduce or substitute for an employee’s 

normal earnings. Treasury will presume 

that retention incentives that are less 

than 25 percent of the rate of base pay 

for an individual employee or 10 

percent for a group or category of 

employees are reasonably proportional 

to the need to retain employees, as long 

as the other requirements are met. 

Ancillary administrative costs. Funds 

may be used to pay for ancillary 

administrative costs associated with 

administering SLFRF-funded hiring and 

retention programs detailed above, 

including costs to publish job postings, 

review applications, and onboard and 

train new hires. For additional 

information on administrative expenses, 

see section Administrative Expenses in 

Program Administration Provisions. 

Effective Service Delivery: 

Administrative Expenses 

The interim final rule provided that 

funds could be used for: ‘‘Expenses to 

improve efficacy of public health or 

economic relief programs: 

Administrative costs associated with the 

recipient’s COVID–19 public health 

emergency assistance programs, 

including services responding to the 

COVID–19 public health emergency or 

its negative economic impacts, that are 

not federally funded.’’ In the final rule, 

Treasury is clarifying that there are 

several categories of eligible 

administrative expenses. 

First, recipients may use funds for 

administrative costs to improve the 

efficacy of public health or economic 

relief programs through tools like 

program evaluation, data analysis, and 

targeted consumer outreach (see section 

Effective Service Delivery: Program 

Evaluation, Data, and Outreach). 

Second, recipients may use funds for 

administrative costs associated with 

programs to respond to the public 

health emergency and its negative 

economic impacts, including programs 

that are not funded by SLFRF or not 

federally funded. In other words, 

Treasury recognizes that responding to 

the public health and economic impacts 

of the pandemic requires many 

programs and activities, some of which 

are not funded by SLFRF. Executing 

these programs effectively is a 

component of responding to the public 

health and negative economic impacts 

of the pandemic. 

Finally, recipients may use funds for 

direct and indirect administrative costs 

for administering the SLFRF program 

and projects funded by the SLFRF 

program. See section Administrative 

Expenses in Program Administration 

Provisions for details on this eligible use 

category. 

Effective Service Delivery: Program 

Evaluation, Data, and Outreach 

The Supplementary Information of 

the interim final rule provided that 

state, local and Tribal governments may 

use SLFRF funds to improve the design 

and execution of programs responding 

to the COVID–19 pandemic and to 

improve the efficacy of programs 

addressing negative economic impacts. 

The interim final rule included highlevel guidance about how SLFRF funds 

could be used in this eligible use 

category, including the use of targeted 

consumer outreach, improvements to 

data or technology infrastructure, 

impact evaluations, and data analysis. 

Since the publication of the interim 

final rule, Treasury has also released 


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246Results for America, Invest in What Works 

State Standard of Excellence (August 2020), https:// 

2020state.results4america.org/2020_StateStandard-of-Excellence.pdf. 

247Learning Agendas are systematic plans to 

identify, prioritize, answer important questions 

about programs and policies using analytic 

techniques that are appropriate to the type of 

question asked. For more information on learning 

agendas, please see OMB Memorandum M–19–23, 

available at: https://www.whitehouse.gov/wpcontent/uploads/2019/07/M-19-23.pdf and OMB 

Memorandum M–21–27, available at: https://

www.whitehouse.gov/wp-content/uploads/2021/06/ 

M-21-27.pdf. 

248Evidence Clearinghouses are databases of 

research in particular program areas. Frequently 

these Clearinghouses identify evidence-based 

programs, the strength of the evidence for those 

programs, and provide contextual or supporting 

information in easy to understand formats. Many 

federal departments have developed rigorous and 

helpful Clearinghouses that cover a wide range of 

uses enumerated in this final rule as well as other 

programs that may be responsive to public health 

or negative economic impacts of the pandemic. For 

more information on Clearinghouses, please see the 

Compliance and Reporting Guidance: U.S. 

Department of the Treasury, Recipient Compliance 

and Reporting Responsibilities, as of November 5, 

2021; https://home.treasury.gov/policy-issues/ 

coronavirus/assistance-for-state-local-and-tribalgovernments/state-and-local-fiscal-recovery-funds/ 

recipient-compliance-and-reporting-responsibilities. 

249See FAQ 2.19. Coronavirus State and Local 

Fiscal Recovery Funds, Frequently Asked 

Questions, as of July 19, 2021; https://

home.treasury.gov/system/files/136/SLFRPFAQ.pdf. 

In the case of courts specifically, this includes 

‘‘implementing COVID–19 safety measures to 

facilitate court operations, hiring additional court 

staff or attorneys to increase speed of case 

supplementary information on data 

analysis, evidence building, and 

program evaluation in the Compliance 

and Reporting Guidance. 

Public Comment: Treasury received 

positive comments about the 

opportunity to invest in data and 

technology upgrades with SLFRF funds. 

For example, one commenter noted that 

investing in technology for better 

connectivity, coupled with software and 

hardware upgrades, will allow the 

workforce to be more productive. 

Treasury also received comments 

seeking clarification on using funds for 

investments in data and technology, 

including whether upgrading 

government websites to improve 

community outreach and investing in 

technologies that support social 

distancing were eligible uses. 

Treasury Response: Governments 

with high capacity to use data and 

evidence to administer programs are 

more likely to be responsive to the 

needs of their community, more 

transparent about their community 

impact, and more resilient to 

emergencies such as the pandemic and 

its economic impacts.246 Treasury 

recognizes that collecting high-quality 

data and developing community-driven, 

evidence-based programs requires 

resources to hire and build the capacity 

of staff, adopt new processes and 

systems, and use new technology and 

tools in order to effectively develop, 

execute, and evaluate programs. As 

such, Treasury is clarifying that 

recipients may use SLFRF funds toward 

the following non-exhaustive list of uses 

to address the data, evidence, and 

program administration needs of 

recipients. Additional information may 

be provided in the Compliance and 

Reporting Guidance. 

• Program evaluation and evidence 

resources to support building and using 

evidence to improve outcomes, 

including development of Learning 

Agendas 247 to support strategic 

evidence building, selection of 

evidence-based interventions, and 

program evaluations including impact 

evaluations (randomized control trials 

and quasi-experimental designs) as well 

as rapid-cycle evaluations, process or 

implementation evaluations, outcome 

evaluations, and cost-benefit analyses. 

Recipients are encouraged to undertake 

rigorous program evaluations when 

practicable, assess the impact of their 

programs by beneficiary demographics 

(including race, ethnicity, gender, 

income, and other relevant factors), and 

engage with community stakeholders 

(including intended beneficiaries) when 

developing Learning Agendas and 

designing evaluations to ensure that 

programmatic, cultural, linguistic, and 

historical nuances are accurately and 

respectfully addressed. 

Recipients are also encouraged to use 

relevant evidence Clearinghouses,248

among other sources, to assess the level 

of evidence for their interventions and 

identify evidence-based models that 

could be applied in their jurisdiction 

(meaning models with strong or 

moderate evidence; see Compliance and 

Reporting Guidance for details on these 

terms). 

• Data analysis resources to gather, 

assess, and use data for effective policymaking and real-time tracking of 

program performance to support 

effective implementation of SLFRFfunded programs and programs that 

respond to the public health emergency 

and its negative economic impacts, or 

which households, small businesses, or 

impacted industries are accessing 

during the pandemic that are funded by 

other sources. These resources include 

but are not limited to data gathering, 

data cleaning, data analysis, data 

infrastructure, data management, data 

sharing, data transparency, performance 

management, outcomes-based 

budgeting, outcomes-based 

procurement, and other data needs. 

Treasury encourages the disaggregation 

of data to identify disparate program 

impacts and the use of crossjurisdictional data sharing to better 

measure and implement government 

programs. 

• Technology infrastructure resources 

to improve access to and the userexperience of government information 

technology systems, including upgrades 

to hardware and software as well as 

improvements to public-facing websites 

or to data management systems, to 

increase public access and improve 

public delivery of government programs 

and services (including in the judicial, 

legislative, or executive branches). 

• Community outreach and 

engagement resources to support the 

gathering and sharing of information in 

ways that improve equity and effective 

implementation of SLFRF-funded 

programs and programs that respond to 

the public health emergency and its 

negative economic impacts, or which 

households, small businesses, or 

impacted industries are accessing 

during the pandemic that are funded by 

other sources. These methods include 

but are not limited to community 

meetings, online surveys, focus groups, 

human-centered design activities, 

behavioral science techniques, and 

other community engagement tools. 

• Capacity building resources to 

support using data and evidence in 

designing, executing, and evaluating 

programs, including hiring public sector 

staff, contractors, academics, 

consultants, and others with expertise 

in evaluation, data, technology, and 

community engagement as well as 

technical assistance support for public 

sector staff, staff of subrecipients, and 

community partners to support effective 

implementation of SLFRF-funded 

programs and programs that respond to 

the public health emergency and its 

negative economic impacts, or which 

households, small businesses, or 

impacted industries are accessing 

during the pandemic that are funded by 

other sources. 

Administrative Needs Caused or 

Exacerbated by the Pandemic 

As described in guidance and the 

interim final rule, SLFRF funds may be 

used to address administrative needs of 

recipient governments that were caused 

or exacerbated by the pandemic. 

Guidance following the interim final 

rule included several examples of this, 

for example, uses of funds to address 

backlogs resulting from pandemicrelated shutdowns (e.g., backlogs in 

court systems).249 This also includes 


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resolution, and other expenses to expedite case 

resolution are eligible uses.’’ 

using funds for increased repair or 

maintenance needs to respond to 

significantly greater use of public 

facilities during the pandemic (e.g., 

increased use of parks resulting in 

damage or increased need for 

maintenance). Some commenters 

expressed support for the ability to use 

funds for these purposes. Treasury is 

maintaining these enumerated eligible 

uses in the final rule and clarifying that 

capital expenditures such as technology 

infrastructure to adapt government 

operations to the pandemic (e.g., videoconferencing software, improvements to 

case management systems or data 

sharing resources), reduce government 

backlogs, or meet increased 

maintenance needs are eligible. 

b. Capital Expenditures 

The interim final rule expressly 

permitted use of funds for a limited 

number of capital expenditures that 

mostly pertained to COVID–19 

prevention and mitigation. These 

included capital investments in public 

facilities to meet pandemic operational 

needs, such as physical plant 

improvements to public hospitals and 

health clinics; adaptations to public 

buildings to implement COVID–19 

mitigation tactics; ventilation 

improvements in congregate settings, 

health care settings, or other key 

locations; assistance to small businesses 

and nonprofits and aid to impacted 

industries to implement COVID–19 

prevention or mitigation tactics, such as 

physical plant changes to enable social 

distancing. For disproportionately 

impacted populations and communities, 

the interim final rule also expressly 

permitted development of affordable 

housing to increase the supply of 

affordable and high-quality living units. 

Public Comment: Many commenters 

supported the interim final rule’s 

allowance of capital expenditures in 

facilities to meet pandemic operational 

needs but requested that the final rule 

explicitly allow for a broader range of 

capital expenditures. Commenters 

expressed an interest in investing in 

equipment, real property, and facilities 

that they argued will yield lasting 

benefits beyond the SLFRF period of 

performance. Some commenters stated 

that the approach in the interim final 

rule limited the vast majority of capital 

expenditures to governments that 

experienced revenue loss under 

Sections 602(c)(1)(C) and 603(c)(1)(C) 

and that this approach may prevent 

some governments from fully meeting 

the needs of their residents. A few 

commenters argued that Treasury 

should limit use of funds on capital 

expenditures not related to addressing a 

direct pandemic harm, such as general 

economic development or workforce 

development, and some expressed 

support for generally limiting capital 

expenditures to those that address the 

needs of low-income communities and 

communities of color. 

Many commenters requested that 

capital expenditures related to direct 

COVID–19 public health response be 

included as enumerated eligible uses. 

The requested types of expenditures 

include improvements and construction 

of hospitals and health clinics 

(including behavioral health clinics), as 

well as other health-related 

infrastructure improvements, such as 

improvements to medical equipment or 

public health information technology. 

These commenters stated that 

investments in health and public health 

systems are vital to ensuring critical 

infrastructure necessary to respond to 

continued impacts of COVID–19 or to 

address disparities in health, due to lack 

of access to health care, that contributed 

to disproportionate impacts of COVID– 

19 on some communities. Further, some 

commenters requested that construction 

or improvements of emergency 

management and public safety facilities 

be deemed eligible, citing that some of 

these sites serve as remote vaccination 

sites or are otherwise crucial to the 

pandemic public health response. 

Commenters also requested use of 

funds for capital expenditures that 

support community needs apart from 

health care, such as new construction or 

improvements to schools, affordable 

housing (beyond presumed 

disproportionately impacted 

communities), childcare facilities, and 

community centers; some suggested that 

all types of projects permissible under 

the Community Development Block 

Grant Program should be eligible both 

for policy and administrability reasons. 

Further, some commenters also asked 

for clarification as to whether parks and 

recreational facilities are eligible if built 

in certain disproportionately impacted 

areas, as well as public transportation 

infrastructure. 

Finally, some commenters also 

requested use of funds for capital 

expenditures in government 

administration buildings, such as public 

courthouses, as well as technology 

infrastructure that would allow for 

remote delivery of public benefits. 

Others also asked about whether funds 

could be used to renovate vacant 

business district buildings or 

commercial spaces to spur economic 

recovery. 

Treasury Response: Capital 

expenditures, in certain cases, can be 

appropriate responses to the public 

health and economic impacts of the 

pandemic, in addition to programs and 

services. Like other eligible uses of 

SLFRF funds in this category, capital 

expenditures should be a related and 

reasonably proportional response to a 

public health or negative economic 

impact of the pandemic. The final rule 

clarifies and expands how SLFRF funds 

may be used for certain capital 

expenditures, including criteria and 

documentation requirements specified 

in this section, as applicable. 

Treasury provides presumptions and 

guidelines for capital expenditures that 

are enumerated earlier in sections 

Public Health, Negative Economic 

Impacts, and General Provisions: Other 

under the Public Health and Negative 

Economic Impact eligible use category 

(‘‘enumerated projects’’), along with 

capital expenditures beyond those 

enumerated by Treasury. In addition to 

satisfying the two-part framework in 

Standards: Designating a Public Health 

Impact and Standards: Designating a 

Negative Economic Impact for 

identifying and designing a response to 

a pandemic harm, Treasury will require 

projects with total expected capital 

expenditure costs of $1 million or 

greater to undergo additional analysis to 

justify their capital expenditure. 

Increased reporting requirements will be 

required for projects that are larger in 

size, as well as projects that are not 

enumerated as eligible by Treasury, 

with certain exceptions for Tribal 

governments discussed below. Smaller 

projects with total expected capital 

expenditures below $1 million will not 

be required to undergo additional 

analysis to justify their capital 

expenditure, as such projects will be 

presumed to be reasonably proportional, 

provided that they are responding to a 

harm caused or exacerbated by the 

public health emergency. These 

standards and documentation 

requirements are designed to minimize 

administrative burden while also 

ensuring that projects are reasonably 

proportional and supporting Treasury’s 

risk-based approach to overall program 

management and monitoring. 

This section provides (1) an overview 

of general standards governing capital 

expenditures; (2) presumptions on 

capital expenditures, which help guide 

recipients in determining whether the 

expenditure meets the standards and the 

associated documentation requirements; 

and (3) additional standards and 

requirements that may apply. 


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250See 25 U.S.C. 5108. 

Overview of General Standards 

In considering whether a capital 

expenditure would be eligible under the 

public health and negative economic 

impacts eligible use category, recipients 

must satisfy the requirements for all 

uses under the public health and 

negative economic impacts eligible use 

category, including identifying an 

impact or harm and designing a 

response that addresses or responds to 

the identified impact or harm. 

Responses must be reasonably designed 

to benefit the individual or class that 

experienced the impact or harm and 

must be related and reasonably 

proportional to the extent and type of 

impact or harm. Recipients should 

consult further details on this standard 

provided in the sections Standards: 

Designating a Public Health Impact and 

Standards: Designating a Negative 

Economic Impact under General 

Provisions: Structure and Standards. 

In addition to the framework 

described above, for projects with total 

expected capital expenditures of $1 

million or greater, recipients must 

complete and meet the substantive 

requirements of a Written Justification 

for their capital expenditure, except for 

Tribal governments as discussed below. 

This Written Justification helps clarify 

the application of this interpretive 

framework to capital expenditures, 

while recognizing that the needs of 

communities differ. In particular, this 

justification reflects the fact that the 

time required for a large construction 

project may make capital expenditures 

less responsive to pandemic-related 

needs relative to other types of 

responses. In addition, as discussed in 

section Timeline for Use of SLFRF 

Funds of this Supplemental 

Information, SLFRF funds must be 

obligated by December 31, 2024 and 

expended by December 31, 2026. 

Capital expenditures may involve long 

lead-times, and the Written Justification 

may support recipients in analyzing 

proposed capital expenditures to 

confirm that they conform to the 

obligation and expenditure timing 

requirements. Further, such large 

projects may be less likely to be 

reasonably proportional to the harm 

identified. For example, construction of 

a new, larger public facility for the 

purpose of increasing the ability to 

socially distance generally would not be 

considered a reasonably proportional 

response compared to other less timeand resource-intensive options that may 

be available and would be equally or 

more effective. Other solutions, such as 

improvements in ventilation, could be 

made more quickly and are typically 

more cost effective than construction of 

a new, larger facility. The needs of 

communities differ, and recipients are 

responsible for identifying uses of 

SLFRF funds that best respond to these 

needs. The Written Justification 

recognizes this while also establishing 

consistent documentation and reporting 

to support monitoring and compliance 

with the ARPA and final rule. Finally, 

the Written Justification also reflects the 

fact that infrastructure projects are 

generally not within scope of this 

eligible use category. See section Uses 

Outside the Scope of this Category in 

General Provisions: Other. 

As noted above, Tribal governments 

are not required to complete the Written 

Justification for projects with total 

capital expenditures of $1 million or 

greater. Tribal governments generally 

have limited administrative capacity 

due to their small size and 

corresponding limited ability to 

supplement staffing for short-term 

programs. In addition, Tribal 

governments are already subject to 

unique considerations that require 

additional administrative processes and 

administrative burden for Tribal 

government decision making, including 

capital expenditures. Tribal 

governments generally are subject to a 

jurisdictionally complex sets of rules 

and regulations in the case of 

improvements to land for which the title 

is held in trust by the United States for 

a Tribe (Tribal Trust Lands).250 This 

includes the requirement in certain 

circumstances to seek the input or 

approval of one or more federal agencies 

such the Department of the Interior, 

which holds fee title of Tribal Trust 

Lands. 

As a result of their limited 

administrative capacity and unique and 

complex rules and regulations 

applicable to Tribal governments 

operating on Tribal Trust Lands, Tribal 

governments would experience 

significant and redundant 

administrative burden by also being 

required to complete a Written 

Justification for applicable capital 

expenditures. While Tribal governments 

are not required to complete the Written 

Justification for applicable capital 

expenditures, the associated substantive 

requirements continue to apply, 

including the requirement that a capital 

expenditure must be reasonably 

designed to benefit the individual or 

class that experienced the identified 

impact or harm and must be related and 

reasonably proportional to the extent 

and type of impact or harm. Note that, 

as a general matter, Treasury may also 

request further information on SLFRF 

expenditures and projects, including 

capital expenditures, as part of the 

regular SLFRF reporting and 

compliance process, including to assess 

their eligibility under the final rule. 

The Written Justification should (1) 

describe the harm or need to be 

addressed; (2) explain why a capital 

expenditure is appropriate to address 

the harm or need; and (3) compare the 

proposed capital expenditure against 

alternative capital expenditures that 

could be made. The information 

required for the Written Justification 

reflects the framework applicable to all 

uses under the public health and 

negative economic impacts eligible use 

category, providing justification for the 

reasonable design, relatedness, and 

reasonable proportionality of the capital 

expenditure in response to the harm or 

impact identified. 

1. Description of harm or need to be 

addressed: Recipients should provide a 

description of the specific harm or need 

to be addressed, and why the harm was 

exacerbated or caused by the public 

health emergency. When appropriate, 

recipients may provide quantitative 

information on the extent and type of 

the harm, such as the number of 

individuals or entities affected. 

2. Explanation of why a capital 

expenditure is appropriate: Recipients 

should provide an independent 

assessment demonstrating why a capital 

expenditure is appropriate to address 

the specified harm or need. This should 

include an explanation of why existing 

capital equipment, property, or facilities 

would be inadequate to addressing the 

harm or need and why policy changes 

or additional funding to pertinent 

programs or services would be 

insufficient without the corresponding 

capital expenditures. Recipients are not 

required to demonstrate that the harm or 

need would be irremediable but for the 

additional capital expenditure; rather, 

they may show that other interventions 

would be inefficient, costly, or 

otherwise not reasonably designed to 

remedy the harm without additional 

capital expenditure. 

3. Comparison of the proposed capital 

expenditure against alternative capital 

expenditures: Recipients should provide 

an objective comparison of the proposed 

capital expenditure against at least two 

alternative capital expenditures and 

demonstrate why their proposed capital 

expenditure is superior to alternative 

capital expenditures that could be 

made. Specifically, recipients should 

assess the proposed capital expenditure 

against at least two alternative types or 

sizes of capital expenditures that are 

potentially effective and reasonably 


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251See, e.g., ‘‘Economic Perspectives on 

Incarceration and the Criminal Justice System,’’ 

Council of Economic Advisers (April 2016), pg. 36– 

43. 

252For instance, the CDC has published detailed 

recommendations for nursing homes, long-term care 

facilities, and correctional and detention facilities, 

on infection prevention and control. Many of these 

recommendations are relatively low cost, such as 

proper use of PPE. In addition, increasing 

vaccination rates among nursing home staff is 

among the most important ways to decrease the 

spread of the disease. Centers for Disease Control 

and Prevention, Interim Infection Prevention and 

Control Recommendations to Prevent SARS–CoV– 

2 Spread in Nursing Homes (September 10, 2021), 

https://www.cdc.gov/coronavirus/2019-ncov/hcp/ 

long-term-care.html#anchor_1631030153017. 

253For instance, researchers have found no 

consistent positive relationship between building 

sports facilities and local economic development. 

As Siegfried and Zimbalist (2000, 103) write in a 

review of the literature, ‘‘independent work on the 

economic impact of stadiums and arenas has 

uniformly found that there is no statistically 

significant positive correlation between sports 

facility construction and economic development.’’ 

John Siegfried and Andrew Zimbalist, The 

Economics of Sports Facilities and Their 

Communities, Journal of Economic Perspectives 14, 

no. 3 (Summer 2000): 95–114, https://

www.aeaweb.org/articles?id=10.1257/jep.14.3.95. 

feasible. Where relevant, recipients 

should compare the proposal against the 

alternative of improving existing capital 

assets already owned or leasing other 

capital assets. Recipients should use 

quantitative data when available, 

although they are encouraged to 

supplement with qualitative 

information and narrative description. 

Recipients that complete analyses with 

minimal or no quantitative data should 

provide an explanation for doing so. 

In determining whether their 

proposed capital expenditure is superior 

to alternative capital expenditures, 

recipients should consider the following 

factors against each selected alternative. 

a. A comparison of the effectiveness of 

the capital expenditures in addressing 

the harm identified. Recipients should 

generally consider the effectiveness of 

the capital expenditures in addressing 

the harm over the useful life of the 

capital asset and may consider metrics 

such as the number of impacted or 

disproportionately impacted individuals 

or entities served, when such 

individuals or entities are estimated to 

be served, the relative time horizons of 

the project, and consideration of any 

uncertainties or risks involved with the 

capital expenditure. 

b. A comparison of the expected total 

cost of the capital expenditures. 

Recipients should consider the expected 

total cost of the capital expenditure 

required to construct, purchase, install, 

or improve the capital assets intended to 

address the public health or negative 

economic impact of the public health 

emergency. Recipients should include 

pre-development costs in their 

calculation and may choose to include 

information on ongoing operational 

costs, although this information is not 

required. 

Recipients should balance the 

effectiveness and costs of the proposed 

capital expenditure against alternatives 

and demonstrate that their proposed 

capital expenditure is superior. Further, 

recipients should choose the most costeffective option unless it substantively 

reduces the effectiveness of the capital 

investment in addressing the harm 

identified. 

As an example, a recipient 

considering building a new diagnostic 

testing laboratory to enhance COVID–19 

testing capacity may consider whether 

existing laboratories sufficiently meet 

demand for COVID–19 testing, 

considering the demand for test results 

(along with their turnaround time) as 

well as the impact of current testing 

availability on the spread of COVID–19. 

Recipients may also consider other 

public health impacts of the level of 

diagnostic testing capacity, for example 

if insufficient capacity has decreased 

testing for other health conditions. The 

recipient may consider alternatives such 

as expanding existing laboratories or 

building a laboratory of a different size. 

In comparing the effectiveness of the 

capital expenditures, examples of 

factors that the recipient may consider 

include when the facilities will become 

operational and for how long; the daily 

throughput of COVID–19 tests; and the 

effect on minimizing delays in test 

results on the populations that such 

tests will serve. In comparing costs, the 

recipient may compare the total 

expected cost of the new laboratory 

(including costs of acquisition of real 

property, construction of the laboratory, 

and purchase of any necessary 

equipment needed to operationalize the 

lab), against the expected costs of 

expanding existing laboratories 

(whether by replacing current 

equipment with higher throughout 

devices or physically expanding space 

to accommodate additional capacity) or 

building a new laboratory of a different 

size, including by leasing property. As 

a reminder, recipients should only 

consider alternatives that are potentially 

effective and reasonably feasible. 

Because, in all cases, uses of SLFRF 

funds to respond to public health and 

negative economic impacts of the 

pandemic must be related and 

reasonably proportional to a harm 

caused or exacerbated by the pandemic, 

some capital expenditures may not 

eligible. For example, constructing a 

new correctional facility would 

generally not be a proportional response 

to an increase in the rate of certain 

crimes or overall crime as most 

correctional facilities have historically 

accommodated fluctuations in 

occupancy.251 In addition, construction 

of new congregate facilities, which 

would generally be expected to involve 

expenditures greater than $1 million, 

would generally not be a proportional 

response to mitigate or prevent COVID– 

19, because such construction is 

generally expected to be more costly 

than alternative approaches or capital 

expenditures that may be equally or 

more effective in decreasing spread of 

the disease.252 These alternatives 

include personal protective equipment, 

ventilation improvements, utilizing 

excess capacity in other facilities or 

wings, or temporary facility capacity 

expansions. 

Large capital expenditures intended 

for general economic development or to 

aid the travel, tourism, and hospitality 

industries—such as convention centers 

and stadiums—are, on balance, 

generally not reasonably proportional to 

addressing the negative economic 

impacts of the pandemic, as the efficacy 

of a large capital expenditure intended 

for general economic development in 

remedying pandemic harms may be very 

limited compared to its cost.253

Presumptions on Capital Expenditures 

For administrative convenience, the 

final rule provides presumptions on 

whether a Written Justification is 

required—and required to be submitted 

to Treasury through reporting—based on 

the type and size of the capital 

expenditure, as detailed in the table 

below. 

As discussed above, Tribal 

governments are not required to 

complete the Written Justification for 

applicable capital expenditures, but the 

associated substantive requirements 

continue to apply, including the 

requirement that a capital expenditure 

must be reasonably designed to benefit 

the individual or class that experienced 

the identified impact or harm and must 

be related and reasonably proportional 

to the extent and type of impact or 

harm. 


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254Whether or not a Written Justification is 

required, recipients should still determine that the 

response is related and reasonably proportional to 

the public health emergency and its negative 

economic impacts. Treasury recognizes that 

enumerated eligible uses are ‘‘related’’ to the public 

health emergency and its negative economic 

impacts and presumed to be reasonably 

proportional, except recipients pursuing projects 

with expected total capital expenditures equal to or 

greater than $1 million should still independently 

determine that the expenditures are a reasonably 

proportional response. Enumerated projects with 

total expected capital expenditures under $1 

million receive a safe harbor and deemed to meet 

the related and reasonably proportional standard. 

255Whether or not a Written Justification is 

required, recipients should still determine that the 

response is related and reasonably proportional to 

the public health emergency and its negative 

economic impacts. Treasury presumes that projects 

with total expected capital expenditures under $1 

million are reasonably proportional in size to 

responding to the public health emergency and its 

negative economic impacts; however, recipients 

should determine that the response otherwise meets 

the requirements of the standard, including that the 

response is related to the public health emergency 

and its negative economic impacts. 

If a project has total expected capital expenditures of and the use is enumerated by Treasury as eligible, 

then 254

and the use is beyond those enumerated by Treasury as eligible, then 255

Less than $1 million ........................ No Written Justification required ............................... No Written Justification required. 

Greater than or equal to $1 million, 

but less than $10 million.

Written Justification required but recipients are not 

required to submit as part of regular reporting to 

Treasury.

Written Justification required and recipients must 

submit as part of regular reporting to Treasury. 

$10 million or more ......................... Written Justification required and recipients must 

submit as part of regular reporting to Treasury.

In selecting these thresholds, Treasury 

recognized that capital expenditures 

vary widely in size and therefore would 

benefit from tiered treatment to 

implement eligibility standards while 

minimizing administrative burden, 

especially for smaller projects. For 

example, Treasury selected $1 million 

as a threshold for whether a recipient 

needs to complete a Written 

Justification as well as a threshold 

under which capital expenditures 

would be presumed reasonably 

proportional. Treasury estimates that $1 

million would encapsulate the costs of 

a significant portion of equipment or 

small renovations. These types of 

smaller projects are often a necessary 

and reasonably proportional part of a 

response to the public health 

emergency; therefore, the $1 million 

threshold provides a simplified pathway 

to complete smaller projects more likely 

to meet the eligibility standard. At the 

same time, Treasury selected $10 

million as the threshold for more 

intensive reporting requirements, 

estimating that projects larger than $10 

million would likely constitute 

significant improvements or 

construction of mid- or large-sized 

facilities. As discussed above, given 

their scale and longer time to 

completion, these types of larger 

projects may be less likely to be 

reasonably proportional responses. The 

$10 million threshold also generally 

aligns with thresholds in other parts of 

the SLFRF program, such as for 

enhanced reporting on labor practices. 

Expenditures from closely related 

activities directed toward a common 

purpose are considered part of the scope 

of one project. These expenditures can 

include capital expenditures, as well as 

expenditures on related programs, 

services, or other interventions. A 

project includes expenditures that are 

interdependent (e.g., acquisition of land, 

construction of the school on the land, 

and purchase of school equipment), or 

are of the same or similar type and 

would be utilized for a common 

purpose (e.g., acquisition of a fleet of 

ambulances that would be used for 

COVID–19 emergency response). 

Recipients must not segment a larger 

project into smaller projects in order to 

evade review. A recipient undertaking a 

set of identical or similar projects (e.g., 

development of a number of new 

affordable housing complexes across the 

recipient jurisdiction) may complete 

one Written Justification 

comprehensively addressing the entire 

set of projects. 

Projects Enumerated as Eligible by 

Treasury 

Under the public health and negative 

economic impacts eligible use category, 

the final rule provides a non-exclusive 

list of eligible uses of funding for 

projects that respond to the public 

health emergency or its negative 

economic impacts. Treasury has 

determined that these enumerated 

projects are related to the public health 

emergency and its negative economic 

impacts; however, recipients (other than 

Tribal governments) undertaking these 

projects with total expected capital 

expenditures of $1 million or greater 

must still complete and meet the 

substantive requirements of a Written 

Justification as part of their 

demonstration that the project is a 

related and reasonably proportional 

response to the harm identified. 

• Projects with total expected capital 

expenditures of under $1 million: 

Treasury provides a safe harbor for 

projects with total expected capital 

expenditures of less than $1 million and 

will not require recipients to complete, 

submit, or meet the substantive 

requirements of a Written Justification 

for the capital expenditure. In essence, 

recipients may pursue an enumerated 

project with total expected capital 

expenditures of under $1 million 

without having to undergo additional 

assessments to meet SLFRF 

requirements. 

• Projects with total expected capital 

expenditures of at least $1 million but 

under $10 million: Recipients should 

complete a Written Justification for the 

capital expenditure and make an 

independent assessment of whether 

their proposed capital expenditure 

meets the substantive requirements of 

the Written Justification. Recipients will 

not be required to submit the Written 

Justification as part of regular reporting 

to Treasury but should keep 

documentation for their records. 

• Projects with total expected capital 

expenditures of at least $10 million: 

Similar to the above, recipients should 

complete a Written Justification of the 

capital expenditure and make an 

independent assessment of whether 

their proposed capital expenditure 

meets the substantive requirements of 

the Written Justification. Further, 

recipients will be asked to submit the 

Written Justification as part of regular 

reporting to Treasury. Similar to other 

parts of the SLFRF program, such as on 

reporting on labor practices, Treasury 

recognizes that projects with expected 

total capital expenditures of at least $10 

million may be less likely to meet 

eligibility requirements and therefore 

requires recipients to provide an 

enhanced level of information to 

Treasury. 

Projects Beyond Those Enumerated as 

Eligible by Treasury 

As with all uses, recipients that 

undertake capital expenditures beyond 

those enumerated as eligible by 

Treasury must meet the two-part 

framework under Standards: 

Designating a Public Health Impact and 

Standards: Designating a Negative 

Economic Impact under General 

Provisions: Structure and Standards, 


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including the requirement that 

responses are related and reasonably 

proportional to the harm or impact 

identified. As part of that assessment, 

these recipients may also be asked to 

complete a Written Justification. 

Recipients (other than Tribal 

governments) are subject to the 

following presumptions for the Written 

Justification of the capital expenditure, 

based on the total expected capital 

expenditures of the project: 

• Projects with total expected capital 

expenditures of under $1 million: 

Treasury provides a safe harbor for 

unenumerated projects with total 

expected capital expenditures of under 

$1 million and will not require 

recipients to complete, submit, or meet 

the substantive requirements of a 

Written Justification of the capital 

expenditure. Recipients should still 

make a determination as to whether the 

capital expenditure is part of a response 

that is related and reasonably 

proportional to the public health 

emergency or its negative economic 

impacts. 

• Projects with total expected capital 

expenditures of $1 million or over: 

Recipients should complete a Written 

Justification of the capital expenditure 

and make an independent assessment 

that their proposed capital expenditure 

meets the substantive requirements of 

the Written Justification. Further, 

recipients will be asked to submit the 

Written Justification as part of regular 

reporting to Treasury. 

Treasury employs a risk-based 

approach to overall program 

management and monitoring, which 

may result in heightened scrutiny on 

larger projects. Accordingly, recipients 

pursuing projects with larger capital 

expenditures should complete more 

detailed analyses for their Written 

Justification, commensurate with the 

scale of the project. 

Additional Provisions, Standards, and 

Definitions 

Strong Labor Standards in Construction 

Treasury encourages recipients to 

carry out projects in ways that produce 

high-quality work, avert disruptive and 

costly delays, and promote efficiency. 

Treasury encourages recipients to use 

strong labor standards, including project 

labor agreements (PLAs) and 

community benefits agreements that 

offer wages at or above the prevailing 

rate and include local hire provisions. 

Treasury also recommends that 

recipients prioritize in their 

procurement decisions employers who 

can demonstrate that their workforce 

meets high safety and training standards 

(e.g., professional certification, 

licensure, and/or robust in-house 

training), that hire local workers and/or 

workers from historically underserved 

communities, and who directly employ 

their workforce or have policies and 

practices in place to ensure contractors 

and subcontractors meet high labor 

standards. Treasury further encourages 

recipients to prioritize employers 

(including contractors and 

subcontractors) without recent 

violations of federal and state labor and 

employment laws. 

Treasury believes that such practices 

will promote effective and efficient 

delivery of high-quality projects and 

support the economic recovery through 

strong employment opportunities for 

workers. Such practices will reduce 

likelihood of potential project 

challenges like work stoppages or safety 

accidents, while ensuring a reliable 

supply of skilled labor and minimizing 

disruptions, such as those associated 

with labor disputes or workplace 

injuries. That will, in turn, promote ontime and on-budget delivery. 

Furthermore, among other 

requirements contained in 2 CFR 200, 

Appendix II, all contracts made by a 

recipient or subrecipient in excess of 

$100,000 with respect to a capital 

expenditure that involve employment of 

mechanics or laborers must include a 

provision for compliance with certain 

provisions of the Contract Work Hours 

and Safety Standards Act, 40 U.S.C. 

3702 and 3704, as supplemented by 

Department of Labor regulations (29 

CFR part 5). 

Treasury will seek information from 

recipients on their workforce plans and 

practices related to capital expenditures 

undertaken under the public health and 

negative economic impacts eligible use 

category with SLFRF funds. This 

reporting will support transparency and 

competition by enhancing available 

information on the services being 

provided. 

Environmental, Uniform Guidance, and 

Other Generally Applicable 

Requirements 

Treasury cautions that, as is the case 

with all projects using SLFRF funds, all 

projects must comply with applicable 

federal, state, and local law. In the case 

of capital expenditures in particular, 

this includes environmental and 

permitting laws and regulations. 

Likewise, as with all capital expenditure 

projects using the SLFRF funds, projects 

must be completed in a manner that is 

technically sound, meaning that it must 

meet design and construction methods 

and use materials that are approved, 

codified, recognized, fall under standard 

or acceptable levels of practice, or 

otherwise are determined to be 

generally acceptable by the design and 

construction industry. 

Further, as with all other uses of 

funds under the SLFRF program, the 

Uniform Guidance at 2 CFR part 200 

applies to capital expenditures unless 

stated otherwise. Importantly, this 

includes 2 CFR part 200 Subpart D on 

post-federal award requirements, 

including property standards pertaining 

to insurance coverage, real property, 

and equipment; procurement standards; 

sub-recipient monitoring and 

management; and record retention and 

access. 

Definitions 

Treasury adopts several definitions 

from the Uniform Guidance at 2 CFR 

200.1 under this section, including for 

capital expenditures, capital assets, 

equipment, and supplies. 

Per the Uniform Guidance, the term 

‘‘capital expenditures’’ means 

‘‘expenditures to acquire capital assets 

or expenditures to make additions, 

improvements, modifications, 

replacements, rearrangements, 

reinstallations, renovations, or 

alterations to capital assets that 

materially increase their value or useful 

life.’’ The term ‘‘capital assets’’ means 

‘‘tangible or intangible assets used in 

operations having a useful life of more 

than one year which are capitalized in 

accordance with [Generally Accepted 

Accounting Principles].’’ 

Capital assets include lands, facilities, 

equipment, and intellectual property. 

Equipment means ‘‘tangible personal 

property (including information 

technology systems) having a useful life 

of more than one year and a per-unit 

acquisition cost which equals or 

exceeds the lesser of the capitalization 

level established by the non-Federal 

entity for financial statement purposes, 

or $5,000.’’ Supplies, which means all 

tangible personal property other than 

those included as ‘‘equipment,’’ are not 

considered capital expenditures. 

Recipients may also use SLFRF funds 

for pre-project development costs that 

are tied to or reasonably expected to 

lead to an eligible capital expenditure. 

For example, pre-project costs 

associated with planning and 

engineering for an eligible project are 

considered an eligible use of funds. 

c. Distinguishing Subrecipients Versus 

Beneficiaries 

Under the interim final rule, state, 

local, and Tribal governments that 

receive a federal award directly from a 

federal awarding agency, such as 

Treasury, are designated as ‘‘recipients,’’ 


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256 In this context, a pass-through entity means a 

recipient of SLFRF funds. 

and state, local, and Tribal governments 

are authorized to transfer funds to other 

entities, including private entities like 

nonprofits. The interim final rule stated 

that, ‘‘[a] transferee receiving a transfer 

from a recipient under sections 602(c)(3) 

and 603(c)(3) will be a subrecipient. 

Subrecipients are entities that receive a 

subaward from a recipient to carry out 

a program or project on behalf of the 

recipient with the recipient’s Federal 

award funding.’’ 

For funds transferred to a 

subrecipient, the interim final rule 

noted that ‘‘[r]ecipients continue to be 

responsible for monitoring and 

overseeing the subrecipient’s use of 

SLFRF funds and other activities related 

to the award to ensure that the 

subrecipient complies with the statutory 

and regulatory requirements and the 

terms and conditions of the award. 

Recipients also remain responsible for 

reporting to Treasury on their 

subrecipients’ use of payments from the 

SLFRF funds for the duration of the 

award.’’ 

Public Comment: Treasury received 

many comments requesting clarification 

about which entities qualify as 

subrecipients and are, in turn, subject to 

subrecipient monitoring and reporting 

requirements. For example, commenters 

sought clarification about whether a 

nonprofit that received a grant to 

provide services under a program to 

carry out an enumerated eligible use 

would qualify as a subrecipient and be 

subject to subrecipient monitoring and 

reporting requirements. Similarly, 

commenters also wondered if a 

nonprofit that received a grant in 

recognition of experiencing a negative 

economic impact of the public health 

emergency would also be a subrecipient 

and subject to subrecipient reporting 

requirements. 

Treasury Response: Treasury is 

clarifying the distinction between a 

subrecipient and beneficiary in the final 

rule. The Uniform Guidance definitions 

for subaward and subrecipient inform 

Treasury’s distinction between 

subrecipients and beneficiaries. 

First, per 2 CFR 200.1 of Uniform 

Guidance ‘‘[s]ubaward means an award 

provided by a pass-through entity 256 to 

a subrecipient for the subrecipient to 

carry out part of a Federal award 

received by the pass-through entity. It 

does not include payments to a 

contractor or payments to an individual 

that is a beneficiary of a Federal 

program. A subaward may be provided 

through any form of legal agreement, 

including an agreement that the passthrough entity considers a contract.’’ 

Further, 2 CFR 200.1 of the Uniform 

Guidance defines a subrecipient, in that 

‘‘[s]ubrecipient means an entity, usually 

but not limited to non-Federal entities, 

that receives a subaward from a passthrough entity to carry out part of a 

Federal award; but does not include an 

individual that is a beneficiary of such 

award. A subrecipient may also be a 

recipient of other Federal awards 

directly from a Federal awarding 

agency.’’ Treasury is aligning the 

definition of subrecipient in the final 

rule with the definition of subrecipient 

in the Uniform Guidance. 

Treasury is maintaining the 

monitoring and subrecipient reporting 

requirements outlined in the final rule. 

Per 2 CFR 200.101 (b)(2) of the Uniform 

Guidance, the terms and conditions of 

federal awards flow down to subawards 

to subrecipients. Therefore, non-federal 

entities, as defined in the Uniform 

Guidance, must comply with the 

applicable requirements in the Uniform 

Guidance regardless of whether the nonfederal entity is a recipient or 

subrecipient of a federal award. This 

includes requirements such as the 

treatment of eligible uses of funds, 

procurement, and reporting 

requirements. 

The Uniform Guidance definitions for 

both subaward and subrecipient specify 

that payments to individuals or entities 

that are direct beneficiaries of a federal 

award are not considered subrecipients. 

The final rule adopts this definition of 

a beneficiary and outlines that 

households, communities, small 

businesses, nonprofits, and impacted 

industries are all potential beneficiaries 

of projects carried out with SLFRF 

funds. Beneficiaries are not subject to 

the requirements placed on 

subrecipients in the Uniform Guidance, 

including audit pursuant to the Single 

Audit Act and 2 CFR part 200, subpart 

F or subrecipient reporting 

requirements. 

The distinction between a 

subrecipient and a beneficiary, 

therefore, is contingent upon the 

rationale for why a recipient is 

providing funds to the individual or 

entity. If the recipient is providing 

funds to the individual or entity for the 

purpose of carrying out a SLFRF 

program or project on behalf of the 

recipient, the individual or entity is 

acting as a subrecipient. Acting as a 

subrecipient, the individual or entity is 

subject to subrecipient monitoring and 

reporting requirements. Conversely, if 

the recipient is providing funds to the 

individual or entity for the purpose of 

directly benefitting the individual or 

entity as a result of experiencing a 

public health impact or negative 

economic impact of the pandemic, the 

individual or entity is acting as a 

beneficiary. Acting as a beneficiary, the 

individual or entity is not subject to 

subrecipient monitoring and reporting 

requirements. 

d. Uses Outside the Scope of This 

Category 

Summary of the Interim Final Rule and 

Final Rule Structure 

In the interim final rule, Treasury 

noted that certain uses of funds are not 

permissible under the eligible use 

category of responding to the public 

health and negative economic impacts 

of the pandemic. In the final rule, these 

uses remain impermissible, but 

Treasury has re-categorized where they 

are addressed to increase clarity. 

Specifically, the interim final rule 

provided that the following uses of 

funds are not eligible under this eligible 

use category: Contributions to rainy day 

funds, financial reserves, or similar 

funds; payment of interest or principal 

on outstanding debt instruments; fees or 

issuance costs associated with the 

issuance of new debt; and satisfaction of 

any obligation arising under or pursuant 

to a settlement agreement, judgment, 

consent decree, or judicially confirmed 

debt restructuring plan in a judicial, 

administrative, or regulatory 

proceeding, except to the extent the 

judgment or settlement requires the 

provision of services that would 

respond to the COVID–19 public health 

emergency. These uses of funds remain 

ineligible under the final rule; Treasury 

has re-categorized these issues to the 

section Restrictions on Use, which 

describes restrictions that apply to all 

eligible use categories, to clarify that 

these uses are not eligible under any 

eligible use category of SLFRF. Treasury 

responds to public comments on this 

issue in the section Restrictions on Use. 

As noted above, the interim final rule 

also posed several questions on what 

other types of services or costs Treasury 

should consider as eligible uses to 

respond to the public health and 

negative economic impacts of COVID– 

19, including in disproportionately 

impacted communities. In this section, 

Treasury addresses proposed uses of 

funds suggested by commenters that 

Treasury has not included as 

enumerated eligible uses of funds in this 

eligible use category. 

General Eligible Uses 

Public Comment: Commenters 

proposed a wide variety of additional 

recommended enumerated eligible uses 


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in all sections of the public health and 

negative economic impacts eligible use 

category, including in impacted and 

disproportionately impacted 

communities. The proposed additional 

uses included general categories of 

services (e.g., legal and social services, 

long-term investments to remediate 

long-term disparities, response to 

natural disasters). Other suggested uses 

of funds respond to needs widely 

experienced across the country (e.g., 

access to and affordability of health 

insurance). Finally, other suggested uses 

of funds were highly specific (e.g., 

healthcare equipment for a specific 

health condition, fire hydrants, weather 

alert systems) or most applicable to the 

particularized needs to certain 

populations or geographic areas of the 

United States (e.g., senior citizens, 

immigrants, formerly incarcerated 

individuals, responding to 

environmental issues in certain 

geographic regions). Other commenters 

generally requested a high degree of 

flexibility to respond to the particular 

needs of their communities. 

Treasury Response: Given the large 

number and diversity of SLFRF 

recipients, Treasury has aimed to 

include as enumerated eligible uses 

programs, services, and capital 

expenditures that respond to public 

health and negative economic impacts 

of the pandemic experienced widely in 

many jurisdictions across the country, 

making it clear and simple for recipients 

to pursue these enumerated eligible uses 

under the final rule. This provides 

enumerated eligible uses that many 

recipients may want to pursue, while 

including uses that are responsive to the 

pandemic’s impacts across the diverse 

range of SLFRF recipients. In the final 

rule, Treasury has clarified several 

additional uses that generally respond 

to pandemic impacts experienced 

broadly across jurisdictions and 

populations. 

Treasury has not chosen to include as 

enumerated uses all uses proposed by 

commenters; given the significant range, 

and in some cases highly specific 

nature, of the proposed uses Treasury 

was not able to assess that the proposed 

uses would respond to negative 

economic impacts experienced 

generally across the country, supporting 

an enumerated eligible use available to 

all recipients presumptively. 

However, Treasury emphasizes that 

the enumerated eligible uses are nonexhaustive and that other uses, beyond 

those enumerated, are eligible. Treasury 

recognizes that the impacts of the 

pandemic vary over time, by 

jurisdiction, and by population; as such, 

the final rule provides flexibility for 

recipients to identify other public health 

or negative economic impacts to 

additional households, small 

businesses, or nonprofits, including 

classes of these entities, and pursue 

programs and services that respond to 

those impacts. Treasury also notes that 

some populations are presumed to be 

impacted or disproportionately 

impacted by the pandemic, and thus 

eligible for responsive services; these 

presumed eligible populations may 

encompass many individuals in the 

specific populations for whom 

commenters recommended services. For 

details on these issues, see section 

General Provisions: Structure and 

Standards. 

Infrastructure, Community 

Development, and General Economic 

Development 

Some potential additions to 

enumerated eligible uses were also 

recommended by several commenters 

each but are not included as enumerated 

eligible uses in the final rule. 

Public Comment: Infrastructure: In 

the interim final rule, Treasury noted 

that a ‘‘general infrastructure project, for 

example, typically would not be 

included [in this eligible use category] 

unless the project responded to a 

specific pandemic public health need.’’ 

Numerous commenters requested that 

Treasury permit investments in 

infrastructure as a response to the 

public health and negative economic 

impacts of the pandemic. While these 

comments most commonly 

recommended that constructing and 

maintaining roads and surface 

transportation infrastructure be eligible, 

the proposed uses for infrastructure 

ranged widely and included parking 

lots, bridges, traffic management 

infrastructure, solid waste disposal 

facilities, and utility infrastructure 

(outside of water, sewer, and 

broadband). 

Many commenters argued that 

infrastructure development and 

maintenance is a pressing need in their 

communities and that their 

communities had less need for water, 

sewer, and broadband infrastructure or 

other eligible uses to respond to the 

public health and negative economic 

impacts of the pandemic. Other 

commenters argued that these uses 

would stimulate the economy, attract 

businesses, or allow for tourist 

movement; these commenters argued 

that, by generally supporting a stronger 

economy or facilitating conditions that 

are more conducive to business activity 

and tourism, these uses respond to the 

negative economic impacts of the 

pandemic. 

Treasury Response: In the final rule, 

Treasury is maintaining the approach 

under the interim final rule that general 

infrastructure projects, including roads, 

streets, and surface transportation 

infrastructure, would generally not be 

eligible, unless the project responded to 

a specific pandemic public health need 

or a specific negative economic impact. 

The ARPA expressly includes 

infrastructure if it is ‘‘necessary’’ and in 

water, sewer, or broadband, suggesting 

that the statute contemplates only those 

types of infrastructure. Further, 

responding to the public health and 

negative economic impacts of the 

pandemic requires identifying whether, 

and the extent to which, there has been 

a harm that resulted from the COVID– 

19 public health emergency and 

whether, and the extent to which, the 

use would respond or address this 

harm. Uses of funds intended to 

generally grow the economy and 

therefore enhance opportunities for 

workers and businesses would not be an 

eligible use, because such assistance is 

not reasonably designed to impact 

individuals or classes that have been 

identified as having experienced a 

negative economic impact. In other 

words, there is not a reasonable 

connection between the assistance 

provided and an impact on the 

beneficiaries. Such an activity would be 

attenuated from and thus not reasonably 

designed to benefit the households that 

experienced the negative economic 

impact. 

Note, however, that Treasury has 

clarified that capital expenditures that 

are related and reasonably proportional 

to responding to the public health and 

economic impacts of the pandemic are 

eligible uses of funds, in addition to 

programs and services; for details on 

eligibility criteria for capital 

expenditures, see section Capital 

Expenditures in General Provisions: 

Other. 

Public Comment: Community 

Development Block Grant: Several 

commenters recommended that 

Treasury enumerate as eligible uses 

those eligible under the Department of 

Housing and Urban Development’s 

Community Development Block Grant 

(CDBG) or the Housing and Community 

Development Act of 1974, which 

established the CDBG program. 

Commenters requested that these uses 

be eligible either to respond to the 

negative economic impacts of the 

pandemic, or in the alternate the 

disproportionate negative economic 

impacts of the pandemic in certain 

communities. Under the CDBG program, 

recipient governments may undertake a 

wide range of community and economic 


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4396 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 

257See, e.g., Matthew D. Mitchell et al., The 

Economics of a Targeted Economic Development 

Subsidy (Arlington, VA: Mercatus Center at George 

Mason University, 2019), 5, available at https://

www.mercatus.org/publications/governmentspending/economics-targeted-economicdevelopment-subsidy; Timothy J. Bartik, Who 

Benefits from Economic Development Incentives? 

How Incentive Effects on Local Incomes and the 

Income Distribution Vary with Different 

Assumptions about Incentive Policy and the Local 

Economy (Upjohn Institute Technical Report No. 

13–034, W.E. Upjohn Institute for Employment 

Research, March 1, 2018), available at: https://

research.upjohn.org/up_technicalreports/34/; Cailin 

Slattery and Owen Zidar, Evaluating State and 

Local Business Tax Incentives, Journal of Economic 

Perspectives 34, no. 2 (2020): 90–118, available at: 

https://www.aeaweb.org/articles?id=10.1257/ 

jep.34.2.90; Kenneth Thomas, The State of State and 

Local Subsidies to Business (Mercatus Policy Brief, 

Mercatus Center at George Mason University, 

Arlington, VA, October 2019), available at: https:// 

www.mercatus.org/system/files/thomas_-_policy_

brief_-_the_state_of_state_and_local_subsidies_to_

business_-_v1.pdf; Dennis Coates, Growth Effects of 

Sports Franchises, Stadiums, and Arenas: 15 Years 

Later (Mercatus Working Paper, Mercatus Center at 

George Mason University, Arlington, VA, 

September 2015), available at: https://

www.mercatus.org/system/files/Coates-SportsFranchises.pdf; Dennis Coates and Brad R. 

Humphreys, Do Economists Reach a Conclusion on 

Subsidies for Sports Franchises, Stadiums, and 

Mega-Events?, Econ Journal Watch 5, no. 3 (2008): 

294–315, available at: https://econjwatch.org/ 

articles/do-economists-reach-a-conclusion-onsubsidies-for-sports-franchises-stadiums-and-megaevents; Matthew D. Mitchell, Daniel Sutter, and 

Scott Eastman, The Political Economy of Targeted 

Economic Development Incentives, Review of 

Regional Studies 48, no. 1 (2018): 1–9, available at: 

https://www.mercatus.org/publications/corporatewelfare/political-economy-targeted-economicdevelopment-incentives. 

development services and projects. 

Commenters reasoned that many state 

and local governments are familiar with 

this program, and that aligning to its 

eligible uses may help recipients easily 

understand and pursue eligible projects. 

Commenters also noted that Treasury 

had chosen to align with existing federal 

programs in other eligible use 

categories, namely water infrastructure, 

in the interim final rule. 

Treasury Response: In the final rule, 

Treasury is not including all categories 

of projects permissible under CDBG as 

enumerated eligible uses to respond to 

the public health and negative economic 

impacts of the pandemic. Because CDBG 

permits such a broad range of activities, 

including services to individual 

households, communities, small 

businesses, general economic 

development activities, and capital 

expenditures, Treasury determined that 

it was more appropriate to assess the 

underlying types of projects eligible 

within CDBG and whether each type of 

project responds to the negative 

economic impacts of the pandemic. In 

other words, Treasury considered 

whether various types of community 

and economic development projects 

respond to the impacts of the pandemic 

in different communities and 

circumstances. In the final rule, 

Treasury addresses the eligibility of 

these various types of projects in each 

relevant eligible use category within 

public health and negative economic 

impacts under SLFRF, including 

assistance for impacted households, 

disproportionately impacted 

households, disproportionately 

impacted small businesses, and capital 

expenditures. 

Public Comment: General Economic 

Development: Treasury provided 

guidance following the interim final 

rule that general economic development 

or workforce development would 

generally not be eligible as it does not 

respond to a negative economic impact 

of the COVID–19 public health 

emergency. 

Some commenters recommended that 

Treasury expand enumerated eligible 

uses to include general economic 

development activities, beyond those 

that respond to negative economic 

impacts of the pandemic, such as 

creating an economic development 

strategy for the jurisdiction’s overall 

economic growth, creating a general 

workforce development strategy, or 

providing funds to businesses that did 

not experience negative economic 

impacts to carry out economic 

development activities or to incentivize 

the addition or retention of jobs. 

Commenters supportive of assistance to 

businesses for general economic 

development activities argued that 

subsidies to businesses increase job 

growth and that, in some cases, 

assistance to companies that excelled 

during the public health emergency 

would help create more job 

opportunities for workers or expand the 

jurisdiction’s tax base and produce 

funds to support government services. 

In contrast, other commenters argued 

that academic research consistently 

finds that economic development 

subsidies have a negligible, or even 

negative, economic effect, citing 

research findings to this effect.257

Treasury Response: In the final rule, 

Treasury maintains the interim final 

rule’s approach that general economic 

development or workforce development, 

meaning activities that do not respond 

to negative economic impacts of the 

pandemic and rather seek to more 

generally enhance the jurisdiction’s 

business climate, would generally not 

be eligible under this eligible use 

category. As noted above, to identify an 

eligible use of funds under this category, 

a recipient must identify a beneficiary 

or class of beneficiaries that experienced 

a harm or impact due to the pandemic, 

and eligible uses of funds must be 

reasonably designed to respond to the 

harm, benefit the beneficiaries that 

experienced it, and be related and 

reasonably proportional to that harm or 

impact. 

As noted above, recipients should 

analyze eligible uses based on the 

beneficiary of the assistance, and 

recipients may not provide assistance to 

small businesses or impacted industries 

that did not experience a negative 

economic impact. Provision of 

assistance to a business that did not 

experience a negative economic impact, 

under the theory that such assistance 

would generally grow the economy and 

therefore enhance opportunities for 

workers, would not be an eligible use, 

because such assistance is not 

reasonably designed to impact 

individuals or classes that have been 

identified as having experienced a 

negative economic impact. In other 

words, there is not a reasonable 

connection between the assistance 

provided and an impact on the 

beneficiaries. Such an activity would be 

attenuated from and thus not reasonably 

designed to benefit the households that 

experienced the negative economic 

impact. Research cited by some 

commenters finding that business 

subsidies have limited or negative 

economic impact also suggests that such 

a response may not be reasonably 

designed to benefit households and 

other entities impacted by the 

pandemic. Similarly, planning activities 

for an economic development or 

workforce strategy regarding general 

future economic growth do not provide 

a program, service, or capital 

expenditure that responds to negative 

economic impacts of the pandemic. 

However, Treasury notes that the final 

rule includes as enumerated eligible 

uses many types of assistance that 

respond to negative economic impacts 

of the pandemic and may produce 

economic development benefits. For 

example, see sections Assistance to 

Unemployed Workers, Assistance to 

Small Businesses, and Capital 

Expenditures. 

B. Premium Pay 

Background and Summary of the 

Interim Final Rule 

Sections 602(c)(1)(B) and 603(c)(1)(B) 

of the Social Security Act, as added by 

the ARPA, provide that SLFRF funds 

may be used ‘‘to respond to workers 

performing essential work during the 

COVID–19 public health emergency by 

providing premium pay to eligible 

workers of the . . . government that are 

performing such essential work, or by 

providing grants to eligible employers 


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258See U.S. Department of Labor, Hazard Pay, 

https://www.dol.gov/general/topic/wages/ 

hazardpay (last visited October 18, 2021). 

259Economic Policy Institute, Only 30% of those 

working outside their home are receiving hazard 

pay (June 16, 2020), https://www.epi.org/press/only30-of-those-working-outside-their-home-arereceiving-hazard-pay-black-and-hispanic-workersare-most-concerned-about-bringing-thecoronavirus-home/. 

260McCormack, supra note 65. 

261 Id. 

262See H.R. 6800, 116th Cong. (2020). 

263Note that the sectors defined in the interim 

final rule already include all state, local, and Tribal 

government employees. 

that have eligible workers who perform 

essential work.’’ 

Premium pay is designed to 

compensate workers that, by virtue of 

their employment, were forced to take 

on additional burdens and make great 

personal sacrifices as a result of the 

COVID–19 pandemic. Premium pay can 

be thought of as hazard pay by another 

name.258

During the public health emergency, 

employers’ policies on COVID–19- 

related premium pay or hazard pay have 

varied widely, with many essential 

workers not yet compensated for the 

heightened risks they have faced and 

continue to face.259 Many of these 

workers earn lower wages on average 

and live in socioeconomically 

underserved communities as compared 

to the general population.260 A recent 

study found that 25 percent of essential 

workers were estimated to have low 

household income, with 13 percent in 

high-risk households.261 The low pay of 

many essential workers makes them less 

able to cope with the financial 

consequences of the pandemic or their 

work-related health risks. As Americans 

return to work and governments relax 

certain rules, essential workers will 

continue to bear the brunt of the risk of 

maintaining the ongoing operation of 

vital facilities and services. The added 

health risk to essential workers is one 

prominent way in which the pandemic 

has amplified pre-existing 

socioeconomic inequities. Premium pay 

is designed to address the disparity 

between the critical services provided 

by and the risks taken by essential 

workers and the relatively low 

compensation they tend to receive. 

The interim final rule established a 

three-part framework for recipients 

seeking to use SLFRF funds for 

premium pay. First, to receive premium 

pay one must be an eligible worker. 

Second, an eligible worker must also 

perform essential work. Finally, 

premium pay must respond to workers 

performing essential work during the 

COVID–19 public health emergency. 

Most of the comments received by 

Treasury pertaining to premium pay 

related to these three requirements. 

Comments also addressed the definition 

of premium pay generally and posed 

questions regarding premium pay 

program structuring. This section 

responds to the comments by addressing 

the three requirements in turn, then the 

overall definition of premium pay and, 

finally, program structure. 

Eligible Workers 

The ARPA defines ‘‘eligible workers’’ 

as ‘‘those workers needed to maintain 

continuity of operations of essential 

critical infrastructure sectors and 

additional sectors as each . . . 

[government] may designate as critical 

to protect the health and wellbeing of 

[its] residents.’’ The interim final rule 

supplemented this definition by 

identifying a list of ‘‘essential critical 

infrastructure sectors’’ whose workers 

are eligible workers, based on the list of 

sectors in the HEROES Act, a bill 

introduced in the House of 

Representatives in 2020 that would have 

provided premium pay to essential 

workers.262 In addition to the critical 

infrastructure sectors defined in the 

interim final rule, the chief executive (or 

equivalent) of a recipient government 

may designate additional non-public 263

sectors as critical so long as doing so is 

necessary to protecting the health and 

wellbeing of the residents of such 

jurisdiction. 

Public Comment: Treasury received 

multiple comments on the definition of 

‘‘eligible worker’’ included in the 

interim final rule. Many commenters 

agreed with the definition of eligible 

worker adopted by Treasury. Other 

commenters sought clarification about 

or changes to the definition of eligible 

worker, including the definition of 

eligible sectors, the inclusion of 

government workers in the definition of 

eligible workers, and the process for 

designating additional non-public 

sectors as eligible. 

Some commenters asked Treasury to 

change how it identifies eligible sectors, 

including suggestions to add to or 

subtract from the list of eligible sectors. 

For example, some commenters asked 

Treasury to consider using Bureau of 

Labor Statistics (BLS)-Standard 

Occupational Classifications to identify 

specific sectors or occupations, in 

contrast to the approach taken in the 

interim final rule, which included a 

mixture of economic sectors, industries, 

and occupations. Many commenters 

asked Treasury to explicitly clarify that 

a particular industry or occupation is 

covered by the definition of ‘‘essential 

critical infrastructure sector.’’ Some of 

these commenters represented public 

employees, e.g., employees of facilities 

and public works; public utilities; 

courthouse employees; police, fire, and 

emergency medical services; and waste 

and wastewater services. Others were a 

mixture of public and private sector 

employees, e.g., coroners and medical 

examiners; transportation infrastructure 

(specifically electric vehicle 

infrastructure and supply equipment); 

electric utilities, natural gas, and steam 

supply; and grocery employees. Other 

commenters requested that Treasury 

prohibit certain occupations currently 

included in the eligible workers 

definition (e.g., police and corrections 

officers) from receiving premium pay for 

performance of regular duties. 

Commenters also asked Treasury to 

clarify which government workers are 

included in the definition of eligible 

workers. The interim final rule included 

as an essential critical infrastructure 

sector, ‘‘any work performed by an 

employee of a State, local, or Tribal 

government.’’ Some commenters 

requested that Treasury adopt a 

definition of eligible worker that 

includes all employees of the recipient 

government; however, all public 

employees of state, local, and Tribal 

governments are already included in the 

interim final rule definition of ‘‘eligible 

worker.’’ Commenters asked whether 

this includes governments that did not 

receive SLFRF funds (i.e., ‘‘non 

recipient governments’’). Many 

commenters from Tribal governments 

requested that the definition of eligible 

worker, which includes ‘‘any work 

performed by an employee of a . . . 

Tribal government,’’ also include an 

employee of a ‘‘Tribal enterprise’’ to 

remove uncertainty regarding which 

employees are included. 

Finally, commenters made 

suggestions for the process by which the 

chief executive (or equivalent) of a 

recipient government may designate 

additional non-public sectors as critical. 

Commenters asked that Treasury adopt 

a requirement that Treasury must 

approve or deny any additional nonpublic sector identified by the chief 

executive of a recipient government 

prior to implementation of the 

recipient’s program. 

Some commenters asked Treasury to 

clarify whether their chief executive (or 

equivalent) could designate particular, 

and in some cases all, employees of the 

recipient government as eligible for 

premium pay. 

Treasury Response: In the final rule, 

Treasury will preserve the definition of 

‘‘eligible worker’’ as it was defined in 

the interim final rule with minor 

modifications to clarify that all public 


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4398 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 

264See, e.g., sources such as Bureau of Labor 

Statistics, Occupational Outlook Handbook, 

which provide information on which 

professions or occupations are typically 

included in interpretations of a sector, https:// 

www.bls.gov/ooh/. 

265Public sector workers are ‘‘eligible workers’’ 

under the interim final rule and final rule. 

employees of recipient governments are 

already included in the interim final 

rule definition of ‘‘eligible worker.’’ A 

more specific eligibility system (e.g., 

linking eligibility to specific 

occupational or industry codes) would 

have provided more certainty but would 

have been much more rigid. In contrast, 

the current definition is flexible enough 

to give recipients the ability to tailor 

their premium pay programs to meet 

their needs while ensuring that 

programs focus on sectors where 

workers were forced to shoulder 

substantial risk as a result of the 

COVID–19 pandemic. Furthermore, the 

critical infrastructure sectors defined in 

the interim final rule already include 

many of the occupations that 

commenters requested be added. For 

example, Treasury received many 

comments from public workers asking 

to be included in the definition of 

‘‘eligible worker’’ even though these 

workers already fall within the scope of 

‘‘any work performed by an employee of 

a State, local, or Tribal government.’’ 

Treasury has clarified in the final rule 

that the chief executive’s discretion to 

designate additional sectors as critical 

relates only to ‘‘non-public’’ sectors, 

since all public employees of recipient 

governments are already included in the 

definition of ‘‘eligible worker.’’ While 

all such public employees are ‘‘eligible 

workers’’ and the chief executive (or 

equivalent) of a recipient government 

may designate additional non-public 

sectors as critical, in order to receive 

premium pay, these workers must still 

meet the other premium pay 

requirements (e.g., performing essential 

work). 

Treasury recognizes that the list of 

‘‘essential critical infrastructure sectors’’ 

includes both occupations and sectors. 

Recipients, if uncertain which 

occupations are included in a critical 

infrastructure sector, may consult 

government occupational classifications 

if helpful but are not required to do 

so.264 Furthermore, a recipient 

government does not need to submit to 

Treasury for approval its designation of 

a sector as essential critical 

infrastructure; rather, Treasury will 

defer to the reasonable interpretation of 

the recipient government and the 

discretion of the recipient’s chief 

executive in making such designations. 

If a recipient is unsure if a non-public 

sector is covered by the definition in the 

final rule,265 the chief executive (or 

equivalent) of a recipient government 

may also identify the non-public sector 

as critical so long as the chief executive 

deems the non-public sector necessary 

to protecting the health and wellbeing of 

residents. Treasury has, where possible, 

clarified the definition of ‘‘essential 

critical infrastructure sectors.’’ For 

instance, Treasury has clarified in the 

final rule that work performed by an 

employee of a Tribal government 

includes an employee of a Tribal 

enterprise and discussed in this 

Supplementary Information how a 

recipient may qualify other non-public 

sectors as essential critical 

infrastructure. 

Essential Work 

The interim final rule defined 

‘‘essential work’’ as work that (1) is not 

performed while teleworking from a 

residence and (2) involves either (i) 

regular, in-person interactions with 

patients, the public, or coworkers of the 

individual that is performing the work 

or (ii) regular physical handling of items 

that were handled by, or are to be 

handled by, patients, the public, or 

coworkers of the individual that is 

performing the work. Treasury adopted 

this definition of essential work to 

ensure that premium pay is targeted to 

workers that faced or face heightened 

risks due to the character of their work 

during a pandemic. 

Public Comment: Some commenters 

found the definition unclear and asked 

Treasury to clarify what constitutes 

‘‘essential work.’’ Others disagreed with 

the essential work test altogether, 

arguing that it forces recipients to 

distinguish between essential and nonessential employees, which may be 

difficult to do. Accordingly, these 

commenters asked Treasury to allow 

recipients to determine which workers 

qualify as essential. Treasury also 

received several requests that specific 

occupations be explicitly deemed 

essential, including all public 

employees, veterinarians, election 

administrators, detention staff and 

sheriff’s deputies, and employees of 

utilities, such as electric power, natural 

gas, steam supply, water supply, and 

sewage removal. 

Several commenters requested that 

Treasury not distinguish between 

remote and in-person work or amend 

the standard so that employees 

providing essential services would still 

be eligible even if they worked 

remotely. Finally, a few commenters 

requested clarification as to the 

definition of ‘‘regular’’ in-person 

interactions and whether Treasury 

could clarify which job functions merit 

more (or less) premium pay. 

Treasury Response: Treasury is 

maintaining the definition of ‘‘essential 

work’’ in the final rule without 

modification. The test adopted in the 

interim final rule was designed to 

compensate workers facing 

disproportionate risk due to the 

pandemic. COVID–19 is transmitted 

through person-to-person interactions, 

and therefore, workers with regular inperson interactions are the primary 

group facing increased health risks. 

Although COVID–19 is not transmitted 

primarily by people handling items, 

such work may present increased risk in 

certain cases, and the final rule 

maintains the interim final rule’s 

inclusion of such work in order to give 

recipient governments the flexibility to 

include workers performing such work 

as they determine appropriate. Changing 

the test as some commenters suggested, 

e.g., by eliminating the in-person work 

requirement or allowing recipients to 

designate which employees are 

essential, even if not working in person, 

would no longer focus the program on 

workers taking on additional health 

risks and instead allow premium pay to 

be awarded to individuals who 

experienced relatively little risk of 

exposure to COVID–19. To maintain 

flexibility, Treasury is not defining the 

term ‘‘regular’’ with regard to in-person 

interactions, allowing recipients to 

develop programs based on the specific 

workforce to be served and local 

circumstances. Generally speaking, 

however, recipients are encouraged to 

consider an eligible worker’s risk of 

exposure in designing premium pay 

programs. 

Respond To 

As required by the ARPA, the interim 

final rule required that premium pay 

programs ‘‘respond to’’ eligible workers 

performing essential work during the 

COVID–19 public health emergency. 

Premium pay responds to eligible 

workers performing essential work if it 

prioritizes low- and moderate-income 

persons, given the significant share of 

essential workers that are low- and 

moderate-income and may be least able 

to bear added costs associated with 

illness. The level of the award limit—up 

to $13 per hour not to exceed $25,000 

in aggregate—in the ARPA supports this 

reasoning. 

Accordingly, the interim final rule 

required written justification for how 

premium pay to certain higher-income 

workers responds to eligible workers 

performing essential work: If a recipient 


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266See generally 29 U.S.C. 207(a); U.S. 

Department of Labor, Overtime Pay Requirements of 

the FLSA (Fact Sheet No. 23), https://www.dol.gov/ 

agencies/whd/fact-sheets/23-flsa-overtime-pay. 

267 Department of Labor, Overtime Pay, https://

www.dol.gov/agencies/whd/overtime; see also 29 

U.S.C. 207. 

268Among workers that report working overtime, 

roughly 41–44 percent of workers earn above 

$50,000 per year, which is slightly less than the 

national average annual wage for all employees 

according to the Bureau of Labor Statistics’ 

Occupational Employment and Wage Statistics, 

available at https://www.bls.gov/oes/. See also U.S. 

Census Bureau, Basic Monthly CPS, January 2019 

through December 2019, available at https://

www.census.gov/data/datasets/time-series/demo/ 

cps/cps-basic.html. Notes: Annual earnings reflect 

weekly wages multiplied by 52. Usual weekly 

earnings are computed by BLS to include earnings 

from work such as tips, overtime, regular wages, 

etc., but not non-labor sources of income such as 

government transfers and capital gains. Preovertime earnings are computed by taking the 

difference of usual weekly earnings and earnings 

from overtime last week and multiplying by 52. 

Note, some sources multiply weekly earnings by 50 

instead of 52 to account for unpaid time off and 

holidays, so these figures may be slightly larger 

than those reported elsewhere. Either assumption 

may overestimate earnings if workers do not work 

year-round. 

(or grantee) uses SLFRF funds to 

provide premium pay to an employee 

and the pay or grant would increase a 

worker’s total pay above 150 percent of 

their residing state or county’s average 

annual wage for all occupations, as 

defined by the BLS Occupational 

Employment and Wage Statistics, 

whichever is higher, on an annual basis, 

then the recipient must provide, 

whether for themselves or on behalf of 

a grantee, written justification to 

Treasury detailing how the award 

responds to eligible workers performing 

essential work. 

Public Comment: Treasury received 

numerous comments on the wage 

threshold and the written justification 

requirement. Several commenters 

supported the threshold as a way to 

encourage recipients to target premium 

pay to lower-income, eligible workers. 

Some commenters even asked Treasury 

to make the wage threshold a firm 

restriction, above which an eligible 

worker could not receive premium pay. 

Others agreed with the threshold but 

also requested flexibility to use existing 

worker classifications as an 

administratively simple way to identify 

workers for whom premium pay would 

be responsive. For instance, a few 

commenters asked Treasury to allow 

recipients or grantees to presume that 

premium pay ‘‘responds to’’ eligible 

workers performing essential work 

when it is provided to employees who 

are not exempt from the Fair Labor 

Standards Act (FLSA) overtime 

provisions—a test that employers are 

routinely required to apply.266

In contrast, several commenters 

disagreed with the threshold and the 

requirement for written justification. A 

few commenters thought the threshold 

was too low to capture employees in 

certain critical infrastructure sectors 

(e.g., public safety, waste collection) and 

that it did not sufficiently account for 

the variance in economic need across 

different geographic areas and family 

structures. Some smaller communities 

argued that the threshold was difficult 

to calculate and apply. 

Other commenters proposed revisions 

for how the threshold is calculated. For 

instance, a few commenters asked 

Treasury to consider using alternative 

earnings measures such as median 

income. Similarly, another commenter 

asked Treasury to consider the incomes 

of workers with different levels of 

seniority in developing any income 

thresholds for permitting or reporting on 

premium pay. 

Finally, there was also some 

uncertainty as to the threshold and the 

requirement for written justification. 

Some commenters interpreted the 

threshold as a hard cap on who was 

eligible for premium pay, which is not 

the case. Relatedly, some commenters 

also requested further guidance on what 

recipients should include in the written 

justification submitted to the Secretary. 

Treasury Response: The final rule 

makes some modifications to the 

determination of when premium pay 

‘‘responds to’’ eligible workers 

performing essential work during the 

public health emergency. Under the 

interim final rule, premium pay was 

responsive if either the workers’ pay 

was below a wage threshold or, if the 

pay was above a wage threshold, the 

recipient submitted written justification 

to Treasury explaining how the 

premium pay was responsive. The final 

rule retains these two means of 

establishing premium pay in response to 

workers performing essential work and 

adds an additional means of 

demonstrating that premium pay is 

responsive. Under the final rule, a 

recipient may also show that premium 

pay is responsive by demonstrating that 

the eligible worker receiving premium 

pay is not exempt from the FLSA 

overtime provisions.267 This change will 

expand the number of workers eligible 

to receive premium pay 268 and does not 

require recipients to provide written 

justification to Treasury regarding the 

workers who are not exempt from the 

FLSA overtime provisions, making the 

program easier to administer for 

recipients. Incorporating this change 

further simplifies application of the 

final rule for recipients because 

Treasury understands that most 

employers, public and private, are 

familiar with and are routinely required 

to apply the FLSA. 

With this addition, the final rule 

provides that premium pay is 

responsive to eligible workers 

performing essential work during the 

public health emergency if each eligible 

worker who receives premium pay falls 

into one of three categories: (1) The 

worker’s pay is below the wage 

threshold, (2) the worker is not exempt 

from the FLSA overtime provisions, or 

(3) the recipient has submitted a written 

justification to Treasury. 

The final rule makes it clear that 

written justification to Treasury is not 

necessary with respect to eligible 

workers whose pay is less than the wage 

threshold. Nor is written justification 

necessary with respect to eligible 

workers who are not exempt from the 

FLSA overtime provisions. The written 

justification is only necessary if the 

worker’s pay (with or without the 

premium) exceeds the threshold, and 

the worker is exempt from the FLSA 

overtime provisions. The final rule also 

clarifies that a worker’s pay exceeds the 

threshold if either the premium pay 

increases the worker’s total pay above 

the wage threshold or the worker’s total 

pay was already above the threshold, 

before receiving premium pay. 

Treasury has also updated the final 

rule to clarify that written justification 

means a brief, written narrative 

justification of how the premium pay or 

grant is responsive to workers 

performing essential work during the 

public health emergency. This could 

include a description of the essential 

workers’ duties, health or financial risks 

faced due to COVID–19, and why the 

recipient determined that the premium 

pay was responsive despite the workers’ 

higher income. 

Recipients should refer to SLFRF 

program reporting guidance, user 

guides, and other documentation for 

further guidance on the form and 

content of the written justification. 

Treasury anticipates that recipients will 

easily be able to satisfy the justification 

requirement for front-line workers, like 

nurses and hospital staff. 

Definition of Premium Pay 

The statute defines premium pay as 

‘‘an amount of up to $13 per hour . . . , 

in addition to wages or remuneration 

the eligible worker otherwise receives, 

for all work performed by the eligible 

worker during the COVID–19 public 

health emergency. Such amount may 

not exceed $25,000 with respect to any 

single eligible worker.’’ The interim 


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269See 29 U.S.C. 207(a) (‘‘[A]t a rate not less than 

one and one-half times the regular rate at which he 

is employed.’’). 

270All recipients are required to comply with 

otherwise applicable laws, including any wage and 

hour requirements in the Fair Labor Standards Act. 

See generally, Department of Labor, Wages and the 

Fair Labor Standards Act, https://www.dol.gov/ 

agencies/whd/flsa. 

271 In the second quarter of 2020, quarterly state 

and local tax revenues as reported by the U.S. 

Census Bureau fell 19 percent compared to the 

second quarter of 2019; U.S. Census Bureau, 

Quarterly Summary of State and Local Tax 

Revenue, https://www.census.gov/programssurveys/qtax.html. 

272National Association of State Budget Officers, 

Fiscal Survey of the States (Fall 2020), available at 

https://higherlogicdownload.s3.amazonaws.com/ 

NASBO/9d2d2db1-c943-4f1b-b750-0fca152d64c2/ 

UploadedImages/Fiscal%20Survey/NASBO_Fall_

2020_Fiscal_Survey_of_States_S.pdf. 

273National League of Cities, City Fiscal 

Conditions (2020), available at https://www.nlc.org/ 

wp-content/uploads/2020/08/City_Fiscal_

Conditions_2020_FINAL.pdf. 

274Surveys conducted by the Center for Indian 

Country Development at the Federal Reserve Bank 

of Minneapolis in March, April, and September 

2020. Elijah Moreno & Heather Sobrepena, Tribal 

entities remain resilient as COVID–19 batters their 

finances, Federal Reserve Bank of Minneapolis 

(Nov. 10, 2020), https://www.minneapolisfed.org/ 

article/2020/tribal-entities-remain-resilient-ascovid-19-batters-their-finances. 

final rule incorporated this definition 

and emphasized that premium pay 

should be in addition to compensation 

typically received. 

Public Comment: Several submitted 

comments related to the definition of 

‘‘premium pay.’’ Several commenters 

asked Treasury to clarify certain aspects 

of the interim final rule and statutory 

definition of premium pay. For instance, 

a few commenters asked whether the 

$25,000 limit applies to the annual 

amount of premium pay received or the 

aggregate amount of premium pay 

received over the period of performance. 

A few commenters requested flexibility 

as to how premium pay may be 

awarded, including flexibility to make 

monthly or quarterly payments or lump 

sum payments. Finally, commenters 

requested additional clarification as to 

how premium pay should be calculated. 

For instance, a commenter asked how to 

calculate the amount of and account for 

overtime pay and other incentive 

pay.269

Treasury Response: Treasury has 

clarified some of these issues in the 

final rule. For example, Treasury has 

clarified in the final rule that the 

$25,000 per employee limit is for the 

entire period of performance, not an 

annual cap. Further, recipients have 

discretion with respect to the way in 

which premium pay is awarded to 

eligible workers (e.g., monthly, 

quarterly, lump sum), provided that the 

total premium pay awarded to any 

eligible worker does not exceed $13 per 

hour or $25,000 over the period of 

performance. Finally, a recipient may 

award premium pay to an eligible 

worker in addition to the overtime pay 

already earned by the eligible worker 

but in no instance may the portion of 

the compensation funded with SLFRF 

funds exceed $13 per hour, even if strict 

time-and-a-half calculation requires 

more.270 To the extent that an employer 

is required under the FLSA to make 

payments to an eligible worker in excess 

of $13 per hour or $25,000 in the 

aggregate over the period of 

performance, the employer must use a 

source of funding other than the SLFRF 

funds to satisfy those obligations. 

Program Structure 

Public Comment: Several commenters 

also requested elaboration on eligible 

types of employees and permissible 

structures for awarding premium pay. A 

few commenters asked if premium pay 

could be awarded to volunteers or those 

in irregular and non-hourly or salaried 

employment positions. Similarly, 

various commenters asked if part-time 

workers were eligible for premium pay. 

Some commenters asked Treasury to 

provide more detail on when premium 

pay may be paid retroactively or if a 

government could reimburse its general 

fund for hazard pay already paid before 

the start of the period of performance. 

Treasury Response: Treasury has also 

made clear in the final rule that a 

recipient may award premium pay to 

non-hourly or salaried workers as well 

as part-time workers. Premium pay may 

not, however, be awarded to volunteers. 

If a recipient is interested in 

compensating volunteers with SLFRF 

funds, then it must do so consistent 

with the requirements set forth in other 

eligible use categories; for example, see 

section Public Sector Capacity and 

Workforce in Public Health and 

Negative Economic Impacts. 

Under the final rule, recipients may 

award premium pay retroactively; 

however, SLFRF funds may not be used 

to reimburse a recipient or eligible 

employer grantee for premium pay or 

hazard pay already received by the 

employee. To make retroactive premium 

payments funded with SLFRF funds, a 

recipient or eligible employer grantee 

must make a new cash outlay for the 

premium payments and the payments 

must be in addition to any wages or 

remuneration the eligible worker 

already received, subject to the other 

requirements and limitations set forth in 

the ARPA and this final rule. 

Finally, as part of accepting the 

Award Terms and Conditions for 

SLFRF, each recipient agreed to 

maintain a conflict-of-interest policy 

consistent with 2 CFR 200.318(c) that is 

applicable to all activities funded with 

the SLFRF award. This award term 

requires recipients and subrecipients to 

report to Treasury or the pass-through 

agency, as appropriate, any potential 

conflict of interest related to the award 

funds per 2 CFR 200.112. Pursuant to 

this policy, decisions concerning SLFRF 

funds must be free of undisclosed 

personal or organizational conflicts of 

interest, both in fact and in appearance. 

Consistent with this policy, elected 

officials are prohibited from using their 

official position and control over SLFRF 

funds for their own private gain. This 

policy also prohibits, among other 

things, elected officials from steering 

funds to projects in which they have a 

financial interest or using funds to pay 

themselves premium pay. 

C. Revenue Loss 

Background 

Sections 602(c)(1)(C) and 603(c)(1)(C) 

of the Social Security Act provide that 

SLFRF funds may be used ‘‘for the 

provision of government services to the 

extent of the reduction in revenue of 

such . . . government due to the 

COVID–19 public health emergency 

relative to revenues collected in the 

most recent full fiscal year of the . . . 

government prior to the emergency.’’ 

This provision allows recipients 

experiencing budget shortfalls to use 

payments from the SLFRF funds to 

avoid cuts to government services and, 

thus, enables state, local, and Tribal 

governments to continue to provide 

valuable services and ensures that fiscal 

austerity measures do not hamper the 

broader economic recovery. 

State and local government budgets 

experienced stress in fiscal year 2020 as 

delayed tax filings and pandemicrelated business closures caused 

revenues to decline sharply.271 Twentytwo state governments took actions to 

close budget gaps in fiscal year 2020 272

and nearly 80 percent of cities reported 

being less able to meet the fiscal needs 

of their communities relative to fiscal 

year 2019.273 Surveys of Tribal 

governments and Tribal enterprises 

conducted in 2020 found majorities of 

respondents reporting substantial cost 

increases and revenue decreases, with 

Tribal governments reporting reductions 

in health care, housing, social services, 

and economic development activities as 

a result of reduced revenues.274

The economic recovery, aided by the 

broad distribution of COVID–19 

vaccines and the deployment of federal 

stimulus, has led to a strong rebound in 

total state and local government revenue 

and is contributing to a brighter fiscal 


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275Analysis of Quarterly Summary of State and 

Local Tax Revenue, U.S. Census Bureau, supra note 

271. 

276National League of Cities, City Fiscal 

Conditions (2021), available at https://www.nlc.org/ 

wp-content/uploads/2021/10/2021-City-FiscalConditions-Report-2021.pdf. 

277Center for Indian Country Development and 

Federal Reserve Bank of Minneapolis, One Year 

Into COVID–19, Pandemic’s Negative Effects Persist 

in Indian Country (May 2021), available at https:// 

www.minneapolisfed.org/article/2021/one-yearinto-covid-19-pandemics-negative-effects-persist-inindian-country. 

278See, e.g., Nora Fitzpatrick et al., Fiscal Drag 

from the State and Local Sector?, Liberty Street 

Economics Blog, Federal Reserve Bank of New York 

(June 27, 2012), https://libertystreeteconomics.

newyorkfed.org/2012/06/fiscal-drag-from-the-stateand-local-sector.html; Jiri Jonas, Great Recession 

and Fiscal Squeeze at U.S. Subnational Government 

Level, IMF Working Paper 12/184, (July 2012), 

available at https://www.imf.org/external/pubs/ft/ 

wp/2012/wp12184.pdf; Gordon, supra note 16. 279State and local government general revenue 

from own sources, adjusted for inflation using the 

Bureau of Economic Analysis’ implicit price 

deflator for GDP. U.S. Census Bureau, Annual 

Survey of State Government Finances and U.S. 

Bureau of Economic Analysis, National Income and 

Product Accounts, https://www.census.gov/ 

programs-surveys/gov-finances.html. 280U.S. Bureau of Labor Statistics, All Employees, 

State Government [CES9092000001] and All 

Employees, Local Government [CES9093000001], 

retrieved from FRED, Federal Reserve Bank of St. 

Louis, https://fred.stlouisfed.org/series/ 

CES9092000001 and https://fred.stlouisfed.org/ 

series/CES9093000001. 

281Pew Research, State and Local Government 

Job Growth Lags as Economy Recovers (September 

2021), available at https://www.pewtrusts.org/en/ 

research-and-analysis/articles/2021/09/14/stateand-local-government-job-growth-lags-as-economyrecovers. 

282At the time the interim final rule was 

published, the average annual growth across all 

state and local government ‘‘General Revenue from 

Own Sources’’ in the most recent three years of 

available data (2015–2018) was 4.1%, which was 

presented as one option for the growth adjustment. 

Since the interim final rule was published, 2019 

data has been made available, which increases this 

rate to 5.2%. The final rule updates the percentage 

to 5.2%, as shown in Step 2. 

283As explained below, in the final rule, 

recipients must adjust actual revenue amounts 

based on certain tax policy changes. 

outlook for most jurisdictions as 

compared to the earlier months of the 

public health emergency. For the fiscal 

year ending June 30, 2021, total state 

and local government tax revenues 

increased 21 percent relative to the 

same period in 2020, reflecting the 

combined impact of the modified tax 

filing deadline in 2020 and an 

improving economy.275 However, 

despite a stable budget situation overall, 

many governments face uncertainty as 

the COVID–19 pandemic continues to 

impact commuting patterns, hospitality 

and tourism, and other drivers of 

jurisdictions’ economies. Thirty-five 

percent of cities still report being less 

able to meet financial needs than in 

fiscal year 2020,276 and over half of 

surveyed Tribal governments and Tribal 

enterprises reported losing at least 40 

percent of their revenue since the start 

of the pandemic.277 Budget challenges 

persist as governments work to mitigate 

and contain COVID–19 and help 

citizens weather the economic 

downturn. 

State, local, and Tribal government 

budgets affect the broader economic 

recovery. During the period following 

the 2007–2009 recession, state and local 

government budget pressures led to 

fiscal austerity that was a significant 

drag on the overall economic 

recovery.278 Inflation-adjusted state and 

local government revenue did not return 

to the previous peak until 2013,279

while employment in the sector 

returned to the previous peak in August 

2019, nearly a decade later.280 Just 

months after recouping losses from the 

previous downturn, the COVID–19 

pandemic caused state and local 

government employment to contract 

again, but this time more sharply: By 

May 2020, state and local government 

payrolls fell 7.7 percent compared to 

February 2020. Despite improvement, 

non-federal public sector job growth 

continues to lag behind the rest of the 

U.S. labor market recovery.281

Summary of Interim Final Rule 

As stated above, the Social Security 

Act provides that SLFRF funds may be 

used ‘‘for the provision of government 

services to the extent of the reduction in 

revenue of such . . . government due to 

the COVID–19 public health emergency 

relative to revenues collected in the 

most recent full fiscal year of the . . . 

government prior to the emergency.’’ 

The interim final rule provided a 

formula for calculating revenue loss 

through a four-step process: 

• Step 1: Identify revenues collected 

in the most recent full fiscal year prior 

to the public health emergency (i.e., last 

full fiscal year before January 27, 2020), 

called the base year revenue. 

• Step 2: Estimate counterfactual 

revenue, which is the amount of 

revenue the recipient would have 

expected in the absence of the downturn 

caused by the pandemic. The 

counterfactual revenue is equal to base 

year revenue * [(1 + growth adjustment) 

∧ (n/12)], where n is the number of 

months elapsed since the end of the 

base year to the calculation date, and 

growth adjustment is the greater of the 

average annual growth rate across all 

State and Local Government ‘‘General 

Revenue from Own Sources’’ in the 

most recent three years prior to the 

emergency, 5.2 percent, or the 

recipient’s average annual revenue 

growth in the three full fiscal years prior 

to the COVID–19 public health 

emergency.282 This approach to the 

growth rate provides recipients with the 

option to use a standardized growth 

adjustment when calculating the 

counterfactual revenue trend and thus 

minimizes administrative burden, while 

not disadvantaging recipients with 

revenue growth that exceeded the 

national average prior to the COVID–19 

public health emergency by permitting 

these recipients to use their own 

revenue growth rate over the preceding 

three years. 

• Step 3: Identify actual revenue,283

which equals revenues collected over 

the twelve months immediately 

preceding the calculation date. 

• Step 4: The extent of the reduction 

in revenue is equal to counterfactual 

revenue less actual revenue. If actual 

revenue exceeds counterfactual revenue, 

the extent of the reduction in revenue is 

set to zero for that calculation date. 

For illustration, consider a 

hypothetical recipient with base year 

revenue equal to 100 (Step 1) that ends 

on June 30, 2019. In Step 2, the 

hypothetical recipient finds that the 

average annual growth across all state 

and local government ‘‘General Revenue 

from Own Sources’’ in the most recent 

three years of available data, 5.2 

percent, is greater than the recipient’s 

average annual revenue growth in the 

three full fiscal years prior to the public 

health emergency. In this illustration, n 

(months elapsed) and counterfactual 

revenue would be equal to: 

As of: 12/31/2020 12/31/2021 12/31/2022 12/31/2023 

n (months elapsed) .......................................................................................... 18 30 42 54 

Counterfactual revenue: .................................................................................. 107.9 113.5 119.4 125.6 


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The figure below illustrates the 

reduction in revenue for the 

hypothetical recipient calculated in 

accordance with the methodology. 

Finally, as explained in greater detail 

below, the clear meaning of the 

statutory phrase ‘‘due to the COVID–19 

public health emergency’’ is that it is 

referring to revenue reductions caused 

by the public health emergency. As 

such, it does not include revenue 

reduced for reasons other than the 

public health emergency. Treasury in 

the interim final rule presumed that any 

reduction in revenue relative to the 

counterfactual estimate would be 

considered revenue lost due to the 

pandemic and thereby relieved 

recipients of the administrative burden 

of determining the extent to which 

reduction in revenue was due to the 

public health emergency. The 

calculation methodology in the interim 

final rule implicitly assumed that 

recipients did not suffer a loss in 

revenue due to the public health 

emergency if they did not experience a 

reduction in aggregate revenue 

compared to the counterfactual 

estimate. The interim final rule invited 

comments on whether Treasury should 

revise its presumption to ‘‘take into 

account other factors, including actions 

taken by the recipient as well as the 

expiration of the COVID–19 public 

health emergency, in determining 

whether to presume that revenue losses 

are ‘due to’ the COVID–19 public health 

emergency.’’ 

Treasury received a substantial 

number of comments on the revenue 

loss provisions set forth in the interim 

final rule. These comments largely 

pertained to the following topics: The 

overall methodology for calculating 

revenue loss; the definition of 

‘‘revenue’’; whether revenue should be 

aggregated or calculated on some 

alternative basis (e.g., source-by-source 

or fund-by-fund); the appropriate 

calculation dates (i.e., fiscal year or 

calendar year); the presumption that all 

revenue loss is due to the pandemic; the 

base year; and the definition of 

‘‘government services.’’ 

Overall Methodology for Calculating 

Revenue Loss 

As noted above, the interim final rule 

provided a formula for recipients to 

calculate revenue loss by comparing 

actual revenues received during a given 

time-period with a counterfactual 

amount of revenue based on revenues in 

the base year and an adjustment for 

expected growth in revenue each year. 

Public Comment: Treasury received 

many public comments on the overall 

methodology for calculating revenue 

loss. Some recipients, including smaller 

governments, have expressed concern 

regarding the burden associated with 

the calculation of revenue loss, 

particularly the burden involved in 

calculating the amount of general 

revenue, given that the definition of 

general revenue in the interim final rule 

does not always align with the 

definition of revenue already calculated 

by recipients for other purposes, and 

requested clarifications regarding a 

number of components, including the 

definition of revenue. Commenters also 

asked for clarification on the 

relationship between revenue loss 

calculations across different calculation 

dates. Other commenters argued that the 

revenue loss formula does not precisely 

capture the nuances of local revenues or 

their particular situation. For example, 

some commenters stated that requiring 

that revenues be aggregated fails to 

capture decreases in revenue sources 

that cannot easily be made up for with 

other revenue sources. 

Treasury Response: In the final rule, 

Treasury is largely maintaining the 

revenue loss formula as set forth in the 

interim final rule. To address comments 

that the formula for calculating revenue 

loss was difficult to apply, Treasury is 

including an option for recipients to use 

a standard allowance for revenue loss. 

Specifically, in the final rule, recipients 

will be permitted to elect a fixed 

amount of loss that can then be used to 

fund government services. This fixed 


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140 

•Actual Revenue 

•Extent of reduction in revenue 

130 

•Base year revenue 

120 ..... counterfactual revenue 

110 

100 

90 

80 

Jun-19 Dec-20 Dec-21 Dec-22 Dec-23 
Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4403 

284Because the Census Bureau’s state and local 

government tax revenue data is reported on a 

quarterly frequency, fiscal base year end dates of 

March 31, June 30, September 30, and December 31 

were used in this assessment. 

285Annual Survey of State and Local Government 

Finances (2019). 

286This is the range of averages that Treasury 

calculated by varying the aforementioned 

assumptions. 

287See, e.g., Government Accountability Office, 

State and Local Governments: Fiscal Conditions 

During the COVID–19 Pandemic in Selected States 

(July 2021) (noting that ‘‘[s]tate and local 

government revenues partly depend on the overall 

economy, and actions to stem the spread of the 

virus drastically reduced economic activity.’’); 

Board of Governors of the Federal Reserve System, 

Monetary Policy Report (July 9, 2021) (noting that 

the pandemic ‘‘pushed down state and local 

government tax collections’’ and that while some of 

the drag is ‘‘abating’’ state and local ‘‘government 

payrolls . . . have only edged up from their lows 

at the onset of the pandemic’’). 

288Local government tax revenue data in the 

Census Bureau’s Quarterly Summary of State and 

Local Tax Revenue, supra note 271, is provided on 

an aggregated basis. 

289The Department also released guidance 

clarifying how a recipient may determine whether 

a particular entity is ‘‘part of the recipient’s 

government.’’ See FAQ 3.14. Coronavirus State and 

Local Fiscal Recovery Funds, Frequently Asked 

Questions, as of July 19, 2021; https://home.

treasury.gov/system/files/136/SLFRPFAQ.pdf. 

amount, referred to as the ‘‘standard 

allowance,’’ is set at up to $10 million 

total for the entire period of 

performance not to exceed the 

recipient’s SLFRF award amount. 

Although Treasury anticipates that this 

standard allowance will be most helpful 

to smaller local governments and Tribal 

governments, any recipient can use this 

standard allowance instead of 

calculating revenue loss pursuant to the 

formula above, so long as recipients 

employ a consistent methodology across 

the period of performance (i.e., choose 

either the standard allowance or the 

regular formula). Treasury intends to 

amend its reporting forms to provide a 

mechanism for recipients to make a onetime, irrevocable election to utilize 

either the revenue loss formula or the 

standard allowance. 

The $10 million level is based on 

average revenue loss across state and 

local governments, taking into 

consideration potential variation in 

revenue types and losses and continued 

uncertainty faced by many recipients 

regarding revenue shortfalls. To 

calculate this estimate, Treasury applied 

a variation of the final rule’s revenue 

loss calculation on available aggregate 

state and local government tax revenue 

data as reported by the Census Bureau 

for the first calculation date of 

December 31, 2020. This estimate 

accounts for expected variation across 

recipient experiences and reflects the 

fact that the final rule revenue loss 

calculation provides recipients several 

options for specific aspects (e.g., 

calendar year or fiscal year basis; use of 

average state and local revenue growth 

rate or specific local rate). Treasury 

compared actual calendar year 2020 tax 

revenues, in aggregate for all state and 

local governments, to several 

counterfactual trends that vary based on 

the end date of the fiscal base year.284

Treasury also assessed counterfactual 

trends using different revenue growth 

rates (e.g., the three-year average growth 

rates of total state and local government 

general revenue for both fiscal years 

ending in 2016–2018 and fiscal years 

ending in 2017–2019; the three-year 

average growth rates of total state and 

local government tax revenues for fiscal 

years ending in 2017–2019; and the oneyear growth rate for total state and local 

government tax revenue in the last full 

fiscal year before the public health 

emergency). To account for the fact that 

the initial estimate, based on tax 

revenue, only includes a subset of 

recipient aggregate general revenue, 

Treasury applied a scaling factor to 

recognize that tax revenues generally 

make up just over half of general 

revenue collected by state and local 

governments (i.e., Treasury scaled up its 

estimate based on tax revenue to 

produce an estimate for total general 

revenue).285 The resulting calculation 

was then extrapolated over the four-year 

period of performance and divided by a 

population of interest to arrive at an 

average loss estimate. 

As noted above, Treasury estimated a 

range of scenarios to account for 

different values of the variables that 

would impact average losses. For 

example, the end date of the fiscal base 

year and growth rate of counterfactual 

revenue impact the overall estimate of 

revenue loss. In addition, this estimate 

takes into consideration the limitations 

in the available data. The governments 

covered by the Census Bureau’s survey 

do not entirely align with SLFRF 

recipients. The Census Bureau’s figures 

are based on 50 state governments, all 

local government property tax collectors 

and local government non-property tax 

imposers, representing at a minimum 

the more than 38,000 ‘‘General Purpose 

Governments’’ defined by Census. 

However, there are only roughly 32,000 

recipients of SLFRF funds. Thus, 

Treasury considered the difference 

between the number and type of entities 

in the Census Bureau data and the 

SLFRF recipients. 

Based on this methodology, Treasury 

estimates that average revenue loss 

(determined by comparing the 

counterfactual revenue to actual 

revenue) may range from $0 to $11.7 

million per recipient over the period of 

performance.286 Treasury settled on a 

point estimate toward the upper end of 

the range of potential averages, in part, 

to account for significant variation in 

the experiences of recipient 

governments: Some recipients likely 

experienced losses at the upper end of 

this range of potential averages. A point 

estimate toward the upper end of the 

range errs toward ensuring more 

recipients’ experiences are covered and 

increases the utility of the standard 

allowance for SLFRF recipients. 

Specifically, the program includes a 

very large number of recipients with 

relatively smaller awards; these 

recipients have tended to describe 

having greater difficulty completing the 

regular revenue loss calculation. Thus, 

selecting a point estimate toward the 

higher end of the expected range not 

only increases the likelihood that the 

standard allowance will reflect the 

experience of a larger number of SLFRF 

recipients but is more responsive to the 

comments of those with smaller awards. 

In addition, using a point estimate 

toward the upper end of the range 

accounts for the difficulty and 

uncertainty in predicting revenue losses 

years into the future, throughout the 

period of performance.287

Finally, Treasury selected a single 

allowance level, as opposed to varying 

levels, to further the goals of simplicity, 

flexibility, and administrability. 

Furthermore, data limitations make it 

difficult to distinguish between types of 

local governments.288

General Revenue 

The interim final rule adopted a 

definition of ‘‘general revenue’’ based 

largely on the components reported 

under ‘‘General Revenue from Own 

Sources’’ in the Census Bureau’s Annual 

Survey of State and Local Government 

Finances. Under the interim final rule, 

general revenue included revenue 

collected by a recipient and generated 

from its underlying economy, and it 

would capture a range of different types 

of tax revenues, as well as other types 

of revenue that are available to support 

government services.289 Specifically, 

revenue under the interim final rule 

included money that is received from 

tax revenue, current charges, and 

miscellaneous general revenues and 

excluded refunds and other correcting 

transactions, proceeds from issuance of 

debt or the sale of investments, agency 

or private trust transactions, revenue 

from utilities, social insurance trust 

revenues, and intergovernmental 


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4404 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 

290The interim final rule stated that ‘‘general 

revenue’’ and ‘‘tax revenue’’ excludes refunds and 

other correcting transactions. Instead of 

‘‘excluding’’ refunds and other correcting 

transactions, the Census Bureau methodology upon 

which those definitions are based provides that 

general revenue and tax revenue are determined 

‘‘net of’’ refunds and other correcting transactions. 

The use of ‘‘excluding’’ in the interim final rule is 

substantively the same as the Census Bureau 

methodology. However, to be consistent with the 

terminology used by the Census Bureau, the final 

rule uses ‘‘net of’’ instead of ‘‘excluding.’’ Current 

charges are defined as ‘‘charges imposed for 

providing current services or for the sale of 

products in connection with general government 

activities.’’ It includes revenues such as public 

education institution, public hospital, and toll 

revenues. Miscellaneous general revenue comprises 

of all other general revenue of governments from 

their own sources (i.e., other than utility and 

insurance trust revenue), including rents, royalties, 

lottery proceeds, and fines. 

291The interim final rule excluded governmental 

transfers from the Federal Government, but it did 

not exclude intergovernmental transfers from other 

governmental units for purposes of the revenue loss 

provisions. 

292U.S. Energy Information Administration, 

Annual Electric Utility Data (October 2021), 

available at https://www.eia.gov/electricity/sales_

revenue_price/. 

293FAQ 3.14 provides further guidance on how 

to determine what entities constitute a government 

for purposes of calculating revenue loss. See 

Coronavirus State and Local Fiscal Recovery Funds, 

Frequently Asked Questions, as of July 19, 2021; 

https://home.treasury.gov/system/files/136/ 

SLFRPFAQ.pdf. 

transfers from the federal government, 

including transfers made pursuant to 

section 9901 of the ARPA.290 In the case 

of Tribal governments, it also included 

revenue from Tribal business 

enterprises. 

Public Comment: Many commenters 

asked Treasury to include certain items 

in the definition of ‘‘general revenue.’’ 

For instance, several commenters that 

operate their own utilities asked that 

revenue from utilities be included, 

arguing that declines in utility revenue 

directly affect contributions to their 

general funds. Many of these 

commenters noted that moratoriums on 

utility shutoffs and a decline in 

collections have resulted in significant 

budgetary pressures. 

Some commenters also asked for the 

exclusion of certain intergovernmental 

transfers in the definition of general 

revenue, including transfers of shared 

revenue from the state.291 Other 

commenters asked for the inclusion of 

certain transfers from the federal 

government, including fees paid for 

services and grants that are, in effect, 

paid for the provision of services. 

Treasury also received multiple 

requests to include revenue from Tribal 

enterprises in the definition of ‘‘general 

revenue’’ and that ‘‘Tribal enterprise’’ be 

defined broadly. Others asked for the 

ability to choose whether to include 

revenue from Tribal enterprises. 

Finally, some commenters requested 

that the definition of general revenue 

exclude certain sources of revenue, such 

as revenue sources that do not support 

a general fund (i.e., revenue sources that 

are restricted in use). Commenters also 

asked that general revenue exclude 

revenue from special assessments, 

settlements that make the recipient 

whole for past expenditures, and onetime revenues such as revenue from the 

sale of property. 

Treasury Response: In the final rule, 

Treasury has maintained the definition 

of ‘‘general revenue’’ from the interim 

final rule with two exceptions. 

Treasury has adjusted the definition 

to allow recipients that operate utilities 

that are part of their own government to 

choose whether to include revenue from 

these utilities in their revenue loss 

calculation. This change responds to 

comments from recipients indicating 

that revenue from utilities is used to 

fund other government services and that 

utility revenues have declined on 

aggregate.292 This approach is consistent 

with other eligible uses, which 

recognize decreased ability of many 

households to make utility payments; 

see section Assistance to Households, 

which identifies utility assistance as an 

enumerated eligible use of funds, 

including through direct or bulk 

payments to utilities for consumer 

assistance. Furthermore, for utilities or 

other entities (e.g., certain service 

districts) that are not part of the 

recipient government, a transfer from 

the utility to the recipient constitutes an 

intergovernmental transfer and therefore 

is included in the definition of ‘‘general 

revenue.’’ 293

Treasury has also added liquor store 

revenue to the definition of general 

revenue. The Supplemental Information 

to the interim final rule stated that the 

definition of tax revenue would include 

liquor store revenue, but the text of the 

rule did not include it. Accordingly, in 

the final rule, Treasury is clarifying that 

revenue includes liquor store revenue. 

However, Treasury believes revenue 

from government-owned liquor stores is 

better classified as general revenue than 

it is as tax revenue, so the final rule 

includes it as part of general revenue. 

In response to requests that the 

definition of general revenue exclude 

revenue from special assessments, 

settlements that make the recipient 

whole for past expenditures, and onetime revenues such as revenue from the 

sale of property, Treasury is maintaining 

its position in the final rule that such 

revenue is included in general revenue. 

While such revenues may be less 

predictable than other sources of 

revenue (e.g., property taxes), these are 

not uncommon sources of revenue for 

recipients, and their inclusion provides 

a more complete view of the financial 

health of a recipient government and is 

consistent with the Census Bureau 

methodology. Treasury is also 

maintaining the exclusion of all 

payments from the federal government 

(including payments for services) from 

general revenue in order to avoid 

substantial dilution of the definition of 

revenue, particularly in light of 

extraordinary fiscal support provided 

during the pandemic. Treasury is 

maintaining the inclusion of 

intergovernmental transfers other than 

from the federal government for the 

reasons provided in the Supplemental 

Information to the interim final rule; to 

do otherwise would be to significantly 

distort the revenue calculations for local 

governments that regularly receive 

revenue sharing payments, for example, 

from their state governments. Treasury 

is also maintaining the approach that 

‘‘general revenue’’ includes revenue 

from Tribal enterprises. This approach 

recognizes that these enterprises often 

form the revenue base for Tribal 

governments’ budgets. 

To ease the burden on recipients and 

account for anomalous variations in 

revenue, as mentioned above, Treasury 

has incorporated a ‘‘standard 

allowance’’ option into the final rule. A 

recipient may choose to use the 

standard allowance, which under the 

final rule is set at up to $10 million, not 

to exceed the recipient’s SLFRF award 

amount, as an alternative to calculating 

revenue loss according to the formula 

described above. This addition will 

promote administrative efficiency and 

simplify the revenue loss calculation for 

the vast majority of recipients. Treasury 

intends to amend its reporting forms to 

provide a mechanism for recipients to 

elect to utilize either the revenue loss 

formula or the standard allowance, in 

addition to other changes made as part 

of the final rule. 

Aggregate Revenue Loss Calculation 

Under the interim final rule, revenue 

loss was calculated based on aggregate 

revenues and therefore loss in one type 

of revenue could be offset by gains in 

another. The amount of SLFRF funds 

available to provide government 

services was based on overall net 

revenue loss. In the Supplementary 

Information to the interim final rule, 

Treasury asked commenters to discuss 

the advantages and disadvantages of, 

and any potential concerns with, this 

approach, including circumstances in 

which it could be necessary or 


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appropriate to calculate the reduction in 

revenue by source. 

Public Comment: Treasury received 

many comments stating that revenue 

loss should be calculated on a sourceby-source basis. Some commenters 

argued that a source-by-source approach 

would be administratively simpler. 

Other commenters argued that 

calculating revenue loss source-bysource would better reflect the impact of 

the COVID–19 pandemic on their ability 

to fund government services because 

revenue gains in one source cannot 

always be used to make up for losses in 

another. For similar reasons, other 

commenters asked that revenue loss be 

calculated on a fund basis. 

Treasury Response: Treasury 

considered alternative methods (e.g., 

source-by-source, fund-by-fund) but 

ultimately determined to maintain the 

calculation of revenue loss in the 

aggregate. The pandemic has had 

different effects on recipients (and their 

revenues), and Treasury recognized that 

one particular type of revenue or one 

particular source may have experienced 

a greater amount of loss for some 

recipients. However, the statute refers 

only to ‘‘the reduction in revenue of 

such State, local government, or Tribal 

government.’’ The statute is thus clear 

that Treasury is to refer to the aggregate 

revenue reduction of the recipient due 

to the public health emergency. Further, 

this provision is designed to address 

declines in the recipients’ overall ability 

to pay for governmental services, and 

calculating revenue loss on an aggregate 

basis provides a more accurate 

representation of the effect of the 

pandemic on overall revenues and the 

fiscal health of the recipient. In many 

circumstances, recipient governments 

have flexibility to use revenues from an 

array of sources and offset declines in 

some sources with gains in others. 

While the details and configuration of 

this flexibility vary widely across 

recipient governments, calculating 

revenue loss on a source-by-source or 

fund-by-fund basis would not capture 

how recipient governments balance 

their budgets in the regular course of 

business. Accordingly, the final rule 

maintains the requirement that revenue 

loss is to be calculated on an aggregate 

basis. 

Calculation Dates 

Public Comment: Under the interim 

final rule, recipients calculate revenue 

loss as of the end of the calendar year. 

Treasury received many comments 

requesting that recipients be permitted 

to calculate revenue loss as of the end 

of their fiscal year. Commenters argued 

that doing so would be simpler and less 

burdensome on recipients and that 

financial data as of the end of the fiscal 

year is audited and therefore more 

reliable. Commenters also argued that 

recipients’ fiscal years are structured 

around the timing of major revenue 

sources, and that the Census Bureau 

uses fiscal years in its Annual Survey. 

Treasury also received comments 

about the use of multiple calculation 

dates. Several Tribal governments stated 

that they would not see ongoing revenue 

losses due to the COVID–19 public 

health emergency and asked to be able 

to determine revenue loss as of the first 

calculation date. Several commenters 

asked whether revenue loss is 

determined independently for each 

year, so that a gain in one year does not 

offset a loss in another, or whether 

revenue loss is cumulative from the 

beginning of the pandemic. 

Treasury Response: In the final rule, 

Treasury has made adjustments to give 

recipients more flexibility with respect 

to calculation dates and to clarify 

certain elements. Specifically, the final 

rule provides recipients the option to 

choose whether to calculate revenue 

loss on a fiscal year or calendar year 

basis, though they must choose a 

consistent basis for loss calculations 

throughout the period of performance. 

Treasury has also clarified in the final 

rule that revenue loss is calculated 

separately for each year such that the 

calculation of revenue lost in one year 

does not affect the calculation of 

revenue lost in prior or future years. 

Presumption That Revenue Loss Is Due 

to the Pandemic 

As stated above, sections 602(c)(1)(C) 

and 603(c)(1)(C) of the Social Security 

Act provide that SLFRF funds may be 

used ‘‘for the provision of government 

services to the extent of the reduction in 

revenue of such . . . government due to 

the COVID–19 public health emergency 

relative to revenues collected in the 

most recent full fiscal year of the . . . 

government prior to the emergency.’’ As 

discussed in the interim final rule, 

although revenue may decline for 

reasons unrelated to COVID–19, in order 

to minimize the administrative burden 

on recipients in calculating revenue loss 

and take into consideration the 

devastating effects of the COVID–19 

public health emergency, any reduction 

in revenue relative to the counterfactual 

estimate was presumed in the interim 

final rule to be considered revenue lost 

due to the pandemic. 

Treasury stated in the Supplementary 

Information to the interim final rule that 

it was considering when, if ever, during 

the period of performance it would be 

appropriate to reevaluate the 

presumption that all losses are 

attributable to the public health 

emergency. Treasury also sought 

comment on whether to take into 

account other factors, including actions 

taken by the recipient as well as the 

expiration of the COVID–19 public 

health emergency, in determining 

whether to presume that revenue losses 

are ‘‘due to’’ the COVID–19 public 

health emergency. 

Public Comment: Treasury received 

many comments in support of the 

presumption, as well as some opposed. 

Some commenters argued that the 

presumption eases the administrative 

burden on recipients because, without 

it, it would be difficult to identify which 

losses are attributable to the COVID–19 

public health emergency. Many 

commenters also argued that Treasury 

should maintain the presumption 

because recipients are likely to 

experience losses due to the public 

health emergency even after the end of 

the public health emergency. Treasury 

also received comments asking that it 

adjust any revenue loss calculation to 

account for tax changes enacted by the 

recipient. In particular, some 

commenters noted that some recipients 

had increased taxes in order to meet 

additional demands for government 

services or to address declines in 

revenue due to the pandemic. These tax 

increases have in some cases offset some 

or all of the actual revenue loss 

attributable to the public health 

emergency. Because the interim final 

rule calculates revenue loss by reference 

to actual revenue collected, commenters 

argued that the calculation of revenue 

loss ‘‘due to’’ the public health 

emergency needs to take into 

consideration the effects of tax increases 

by deducting the effect of these tax 

increases from actual revenue collected. 

Treasury Response: In the final rule, 

Treasury has maintained the 

presumption that a reduction in a 

recipient’s revenue is due to the public 

health emergency with certain 

adjustments to respond to comments 

and to better account for revenue loss 

‘‘due to the COVID–19 public health 

emergency.’’ The final rule makes 

adjustments to the presumption to take 

into account certain government actions 

to change tax policy. In particular, 

Treasury is adjusting the presumption to 

account for changes to tax policy by 

providing that changes in revenue that 

are caused by tax increases or decreases 

adopted after the issuance of the final 

rule will not be treated as due to the 

public health emergency. 


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294See also sections 602(a)(1) and 603(a) of the 

Social Security Act (appropriating the funds for 

payment to recipients in order to ‘‘mitigate the 

fiscal effects stemming from the public health 

emergency’’). 

295U.S. Postal Service v. Postal Regulatory 

Comm’n, 640 F.3d 1263 (D.C. Cir. 2011); see Kimber 

v. Thiokol Corp., 196 F.3d 1092, 1100 (10th Cir. 

1999); Adams v. Director, OWCP, 886 F.2d 818, 821 

(6th Cir. 1989). 

296Treasury considered whether to also eliminate 

the presumption with respect to losses resulting 

from other changes in policy, such as decreases in 

user fees or fines. However, the effects of these 

changes are more minor overall and would be more 

challenging to accurately identify and quantify, so 

the administrability benefit of the presumption for 

recipients outweighs whatever distortion there 

might be as a result of not reflecting such changes. 

297See generally, National Association of State 

Budget Officers, Budget Processes in the States, 

(2021), available at https://higherlogicdownload.

s3.amazonaws.com/NASBO/9d2d2db1-c943-4f1bb750-0fca152d64c2/UploadedImages/Budget%20

Processess/NASBO_2021_Budget_Processes_in_the_

States_S.pdf. 

Presumption of Revenue Loss ‘‘Due To’’ 

the Pandemic 

In enacting sections 602(c)(1)(C) and 

603(c)(1)(C) of the Social Security Act, 

Congress provided that a state, local 

government, or Tribal government could 

use funds to ‘‘cover costs . . . for the 

provision of government services,’’ but 

only ‘‘to the extent of the reduction in 

revenue . . . due to the COVID–19 

public health emergency relative to 

revenues collected in the most recent 

full fiscal year . . . prior to the 

emergency.’’ In doing so, Congress 

recognized that the pandemic was 

causing significant disruption to 

economic activity and sought to 

minimize the impact of associated 

revenue losses on the ability of the 

recipient to provide government 

services when such services were 

needed most.294 The text of the statute 

itself reinforces this important context: 

The law specifically limits funds to 

cover revenue losses that both are ‘‘due 

to the COVID–19 public health 

emergency’’ and could impact ‘‘the 

provision of government services.’’ 

Courts have recognized that the 

phrase ‘‘due to’’ can refer to various 

causal standards.295 Here, in the context 

of Congress’s addressing economic 

disruptions caused by the COVID–19 

pandemic that could impact both 

revenues and government services, the 

key consideration is whether a revenue 

loss experienced by the recipient 

resulted from the exogenous impacts of 

the public health emergency (and were 

thus ‘‘due to’’ the pandemic) or instead 

from the recipient’s own discretionary 

actions (and, in this context, were not 

‘‘due to’’ the pandemic). Reductions in 

revenue due to the public health 

emergency does not cover revenue 

reductions that resulted from a 

recipient’s own discretionary actions. 

In the interim final rule, Treasury 

included a presumption that all revenue 

loss is due to the pandemic in order to 

minimize the administrative burden on 

recipients discussed above and take into 

consideration the devastating effects of 

the COVID–19 public health emergency. 

Based on comments, Treasury believes 

that the reasons for the presumption 

continue to be valid and has determined 

to maintain the presumption in the final 

rule with certain modifications. In 

particular, at this point in the course of 

the pandemic, with the fiscal pressure 

on state and local governments having 

been significantly reduced, it is 

appropriate for Treasury to reassess 

aspects of this presumption. As 

discussed below, the final rule requires 

recipients to exclude the value of tax 

policy changes adopted after January 6, 

2022. 

Recipients of the SLFRF range from 

states to the smallest local governments. 

At the time that the interim final rule 

was adopted, it was important for 

recipients to be able to calculate with 

ease and certainty their amount of 

revenue loss so that they could begin 

deploying these funds to continue to 

maintain essential government services. 

To this end, the presumption in the 

interim final rule provided a relatively 

simple formula for all recipients to use, 

but the exigent need for recipients to 

immediately deploy funds for the 

provision of government services has 

decreased and the benefit of the 

presumption in reducing administrative 

burden is less relevant for those 

governments that are not likely to avail 

themselves of the standard allowance 

described above. 

Consistent with these considerations, 

the final rule requires recipients to 

exclude revenue loss due to tax changes 

adopted after January 6, 2022. 

Eliminating revenue loss due to tax 

changes from the presumption is 

appropriate given the significance of tax 

revenue as a portion of all revenue for 

state and local governments, the direct 

impact of tax policy decisions on 

revenue collected, and the relative ease 

with which recipients can isolate the 

estimated effect of a tax change on 

revenue.296 Most state budgeting 

processes require a ‘‘budget score,’’ 

often developed through a consensus 

process with executive and legislative 

branch experts,297 and Treasury expects 

that larger localities, those most likely to 

utilize the revenue loss formula rather 

than the standard allowance, also 

regularly use revenue or budget 

estimates when considering changes to 

tax policies. As such, in many cases, 

recipients already prepare estimates of 

the impact of tax changes on revenue, 

and as discussed below, Treasury will 

generally permit recipients to rely on 

such estimates in adjusting their 

revenue loss calculations. 

Reductions in revenue that are not 

attributable to tax changes would 

continue to be subject to the 

presumption. A requirement that 

recipients evaluate the revenue effect of 

changes in discretionary policy actions 

other than tax changes would be more 

difficult for recipients than evaluating 

the changes attributable to tax changes 

given that state and local governments 

do not generally prepare estimates of the 

revenue effects of other actions. Finally, 

as noted above, taxes are the single 

largest source of revenue for state and 

local government recipients in the 

aggregate. 

Revisions to Presumption To Address 

Tax Reductions 

For these reasons, Treasury is 

providing in the final rule that changes 

in general revenue that are caused by 

tax cuts adopted after the date of 

adoption of the final rule (January 6, 

2022) will not be treated as due to the 

public health emergency, and the 

estimated fiscal impact of such tax cuts 

must be added to the calculation of 

‘‘actual revenue’’ for purposes of 

calculation dates that occur on or after 

April 1, 2022. Tax cuts include final 

legislative or regulatory action or a new 

or changed administrative interpretation 

that reduces any tax (by providing for a 

reduction in a rate, a rebate, a 

deduction, a credit, or otherwise) or 

delays the imposition of any tax or tax 

increase and that the recipient assesses 

has had the effect of reducing tax 

revenue relative to current law. This 

includes the phase-in or taking effect of 

any statute or rule if the phase-in or 

taking effect was not prescribed prior to 

the issuance of the final rule. 

In assessing whether a tax change has 

had the effect of reducing tax revenue, 

recipients may either calculate the 

actual effect on revenue or rely on 

estimates prepared at the time the tax 

change was adopted. More specifically, 

recipients may rely on information 

typically prepared in the course of 

developing the budget (e.g., expected 

revenues) and/or considering tax 

changes (e.g., budget scores, revenue 

notes) to determine the amount of 

revenue that would have been collected 

in the absence of the tax cut, as long as 

those estimates are based on reasonable 

assumptions and do not use dynamic 

methodologies that incorporate the 

projected effects of macroeconomic 

growth, given that macroeconomic 


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298The final rule does not permit recipients to 

reflect the effects of other changes in policy, such 

as increases in fees adopted after adoption of the 

final rule. Treasury understands that the main 

beneficiaries of such a change would be those 

recipients that will benefit from the standard 

allowance provided for in the final rule and that for 

other recipients the administrative burden on 

recipients needed to calculate these adjustments 

would outweigh the benefit of having a somewhat 

larger amount of funds available for government 

services. 

299The final rule also addresses the possibility 

that some recipients may have fiscal years ending 

during the period between January 6, 2022 and 

April 1, 2022; such recipients’ election to reflect tax 

changes from prior periods would also apply to 

changes during this period with respect to the 

calculation date in this period. 

growth is accounted for in the 

counterfactual growth assumptions. 

Recipients that choose to calculate the 

actual effect of a tax change on revenue 

must similarly base their calculations on 

reasonable estimates that do not use 

dynamic methodologies. Recipients 

should apply this adjustment in 

determining their actual revenue totals 

at Step 3 in the revenue loss calculation 

described above. 

Revisions to Presumption To Address 

Tax Increases 

As noted above, the calculation 

methodology in the interim final rule 

implicitly assumed that recipients did 

not experience a reduction in revenue 

due to the public health emergency if 

they did not experience a reduction in 

aggregate revenue relative to the 

counterfactual estimate. Treasury 

recognizes that some recipients may 

have experienced a reduction in 

revenue due to the public health 

emergency that was offset by other 

revenue, particularly in the case of 

increases to tax revenue resulting from 

a tax increase. The final rule requires 

recipients that increased taxes to deduct 

the amount of increases to revenue 

attributable to such tax increase. This 

change is also consistent with the 

incorporation in the interim final rule 

and final rule of a counterfactual growth 

rate, which effectively permits 

recipients to count revenue losses due 

to the public health emergency that are 

offset by increased tax revenue resulting 

from organic growth. 

For these reasons, Treasury is 

providing in the final rule that 

recipients must subtract from their 

calculation of actual revenue the effect 

of tax increases adopted after the date of 

adoption of this final rule (January 6, 

2022) for purposes of calculation dates 

that occur on or after April 1, 2022. This 

change and the change to the final rule 

described above treat tax changes in a 

consistent manner: In the case of 

reduction in revenue resulting from a 

tax cut, a recipient must add the amount 

of that reduction to its calculation of 

actual revenue, and in the case of an 

increase in revenue resulting from a tax 

increase, a recipient must subtract the 

amount of additional revenue collected 

as a result of the tax increase from its 

calculation of actual revenue.298

As is the case with tax cuts, discussed 

above, tax increases that must be 

reflected in the calculation of revenue 

include final legislative or regulatory 

action or a new or changed 

administrative interpretation that 

increases any tax and that the recipient 

assesses has had the effect of increasing 

tax revenue relative to current law. In 

assessing whether a tax change has had 

the effect of increasing tax revenue, 

recipients may either calculate the 

actual effect on revenue or rely on 

estimates prepared at the time the tax 

change was adopted. Recipients may 

rely on information typically prepared 

in the course of developing the budget 

(e.g., expected revenues) and/or 

considering tax changes (e.g., budget 

scores, revenue notes) to determine the 

amount of revenue that was collected as 

a result of the tax increase as long as 

those estimates are based on reasonable 

assumptions and do not use dynamic 

methodologies that incorporate the 

projected effects of macroeconomic 

growth, given that macroeconomic 

growth is accounted for in the 

counterfactual growth assumptions. 

Recipients that choose to calculate the 

actual effect of a tax change on revenue 

must similarly base their calculations on 

reasonable estimates that do not use 

dynamic methodologies. Recipients 

should apply this adjustment in 

determining their actual revenue totals 

at Step 3 in the revenue loss calculation 

described above. 

Previously Adopted Tax Changes 

As discussed above, the final rule will 

not require recipients to reflect the 

revenue effects of tax increases or 

decreases adopted prior to the adoption 

of the final rule. Recipients that adopted 

a tax change in a previous period will 

not be required to recalculate the 

amount of revenue loss as of prior 

calculation dates or to reflect the fiscal 

impacts of such tax changes in 

calculation dates after the effective date 

of the final rule. However, the final rule 

will permit recipients to elect to reflect 

the revenue effects of their tax changes 

adopted between the beginning of the 

public health emergency and the 

adoption of the final rule.299 If a 

recipient elects to do so, it must do so 

with respect to all of its tax changes 

adopted between the beginning of the 

public health emergency and the 

adoption of the final rule. Treasury 

intends to revise its reporting 

requirements to permit recipients to 

amend their previously reported 

calculation periods to reflect such 

changes. 

Determination of the Base Year 

Under the ARPA and interim final 

rule, SLFRF funds may be used ‘‘for the 

provision of government services to the 

extent of the reduction in revenue . . . 

relative to revenues collected in the 

most recent full fiscal year’’ of the 

recipient. Therefore, the base year for 

the revenue loss calculation is the most 

recent full fiscal year prior to the 

COVID–19 public health emergency. 

Public Comment: Treasury received 

multiple comments asking for flexibility 

in determining base year revenues. For 

instance, some commenters asked to use 

a different base year than the ‘‘most 

recent full fiscal year’’ prior to the 

pandemic for calculating revenue loss; 

others asked to be able to average prior 

years. Commenters stated that, for 

various reasons, revenue was artificially 

low in the last full fiscal year prior to 

the public health emergency, and, 

therefore, using revenue in that year as 

the base year did not accurately reflect 

expected revenue in a normal year. For 

example, several Tribes stated that 

unforeseeable weather events resulted 

in forced closure of casinos which, in 

turn, artificially deflated revenues in the 

base year. Other commenters indicated 

that one-time anomalies in the timing of 

tax collection in that year artificially 

pushed revenue into the following fiscal 

year. Similarly, a few commenters noted 

that tax changes that took effect in the 

middle of the base year may artificially 

skew the size of the revenue loss 

experienced by the recipient 

government. 

Treasury Response: Treasury 

understands that recipients may have 

experienced events in the base year that 

led to lower or higher revenues than 

what they otherwise would have 

collected. The ARPA provides that 

revenue loss is to be determined with 

respect to revenue in the most recent 

full fiscal year prior to the pandemic, 

and therefore the final rule maintains its 

incorporation of the statutory definition. 

In calculating revenue loss, recipients 

may use data on a cash, accrual, or 

modified accrual basis, provided that 

recipients are consistent in their choice 

of methodology throughout the covered 

period, which might help recipients 

adjust to certain delays in revenue 

receipt. Both the standard allowance 

and elements of the formula (e.g., 


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300Pay-go infrastructure funding refers to the 

practice of funding capital projects with cash-onhand from taxes, fees, grants, and other sources, 

rather than with borrowed sums. 

counterfactual growth rate) incorporate 

generous assumptions to give recipients 

flexibility and to account for variation 

among recipients’ experiences during 

the pandemic. 

Government Services 

The SUPPLEMENTAL INFORMATION to the 

interim final rule provided a nonexhaustive list of examples of services 

that are government services. The 

interim final rule also discussed why 

neither payment of debt service nor 

replenishing financial reserves 

constitutes government services, as 

these expenditures do not provide 

services but relate to the financing of 

such services. Similarly, government 

services under the interim final rule did 

not include satisfaction of any 

obligation arising under or pursuant to 

a settlement agreement, judgment, 

consent decree, or judicially confirmed 

debt restructuring in a judicial, 

administrative, or regulatory 

proceeding, unless the judgment or 

settlement required the provision of 

government services. 

Public Comment: Treasury received 

several comments requesting further 

clarification regarding the scope of 

government services, including asking 

for either a specific definition of 

government services or that a specific 

use be expressly deemed to be a 

government service. Some commenters 

disagreed with the exclusions from 

government services in the interim final 

rule. For instance, many of the 

comments Treasury received suggested 

that replenishing reserve funds and at 

least certain types of debt service should 

be treated as providing governmental 

services. Some commenters also 

suggested that a recipient should be able 

to use funds for costs incurred before 

March 3, 2021. Other commenters asked 

Treasury to maintain the prohibition on 

using the funds to pay debt service. 

Treasury Response: Treasury 

continues to believe that the lists of 

activities that either are or are not 

providing government services are 

accurate but is clarifying here that, 

generally speaking, services provided by 

the recipient governments are 

‘‘government services’’ under the 

interim final rule and final rule, unless 

Treasury has stated otherwise. 

Government services include, but are 

not limited to, maintenance or pay-go 

funded building 300 of infrastructure, 

including roads; modernization of 

cybersecurity, including hardware, 

software, and protection of critical 

infrastructure; health services; 

environmental remediation; school or 

educational services; and the provision 

of police, fire, and other public safety 

services. 

The aforementioned list of 

government services is not exclusive. 

However, recipients should be mindful 

that other restrictions may apply, 

including those articulated in the 

section Restrictions on Use. In the final 

rule, Treasury is maintaining the 

limitations on government services 

included in the interim final rule and 

has addressed and responded to public 

commenters on these issues in the 

section Restrictions on Use. 

D. Investments in Water, Sewer, and 

Broadband Infrastructure 

Summary of Interim Final Rule 

Under the ARPA, recipients may use 

funds to make necessary investments in 

water, sewer, and broadband 

infrastructure. The interim final rule 

provided recipients with the ability to 

use funds for a broad array of uses 

within these categories. 

The interim final rule discussed two 

general provisions that apply across all 

water, sewer, and broadband 

infrastructure investments. First, the 

interim final rule addressed the 

meaning of ‘‘necessary’’ investments as 

meaning those designed to provide an 

adequate minimum level of service and 

unlikely to be made using private 

sources of funds. Second, the interim 

final rule encouraged recipients to use 

strong labor standards in water, sewer, 

and broadband projects, as discussed 

below. 

Necessary Investments 

The statute limits investments to 

those that are necessary. As discussed in 

more detail below, Treasury determined 

that the types of water and sewer 

projects that were authorized under the 

interim final rule by reference to 

existing Environmental Protection 

Agency (EPA) programs would in all 

cases be necessary investments given 

the conditions applicable to such EPA 

programs. Similarly, the interim final 

rule’s definition of eligible broadband 

projects as those designed to provide a 

certain standard of service to those 

households and businesses with limited 

existing service was based on the 

statutory requirement that investments 

in water, sewer, and broadband must be 

‘‘necessary.’’ 

As discussed further below, Treasury 

has expanded the scope of what is an 

eligible water and sewer infrastructure 

project to include additional uses. In 

particular, the final rule permits use of 

SLFRF funds for certain dam and 

reservoir restoration projects and certain 

drinking water projects to support 

population growth. The nature of these 

additional uses is such that additional 

factors must be considered in 

determining whether one of these 

additional uses is a necessary project. In 

addition, Treasury recognizes that there 

may be a need for improvements to 

broadband beyond those households 

and businesses with limited existing 

service as defined in the interim final 

rule. Treasury has replaced this specific 

requirement based on an understanding 

that broadband investments may be 

necessary for a broader set of reasons. 

Given this expansion of what is 

considered in scope as a water, sewer, 

or broadband infrastructure project, the 

final rule provides a further elaboration 

of Treasury’s understanding of the 

conditions under which an 

infrastructure project will be considered 

to be a necessary investment. Treasury 

considers a necessary investment in 

infrastructure to be one that is (1) 

responsive to an identified need to 

achieve or maintain an adequate 

minimum level of service, which may 

include a reasonable projection of 

increased need, whether due to 

population growth or otherwise and (2) 

a cost-effective means for meeting that 

need, taking into account available 

alternatives. In addition, given that 

drinking water is a resource that is 

subject to depletion, in the case of 

investments in infrastructure that 

supply drinking water in order to meet 

projected population growth, the project 

must be projected to be sustainable over 

its estimated useful life. 

Not included in the list of criteria 

above is the requirement in the interim 

final rule that the project be unlikely to 

be made using private sources of funds. 

Given that it may be difficult to assess 

in a particular case what the probability 

of private investment in a project would 

be, Treasury has eliminated this 

standard from the meaning of necessary 

but still encourages recipients to 

prioritize projects that would provide 

the greatest public benefit in their 

respective jurisdictions. 

Strong Labor Standards in Water, Sewer, 

and Broadband Construction 

As stated in the Supplementary 

Information to the interim final rule, 

Treasury encourages recipients to carry 

out investments in water, sewer, or 

broadband infrastructure in ways that 

produce high-quality infrastructure, 

avert disruptive and costly delays, and 


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Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4409 

301Treasury received several comments related to 

its encouragement of certain wage and labor 

standards in the Supplementary Information to the 

interim final rule. Some commenters opposed this 

encouragement, arguing that even encouragement 

and reference to PLAs and prevailing wage laws 

could lead to confusion or make it more likely that 

recipients would apply labor standards in ways that 

would discourage competition and raise project 

costs. Conversely, some commenters supported the 

encouragement of the use of certain standards, 

including giving preference to employers that meet 

certain employment standards (e.g., those that 

maintain high safety and training standards) 

because it would support the goal of completing 

water, sewer, and broadband projects efficiently 

and safely. As in the interim final rule, this 

encouragement does not impose a legally binding 

restriction on recipients. 

302See U.S. Department of the Treasury, 

Compliance and Reporting Guidance, 21 (June 24, 

2021), https://home.treasury.gov/system/files/136/ 

SLFRF-Compliance-and-Reporting-Guidance.pdf. 

promote efficiency.301 Treasury 

encourages recipients to use strong labor 

standards, including project labor 

agreements (PLAs) and community 

benefits agreements that offer wages at 

or above the prevailing rate and include 

local hire provisions. Treasury also 

recommends that recipients prioritize in 

their procurement decisions employers 

who can demonstrate that their 

workforce meets high safety and 

training standards (e.g., professional 

certification, licensure, and/or robust inhouse training), that hire local workers 

and/or workers from historically 

underserved communities, and who 

directly employ their workforce or have 

policies and practices in place to ensure 

contractors and subcontractors meet 

high labor standards. Treasury further 

encourages recipients to prioritize 

employers (including contractors and 

subcontractors) without recent 

violations of federal and state labor and 

employment laws. 

Treasury believes that such practices 

will promote effective and efficient 

delivery of high-quality infrastructure 

projects and support the economic 

recovery through strong employment 

opportunities for workers. Such 

practices will also reduce the likelihood 

of potential project challenges like work 

stoppages or safety accidents, while 

ensuring a reliable supply of skilled 

labor and minimizing disruptions, such 

as those associated with labor disputes 

or workplace injuries. That will, in turn, 

promote on-time and on-budget 

delivery. 

Furthermore, among other 

requirements contained in 2 CFR 200, 

Appendix II, all contracts made by a 

recipient or subrecipient in excess of 

$100,000 with respect to water, sewer, 

or broadband infrastructure project that 

involve employment of mechanics or 

laborers must include a provision for 

compliance with certain provisions of 

the Contract Work Hours and Safety 

Standards Act, 40 U.S.C. 3702 and 3704, 

as supplemented by Department of 

Labor regulations (29 CFR part 5). 

Treasury will continue to seek 

information from recipients on their 

workforce plans and water, sewer, and 

broadband projects undertaken with 

SLFRF funds. This reporting will 

support transparency and competition 

by enhancing available information on 

the services being provided. Since 

publication of the interim final rule, 

Treasury has provided recipients with 

additional guidance and instructions on 

the reporting requirements.302

Environmental and Other Generally 

Applicable Requirements 

Treasury cautions that, as is the case 

with all projects engaged in using the 

SLFRF funds, all projects must comply 

with applicable federal, state, and local 

law. In the case of infrastructure 

projects in particular, this includes 

environmental and permitting laws and 

regulations. Likewise, as with all capital 

expenditure projects using SLFRF 

funds, projects must be undertaken and 

completed in a manner that is 

technically sound, meaning that they 

must meet design and construction 

methods and use materials that are 

approved, codified, recognized, fall 

under standard or acceptable levels of 

practice, or otherwise are determined to 

be generally acceptable by the design 

and construction industry. 

1. Water and Sewer Infrastructure 

Sections 602(c)(1)(D) and Section 

603(c)(1)(D) of the Social Security Act 

provide that recipients may use the 

SLFRF funds ‘‘to make necessary 

investments in water [and] sewer . . . 

infrastructure.’’ The interim final rule 

permitted a broad range of necessary 

investments in projects that improve 

access to clean drinking water and 

improve wastewater and stormwater 

infrastructure systems. As discussed 

below, after review of comments 

received on the interim final rule, 

Treasury has made changes in the final 

rule to expand the scope of eligible 

water and sewer projects. 

Summary of Interim Final Rule and 

Final Rule Structure 

Background: In the interim final rule, 

Treasury aligned eligible uses of the 

SLFRF with the wide range of types or 

categories of projects that would be 

eligible to receive financial assistance 

through the Clean Water State Revolving 

Fund (CWSRF) or Drinking Water State 

Revolving Fund (DWSRF) administered 

by the Environmental Protection Agency 

(EPA). By referring to these existing 

programs, with which many recipients 

are already familiar, Treasury intended 

to provide flexibility to recipients to 

respond to the needs of their 

communities while facilitating 

recipients’ identification of eligible 

projects. Furthermore, by aligning 

SLFRF eligible uses with these existing 

programs, Treasury could ensure that 

projects using the SLFRF are limited to 

‘‘necessary investments.’’ 

Public Comment: Treasury received 

many comments responding to the 

water and sewer infrastructure 

provisions of the interim final rule from 

state, local, and Tribal governments, 

industry trade associations, public 

interest groups, private individuals, and 

other interested parties. Commenters 

requested that Treasury provide a wider 

set of eligible uses for water and sewer 

infrastructure beyond those uses 

articulated by the DWSRF and CWSRF, 

suggesting that Treasury expand the 

definition of necessary water and sewer 

infrastructure. 

Treasury Response: In response to 

commenters, Treasury is expanding the 

eligible use categories for water and 

sewer infrastructure, discussed in 

further detail below. Because the 

interim final rule aligned the definition 

of necessary water and sewer 

infrastructure with the eligible uses 

included in the DWSRF and CWSRF, 

Treasury is reflecting in the final rule a 

revised standard for determining a 

necessary water and sewer 

infrastructure investment for eligible 

water and sewer uses beyond those uses 

that are eligible under the DWSRF and 

CWSRF. 

Interpretation of Necessary Investments 

and Water and Sewer Infrastructure 

Necessary Investments: As discussed 

above, Treasury considers an 

investment in infrastructure to be 

necessary if it is (1) responsive to an 

identified need to achieve or maintain 

an adequate minimum level of service, 

which for some eligible project 

categories may include a reasonable 

projection of increased need, whether 

due to population growth or otherwise 

and (2) a cost-effective means for 

meeting that need, taking into account 

available alternatives. In addition, in the 

case of investments in drinking water 

service infrastructure to supply drinking 

water to satisfy a projected increase in 

population, the project must also be 

projected to be sustainable over its 

estimated useful life. As detailed further 

below, DWSRF and CWSRF eligible 

projects continue to be presumed to be 

necessary investments under the final 


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303See 40 CFR 35.3520(b)(2)(vi). 

304 In such cases, either the projects are 

presumptively cost-effective (e.g., lead projects 

would always be considered cost-effective given the 

costs imposed by lead poisoning) or a costeffectiveness test is less relevant given the lack of 

available alternatives or the relatively low cost of 

the project. 

305 In many jurisdictions, stormwater flows into 

the sewer system rather than into a separate 

stormwater system. The separate inclusion of 

‘‘water’’ and ‘‘sewer’’ infrastructure also makes 

clear that ‘‘water’’ in this context cannot refer to all 

uses relevant to water. Given that sewer systems 

carry wastewater (and often stormwater), if water 

infrastructure were to refer to all water-related 

infrastructure in this context, it would make the 

inclusion of sewer infrastructure redundant. 

rule, with the exception of projects for 

the rehabilitation of dams and 

reservoirs, which the EPA has permitted 

in certain circumstances under the 

DWSRF and, as discussed below, are 

addressed separately in the final rule. 

In evaluating whether a project would 

respond to a need to achieve or 

maintain an adequate minimum level of 

service, a recipient should consider 

whether it would meet the needs of the 

population to be served and would 

satisfy applicable standards. For 

example, a drinking water project must 

be sized such that it provides an 

adequate volume of water to households 

and other customers and must meet 

applicable standards for drinking water 

quality under the Safe Drinking Water 

Act (SDWA). Similarly, a centralized 

wastewater treatment project should be 

designed to manage updated estimated 

flow rates and comply with Clean Water 

Act requirements. These requirements 

are already reflected in the eligibility 

criteria of the DWSRF and CWSRF, 

respectively. 

In evaluating whether a project is a 

cost-effective means of providing the 

water or sewer service, the recipient 

should consider the need for the project, 

the costs and benefits of the project 

compared to alternatives, and the 

effectiveness of the project in meeting 

the identified need. Recipients are not 

required to conduct a full cost-benefit 

analysis; however, they should consider 

and analyze relevant factors. For 

example, a recipient may not use funds 

to pursue a costly dam rehabilitation to 

provide drinking water to a community 

if it could provide the same service with 

a significantly smaller investment by 

drawing water from another available 

reservoir, assuming that doing so would 

meet the other requirements of the final 

rule. As detailed further below, 

recipients are only required to assess 

cost-effectiveness of projects for the 

creation of new drinking water systems, 

dam and reservoir rehabilitation 

projects, or projects for the extension of 

drinking water service to meet 

population growth needs. 

Certain DWSRF eligibilities are 

already subject to a cost-effectiveness 

test. Specifically, projects that create 

new drinking water systems must be a 

cost-effective solution to addressing the 

identified problem.303 The EPA also 

imposes a cost-effectiveness condition 

on dam and reservoir rehabilitation 

projects undertaken pursuant to its class 

deviation from the DWSRF rule. These 

projects are particularly expensive and, 

unlike in the case of other types of 

eligible projects, there are often 

available alternatives to conducting 

these projects. Projects for the extension 

of drinking water service to meet 

population growth needs are also often 

particularly expensive, and there are 

often different ways to meet the needs 

of expanding populations. Treasury will 

accordingly require that recipients 

engage in a cost-effectiveness analysis 

when engaging in projects for the 

creation of new drinking water systems, 

dam and reservoir rehabilitation 

projects, or projects for the extension of 

drinking water service to meet 

population growth needs. Other types of 

eligible water or sewer projects will not 

be subject to this cost-effectiveness test, 

including lead line replacement and 

lead remediation.304

In the case of projects that expand 

drinking water service infrastructure to 

satisfy a projected increase in 

population, the project must also be 

sustainable, meaning that the project 

can continue providing the adequate 

minimum level of service for its 

estimated useful life, taking into 

account projected impacts of changes to 

the climate and other expected demands 

on the source of water. For example, a 

reservoir rehabilitation project may not 

be pursued if the reservoir will no 

longer be able to provide an adequate 

source of drinking water before the end 

of the estimated useful life of the 

improvements to the reservoir. In areas 

currently impacted by drought or where 

drought conditions are expected to be 

more frequent or more severe in the 

future, sources of drinking water may be 

diminished more quickly than in prior 

periods. In considering how much of a 

source of water will be available in the 

future for the drinking water project, a 

recipient must consider that a source of 

water may be drawn upon or otherwise 

used for other current and expected 

uses, including use by fish and other 

wildlife. 

The final rule applies this 

sustainability condition to projects that 

expand drinking water service 

infrastructure to satisfy a projected 

increase in population but not to other 

drinking water projects. When a new 

source of water is required to remedy an 

existing threat to public health, as in the 

case of source projects eligible under the 

DWSRF, sustainability should be a 

consideration, but in some cases, the 

need to replace a contaminated source 

may mean that a less sustainable choice 

may be made. When faced with such an 

issue, such as in the case of a 

contaminated well system, a project to 

replace the contaminated source can be 

said to be ‘‘necessary’’ even if the 

replaced source is not sustainable over 

the long term. Expediency may dictate 

that a shorter-term solution is pursued 

if it is cost-effective and will prevent 

health issues while a longer-term 

solution can be found. In contrast, an 

expansion to accommodate population 

growth cannot be said to be necessary if 

it is not sustainable over its estimated 

useful life. 

Not included in the list of criteria 

above is the requirement in the interim 

final rule that the project be unlikely to 

be made using private sources of funds. 

Given that it may be difficult to assess 

in a particular case what the probability 

of private investment in a project would 

be, Treasury has eliminated this 

standard from the meaning of necessary 

but nevertheless encourages recipients 

to apply funds to projects that would 

provide the greatest public benefit. 

Water and Sewer Infrastructure: As 

stated above, Congress provided that 

SLFRF funds are available for 

‘‘necessary water, sewer, and broadband 

infrastructure.’’ Treasury interprets the 

reference to water and sewer uses 

consistent with the inclusion of 

broadband uses. Water, sewer, and 

broadband infrastructure all involve the 

provision of essential services to 

residents, businesses, and other 

consumers. As the pandemic has made 

clear, access to broadband has itself 

become essential for individuals and 

businesses to participate in education, 

commerce, work, and civic matters and 

to receive health care and social 

services. 

Water and sewer services provided 

broadly to the public as essential 

services include the provision of 

drinking water and the removal, 

management, and treatment of 

wastewater and stormwater.305

Although governments are engaged in 

other infrastructure related to water, 

including irrigation projects, 

transportation projects, and recreation 

projects, such projects go beyond the 

scope of what is provided to all 

residents as an essential service. 

Provision of drinking water and 

removal, management, and treatment of 


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306 In addition, Treasury interprets the eligible 

uses of SLFRF funds against the background of the 

Coronavirus Relief Fund (CRF), for which the 

SLFRF funds are, in part, a successor. CRF 

recipients expressed great interest in using the CRF 

to pursue water infrastructure projects, including 

provision of drinking water and internal plumbing 

on Tribal lands and in Alaskan villages, and 

broadband projects throughout the country; 

Treasury permitted these projects given the 

connection to the public health emergency (see 

Coronavirus Relief Fund for States, Tribal 

Governments, and Certain Eligible Local 

Governments, 86 FR 4182, 4190, 4192 (Jan. 15, 

2021), but the short deadline for use of funds made 

it difficult to use CRF funds in this way. Congress’ 

inclusion of the water, sewer, and broadband clause 

in the ARPA, along with the SLFRF funds’ longer 

eligible use date, is responsive to this unmet need. 

As discussed below, Congress in the Infrastructure 

Investment and Jobs Act amended sections 602(c) 

and 603(c) of the Social Security Act to add a new 

paragraph as sections 602(c)(4) and 603(c)(5), 

respectively, providing that SLFRF funds may be 

used to meet non-federal matching requirements of 

any authorized Bureau of Reclamation project. This 

authority was added as a separately enumerated 

eligible use regardless of whether the underlying 

project would be an eligible use of SLFRF funds 

under the water and sewer infrastructure eligible 

use category. 

307See, e.g., section 502 of the Federal Water 

Pollution Control Act (33 U.S.C. 1362), defining 

‘‘green infrastructure’’ as ‘‘the range of measures 

that use plant or soil systems, permeable pavement 

or other permeable surfaces or substrates, 

stormwater harvest and reuse, or landscaping to 

store, infiltrate, or evapotranspirate stormwater and 

reduce flows to sewer systems or to surface waters.’’ 

308Specifically, this would include desalination 

projects that decrease the burden on aquifers where 

there is causal relationship between aquifer 

withdrawals and saltwater intrusion if the projects 

implement a nonpoint source pollution 

Continued 

wastewater and stormwater are the 

typical responsibilities of ‘‘water and 

sewer’’ authorities throughout the 

country, and there is a tremendous need 

for improvements to the ability of state, 

local, and Tribal governments to 

provide such services, including to 

address the consequences of deferred 

maintenance and additional resiliency 

needed to adapt to changes to the 

climate.306

Although the meaning of water and 

sewer infrastructure for purposes of 

sections 602(c)(1)(D) and 603(c)(1)(D) of 

the Social Security Act does not include 

all water-related uses, Treasury has 

made clear in this final rule that 

investments to infrastructure include a 

wide variety of projects. Treasury 

interprets the word ‘‘infrastructure’’ in 

this context broadly to mean the 

underlying framework or system for 

achieving the given public purpose, 

whether it be provision of drinking 

water or management of wastewater or 

stormwater.307 As discussed below, this 

can include not just storm drains and 

culverts for the management of 

stormwater, for example, but also 

bioretention basins and rain barrels 

implemented across a watershed, 

including on both public and private 

property, that together reduce the 

amount of runoff that needs to be 

managed by traditional infrastructure. 

Further, Treasury understands that 

investments in infrastructure include 

improvements that increase the capacity 

of existing infrastructure and extend the 

useful life of existing infrastructure. 

Accordingly, water and sewer 

infrastructure investment projects 

include those that conserve water, 

thereby reducing pressure on 

infrastructure for the provision of 

drinking water, and that recycle 

wastewater and stormwater, thereby 

reducing pressure on the infrastructure 

for treating and managing wastewater 

and stormwater. 

As with other infrastructure projects 

and capital expenditure projects that are 

permitted as responses to the public 

health emergency and its negative 

economic impacts, costs for planning 

and design and associated pre-project 

costs are eligible uses of SLFRF funds. 

Costs for the acquisition of land are also 

eligible, but only if needed for the 

purposes of locating eligible project 

components. Recipients should ensure 

that they have the technical, financial, 

and managerial capability to ensure 

compliance with the requirements of the 

SDWA, or that the assistance will 

ensure compliance and the owners or 

operators of the systems will undertake 

feasible and appropriate changes in 

operations to ensure compliance over 

the long-term. 

Drinking Water State Revolving Fund 

and Clean Water State Revolving Fund 

Background: As stated above, in the 

interim final rule, Treasury included 

eligible uses of the DWSRF and the 

CWSRF as eligible uses of the SLFRF in 

the water and sewer infrastructure 

category. By providing that projects 

eligible under the DWSRF and the 

CWSRF are also eligible uses of SLFRF 

funds, the interim final rule permitted a 

broad range of projects that improve 

drinking water infrastructure, such as 

building or upgrading facilities and 

transmission, distribution, and storage 

systems, including replacement of lead 

service lines. With respect to clean 

water and wastewater infrastructure, the 

interim final rule provided that 

recipients may use SLFRF funds to 

construct publicly owned treatment 

infrastructure, manage and treat 

stormwater or subsurface drainage 

water, and facilitate water reuse, among 

other uses. Consistent with the DWSRF 

and the CWSRF, the interim final rule 

provided that SLFRF funds may be used 

for cybersecurity needs to protect water 

or sewer infrastructure, such as 

developing effective cybersecurity 

practices and measures at drinking 

water systems and publicly owned 

treatment works. 

Use of DWSRF and CWSRF to Support 

Climate Change Adaptations. Many of 

the types of projects eligible under 

either the DWSRF or CWSRF also 

support efforts to address climate 

change. For example, by taking steps to 

manage potential sources of pollution 

and preventing these sources from 

reaching sources of drinking water, 

projects eligible under the DWSRF and 

CWSRF may reduce energy required to 

treat drinking water. Similarly, projects 

eligible under the DWSRF and CWSRF 

include measures to conserve and reuse 

water, for example through projects to 

reuse or recycle wastewater, stormwater, 

or subsurface drainage water. Treasury 

encourages recipients to consider green 

infrastructure investments and projects 

to improve resilience to the effects of 

climate change. For example, more 

frequent and extreme precipitation 

events combined with construction and 

development trends have led to 

increased instances of stormwater 

runoff, water pollution, and flooding. 

Green infrastructure projects that 

support stormwater system resiliency 

could include bioretention basins that 

provide water storage and filtration 

benefits, and green streets, where 

vegetation, soil, and engineered systems 

are combined to direct and filter 

rainwater from impervious surfaces. In 

cases of a natural disaster, recipients 

may also use SLFRF funds for water 

infrastructure to provide relief, such as 

interconnecting water systems or 

rehabilitating existing wells during an 

extended drought. 

Public Comment: Many commenters 

expressed support for the interim final 

rule’s alignment of the use of funds for 

water and sewer infrastructure under 

the SLFRF with the project categories 

provided through the EPA’s DWSRF and 

CWSRF programs. 

Many commenters also provided 

recommendations about the specific 

types of water infrastructure projects 

that should be eligible under the final 

rule. In many of these cases, 

commenters recommended that 

Treasury include project types that are 

already eligible under the DWSRF and 

CWSRF and thus eligible under the 

interim final rule and final rule. For 

example, several commenters requested 

that aquifer recharge projects, or other 

groundwater protection and restoration 

projects, be included as eligible uses of 

SLFRF when certain aquifer recharge 

projects that (1) implement a nonpoint 

source pollution management 

program 308 or (2) constitute reuse of 


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4412 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 

management program under section 319 of the 

Clean Water Act. This could include projects in 

which desalinated seawater is injected into the 

aquifer to mitigate or prevent salt water intrusion, 

as well as projects in which brackish water is 

removed from an aquifer, desalinated, and returned 

to the aquifer. 

309See 42 U.S.C. 300j–12(a)(2)(B) (limiting 

financial assistance used by a public water system 

to expenditures (including expenditures for 

planning, design, siting, and associated 

preconstruction activities, or for replacing or 

rehabilitating aging treatment, storage, or 

distribution facilities of public water systems, but 

not including monitoring, operation, and 

maintenance expenditures of a type or category 

which the Administrator of the EPA has 

determined, through guidance, will facilitate 

compliance with national primary drinking water 

regulations applicable to the system under 42 

U.S.C. 300g–1 or otherwise significantly further the 

health protection objectives of the SWDA); See also 

40 CFR 35.3520(b). 

310See 40 CFR 35.3520(d)(1). 

311See id at § 35.3520(e)(2)–(4). 

312 33 U.S.C. 1383(c). 

313 33 U.S.C. 1292. 

314 33 U.S.C. 1329. 

315 33 U.S.C. 1330. 

wastewater, stormwater, or subsurface 

drainage water are in fact eligible uses 

under the CWSRF. Furthermore, under 

the DWSRF, eligible projects include 

certain aquifer storage and recovery 

systems for water storage. 

Treasury Response: Eligible projects 

articulated in the DWSRF and CWSRF 

continue to be eligible uses of SLFRF 

funds under the final rule. Recognizing 

that recipients have faced challenges 

interpreting eligible use categories 

under the interim final rule or crossreferencing EPA program materials to 

interpret eligible project types, Treasury 

is including in this Supplementary 

Information additional information on 

the types of projects eligible under the 

DWSRF and CWSRF. Treasury 

emphasizes that this further clarification 

does not represent a change in 

eligibility. Treasury encourages 

recipients to reference EPA handbooks 

for the DWSRF and CWSRF, which 

provide further information and detail 

about the types of projects eligible 

under those programs and thus under 

the final rule. 

Eligible projects under the DWSRF. 

Eligibilities under the DWSRF, the 

interim final rule, and the final rule 

include projects that address present or 

prevent future violations of health-based 

drinking water standards. These include 

projects needed to maintain compliance 

with existing national primary drinking 

water regulations for contaminants with 

acute and chronic health effects. 

Projects to replace aging infrastructure 

are also eligible uses if they are needed 

to maintain compliance or further the 

public health protection objectives of 

section 1452 of the SDWA.309 The 

following project categories are eligible 

under the DWSRF, were eligible under 

the interim final rule, and continue to 

be eligible under the final rule: 

(i) Treatment projects, including 

installation or upgrade of facilities to 

improve the quality of drinking water to 

comply with primary or secondary 

standards and point of entry or central 

treatment under section 1401(4)(B)(i)(III) 

of the SDWA. 

(ii) Transmission and distribution 

projects, including installation or 

replacement of transmission and 

distribution pipes to improve water 

pressure to safe levels or to prevent 

contamination caused by leaks or breaks 

in the pipes. 

(iii) Source projects, including 

rehabilitation of wells or development 

of eligible sources to replace 

contaminated sources. 

(iv) Storage projects, including 

installation or upgrade of eligible 

storage facilities, including finished 

water reservoirs, to prevent 

microbiological contaminants from 

entering a public water system. 

(v) Consolidation projects, including 

projects needed to consolidate water 

supplies where, for example, a supply 

has become contaminated or a system is 

unable to maintain compliance for 

technical, financial, or managerial 

reasons. 

(vi) Creation of new systems, 

including those that, upon completion, 

will create a community water system to 

address existing public health problems 

with serious risks caused by unsafe 

drinking water provided by individual 

wells or surface water sources. Eligible 

projects are also those that create a new 

regional community water system by 

consolidating existing systems that have 

technical, financial, or managerial 

difficulties. Projects to address existing 

public health problems associated with 

individual wells or surface water 

sources must be limited in scope to the 

specific geographic area affected by 

contamination. Projects that create new 

regional community water systems by 

consolidating existing systems must be 

limited in scope to the service area of 

the systems being consolidated. 

Ineligible projects under the DWSRF. 

Federally-owned public water systems 

and for-profit noncommunity water 

systems are not eligible to receive 

DWSRF funds and therefore SLFRF 

funds.310 The acquisition of water 

rights, laboratory fees for routine 

compliance monitoring, and operation 

and maintenance expenses are not costs 

associated with investments in 

infrastructure and thus would not be 

eligible under the final rule. 311 Projects 

needed primarily to serve future 

population growth are also ineligible 

under the DWSRF; the treatment of such 

projects under the final rule is discussed 

separately below under ‘‘Expansion of 

Drinking Water Service.’’ Projects 

eligible under the DWSRF must be sized 

only to accommodate a reasonable 

amount of population growth expected 

to occur over the useful life of the 

project. 

Eligible projects under the CWSRF. 

The final rule continues to allow the use 

of SLFRF funds for projects eligible 

under the CWSRF, consistent with the 

interim final rule. Under the CWSRF, a 

project must meet the criteria of one of 

the following CWSRF eligibilities to be 

eligible for assistance. Section 603(c) of 

the Clean Water Act (CWA) 312 provides 

that the CWSRF can provide assistance: 

(i) to any municipality, intermunicipal, 

interstate, or state agency for construction of 

publicly owned treatment works (as defined 

in section 212 of the CWA); 313

(ii) for the implementation of a 

management program established under 

section 319 of the CWA; 314

(iii) for the development and 

implementation of a conservation and 

management plan under section 320 of the 

CWA; 315

(iv) for the construction, repair, or 

replacement of decentralized wastewater 

treatment systems that treat municipal 

wastewater or domestic sewage. Eligible 

projects include, but are not limited to, the 

construction of new decentralized systems 

(e.g., individual onsite systems and cluster 

systems), as well as the upgrade, repair, or 

replacement of existing systems. 

(v) for measures to manage, reduce, 

treat, or recapture stormwater or 

subsurface drainage water. Publicly and 

privately owned, permitted and 

unpermitted projects that manage, 

reduce, treat, or recapture stormwater or 

subsurface drainage water are eligible. 

For example, projects that are 

specifically required by a Municipal 

Separate Storm Sewer System (MS4) 

permit are eligible, regardless of 

ownership. Projects may include, but 

are not limited to green roofs, 

bioretention basins, roadside plantings, 

porous pavement, and rainwater 

harvesting. 

(vi) to any municipality, 

intermunicipal, interstate, or state 

agency for measures to reduce the 

demand for publicly owned treatment 

works capacity through water 

conservation, efficiency, or reuse. 

Eligible projects include, but are not 

limited to, the installation, replacement, 

or upgrade of water meters; plumbing 

fixture retrofits or replacement; and gray 

water recycling. Water audits and water 

conservation plans are also eligible. 


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316 33 U.S.C. 1274. 

Equipment to reuse effluent (e.g., gray 

water, condensate, and wastewater 

effluent reuse systems) is eligible. 

(vii) for the development and 

implementation of watershed projects 

meeting the criteria set forth in section 

122 of the CWA.316 Projects that 

develop or implement a watershed pilot 

project related to at least one of the six 

areas identified in section 122 of the 

CWA are eligible: Watershed 

management of wet weather discharges, 

stormwater best management practices, 

watershed partnerships, integrated 

water resource planning, municipalitywide stormwater management planning, 

or increased resilience of treatment 

works. 

(viii) to any municipality, 

intermunicipal, interstate, or state 

agency for measures to reduce the 

energy consumption needs for publicly 

owned treatment works. Projects may 

include, but are not limited to, the 

installation of energy efficient lighting, 

HVAC, process equipment, and 

electronic equipment and systems at 

publicly owned treatment works. 

Planning activities, such as energy 

audits and optimization studies are also 

eligible. 

(ix) for reusing or recycling 

wastewater, stormwater, or subsurface 

drainage water. Projects involving the 

reuse or recycling of wastewater, 

stormwater, or subsurface drainage 

water are eligible. This includes, as part 

of a reuse project, the purchase and 

installation of treatment equipment 

sufficient to meet reuse standards. Other 

eligible projects include, but are not 

limited to, distribution systems to 

support effluent reuse, including piping 

the effluent on the property of a private 

consumer, recharge transmission lines, 

injection wells, and equipment to reuse 

effluent (e.g., gray water, condensate, 

and wastewater effluent reuse systems). 

(x) for measures to increase the 

security of publicly owned treatment 

works. Security measures for publicly 

owned treatment works might include, 

but are not limited to, vulnerability 

assessments, contingency/emergency 

response plans, fencing, security 

cameras/lighting, motion detectors, 

redundancy (systems and power), 

secure chemical and fuel storage, 

laboratory equipment, securing large 

sanitary sewers, and tamper-proof 

manholes. The CWSRF cannot fund 

operations and maintenance activities. 

Therefore, maintaining a human 

presence (i.e., security guards) and 

monitoring activities are not eligible. 

Other Clarifications of DSWRF and 

CWSRF Eligible Project Categories 

Public Comment: Several commenters 

requested that Treasury provide 

clarification of the requirements 

associated with use of SLFRF funds for 

necessary investments in water and 

sewer infrastructure. 

Treasury Response: After release of 

the interim final rule, Treasury clarified 

in further guidance that, while 

recipients must ensure that water and 

sewer infrastructure projects pursued 

are eligible under the final rule, 

recipients are not required to obtain 

project pre-approval from Treasury or 

any other federal agency when using 

SLFRF funds for necessary water and 

sewer infrastructure projects unless 

otherwise required by federal law. For 

projects that are being pursued under 

the eligibility categories provided 

through the DWSRF or CWSRF 

programs, project eligibilities are based 

on federal project categories and 

definitions for the programs and not on 

each state’s eligibility or definitions. 

While reference in the final rule to the 

DWSRF, CWSRF, or other federal water 

programs is provided to assist recipients 

in understanding the types of water and 

sewer infrastructure projects eligible to 

be funded with SLFRF, recipients do 

not need to apply for funding from the 

applicable state programs or through 

any federal water program. Similarly, 

besides eligible project categories, the 

final rule does not incorporate other 

program requirements or guidance that 

attach to the DWSRF, CWSRF, or other 

federal water programs. However, as 

noted above, recipients should be aware 

of other federal or state laws or 

regulations that may apply to 

construction projects or water and sewer 

projects, independent of SLFRF funding 

conditions, and that may require preapproval from another federal or state 

agency. 

Expanded Eligible Uses for Water and 

Sewer Infrastructure 

Summary 

Public Comment: Many commenters 

requested broader flexibility in the use 

of SLFRF funds for water and sewer 

infrastructure projects that are not 

eligible under the DWSRF and CWSRF. 

These commenters argued that localities 

are best situated to identify the highestneed water and sewer projects in their 

communities. Several Tribal 

government commenters noted that 

Tribes have different water and sewer 

infrastructure needs than states and 

localities and that additional flexibility 

in the use of funds would lift current 

barriers to improving infrastructure on 

Tribal lands. 

To achieve additional flexibility, 

commenters suggested a range of 

options for broadening the eligible use 

of SLFRF funds for necessary water and 

sewer infrastructure. For example, 

several commenters suggested Treasury 

broaden the eligibilities provided under 

the interim final rule to include project 

types eligible under other federal water 

and sewer programs. 

Treasury Response: Treasury agrees 

that additional flexibility for use of 

SLFRF funds is warranted and is 

providing expanded eligibilities as 

described below, several of which 

address specific areas of need outlined 

by Tribal and rural communities. 

As discussed below, Treasury has 

incorporated into the final rule projects 

that are eligible under certain programs 

established by the EPA under the Water 

Infrastructure Improvements for the 

Nation Act (WIIN Act). Other waterrelated grant programs cited by 

commenters include projects that are 

otherwise already covered by the final 

rule, for example because they are 

covered as eligible under the DWSRF or 

the CWSRF, or projects that are 

ineligible under the final rule because 

they are beyond the scope of the 

meaning of water and sewer projects for 

purposes of ARPA. To minimize the 

need for recipients of SLFRF funds to 

cross reference eligibilities across 

multiple federal programs, which may 

exacerbate current challenges to 

understanding eligibility under SLFRF, 

Treasury is providing detailed 

information related to expanded 

eligibilities within the text of this 

SUPPLEMENTARY INFORMATION for the 

final rule. 

Stormwater Infrastructure 

Public Comment: Several commenters 

requested that additional stormwater 

infrastructure projects be included as 

eligible uses of SLFRF funds under the 

final rule. Commenters suggested that 

culvert repair and resizing and 

replacement of storm sewers is 

necessary to address increased rainfall 

brought about by a changing climate. 

Other commenters noted that rural 

communities that do not manage their 

own sewer systems may rely on this 

type of water infrastructure. 

Treasury Response: The CWSRF 

includes a broad range of stormwater 

infrastructure projects, and as such 

these projects were eligible under the 

interim final rule and continue to be 

eligible under the final rule. These 

projects include gray infrastructure 

projects, such as traditional pipe, 

storage, and treatment systems. Projects 


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317The White House, Updated Fact Sheet: 

Bipartisan Infrastructure Investment and Jobs Act 

(August 2, 2021), https://www.whitehouse.gov/ 

briefing-room/statements-releases/2021/08/02/ 

updated-fact-sheet-bipartisan-infrastructureinvestment-and-jobs-act/. 

318See EPA Science Advisory Board, Evaluation 

of the Effectiveness of Partial Lead Service Line 

Replacements, (September 2011), https://

www.epa.gov/sdwa/science-advisory-boardevaluation-effectiveness-partial-lead-service-linereplacements (advising against partial lead service 

line replacement). 319Environmental Protection Agency, supra note 

188. 320Environmental Protection Agency, National 

Primary Drinking Water Regulations: Lead and 

Copper Rule Revisions, 86 FR 4198. 40 CFR 141.84, 

and preamble at 4215, January 15, 2021, https://

www.federalregister.gov/d/2020-28691; scheduled 

to become effective December 16, 2021, 

Environmental Protection Agency, 86 FR 31939, 

https://www.federalregister.gov/d/2021-12600. 

321Eligible uses of funds include those eligible 

under the Small, Underserved, and Disadvantaged 

Communities Grant (Section 2104), Reduction in 

Lead Exposure via Drinking Water Grant Program 

(Section 2105) and Lead Testing in School and 

Child Care Program Drinking Water Grant Program 

(Section 2107). 322Such testing and remediation programs would 

be an eligible use of SLFRF funds given that they 

that manage, reduce, treat, or recapture 

stormwater or subsurface drainage water 

are also eligible, including real-time 

control systems for combined sewer 

overflow management, and sediment 

control. Culvert infrastructure projects 

are eligible under the CWSRF if they (1) 

implement a nonpoint source 

management plan, (2) implement 

National Estuary Program 

Comprehensive Conservation and 

Management Plan, or (3) implement a 

stormwater management plan with the 

goal of providing a water quality benefit. 

Stormwater projects under the CWSRF 

also encompass a number of eligible 

green infrastructure categories, such as 

green roofs, green streets, and green 

walls, rainwater harvesting collection, 

storage, management, and distribution 

systems, real-time control systems for 

harvested rainwater, infiltration basins, 

constructed wetlands, including surface 

flow and subsurface flow (e.g., gravel) 

wetlands, bioretention/bioswales (e.g., 

bioretention basins, tree boxes), 

permeable pavement, wetland, riparian, 

or shoreline creation, protection, and 

restoration, establishment or restoration 

of urban tree canopy, and replacement 

of gray infrastructure with green 

infrastructure including purchase and 

demolition costs. 

In addition to the eligible uses under 

the CWSRF, Treasury is expanding the 

eligible uses under the final rule to 

include stormwater system 

infrastructure projects regardless of 

whether there is an expected water 

quality benefit from the project. 

Treasury anticipates that this eligible 

use will allow recipients to manage 

increased volumes of stormwater as a 

result of changes to the climate. For 

example, the final rule now permits the 

use of SLFRF funds for the repair, 

replacement, or removal of culverts or 

other road-stream crossing 

infrastructure to the extent the purpose 

of the project is to manage stormwater. 

In addition, Treasury understands that 

the repair, replacement, or removal of 

culverts may necessitate the repair or 

upgrade of roads. As noted in guidance 

issued after the interim final rule, 

recipients may use SLFRF funds for 

road repairs and upgrades that interact 

directly with an eligible stormwater 

infrastructure project. All stormwater 

infrastructure projects undertaken 

should incorporate updated design 

features and current best practices. 

Private Wells and Septic Systems 

Public Comment: Several commenters 

requested that the scope of eligible 

projects be expanded to allow for the 

expenditure of SLFRF funds on private 

wells or septic systems. Commenters 

noted that wells may be contaminated 

with dangerous substances, including 

arsenic, lead, radon, and PFAS (per- and 

polyfluoroalkyl). Commenters also 

suggested that, because rural and 

underserved communities are often 

reliant on these infrastructure types for 

their drinking water or wastewater 

needs, lack of appropriate funding to 

maintain these systems could present 

health and safety issues that 

disproportionately affect certain 

communities. 

Treasury Response: Consistent with 

the CWSRF, the installation, repair, or 

replacement of private septic units 

continues to be an eligible use of SLFRF 

funds under the final rule. For example, 

eligible projects include those that 

address groundwater contamination 

resulting from faulty septic units and 

those that would connect failing septic 

systems to centralized wastewater 

treatment. Consistent with the DWSRF, 

connecting homes served by a private 

well to a public water system is an 

eligible use of SLFRF funds. 

In addition, Treasury has provided in 

the final rule that recipients may use 

SLFRF funds for an expanded set of 

infrastructure projects that improve 

access to and provision of safe drinking 

water for individuals served by 

residential wells. Eligible projects under 

this category include rehabilitation of 

private wells, testing initiatives to 

identify contaminants in wells, and 

treatment activities and remediation 

strategies that address contamination. 

Remediating Lead in Water 

Public Comment: Several commenters 

emphasized the need to fully remediate 

lead contamination, especially in 

structures that serve the public or 

populations like children that are 

particularly vulnerable to the effects of 

lead exposure, such as schools and 

daycares. Many American households 

and an estimated 400,000 schools and 

childcare centers currently lack safe 

drinking water.317

Treasury Response: The replacement 

of lead service lines, up to premise 

plumbing, is an eligible use under the 

DWSRF and continues to be an eligible 

use of SLFRF funds. Such projects are 

eligible regardless of the pipe material 

of the replacement lines and ownership 

of the property on which the service 

line is located. Lead service line 

replacement projects can serve 

households, schools, or any other 

entities. Given the lifelong impacts of 

lead exposure for children and the 

widespread prevalence of lead service 

lines, Treasury encourages recipients to 

consider projects to replace lead service 

lines. 

In addition, Treasury is providing in 

the final rule that for lead service line 

replacement projects, recipients must 

replace the full length of the service 

line, and not just a partial portion of the 

service line. Some water utilities, when 

replacing service lines, will only replace 

the ‘‘public portion’’ of the service line 

and physically slice through the lead 

service line at the public/private line. 

This action can result in elevated 

drinking water lead levels for some 

period of time after replacement, 

suggesting the potential for harm, rather 

than benefit during that time period.318

Requiring replacement of the full length 

of the service line is also consistent with 

the requirements of the EPA’s Lead and 

Copper Rule Revisions for water 

systems that have an action level 

exceedance for lead 319 and certain other 

water systems.320

Treasury is expanding eligible uses of 

SLFRF funds to include infrastructure 

projects eligible under EPA grant 

programs authorized by the WIIN 

Act.321 Eligible projects under these 

programs include the installation or reoptimization of corrosion control 

treatment, replacing lead service lines, 

replacing galvanized pipes downstream 

of a lead service line (other than lead 

pipes within a home as discussed 

below), and maintaining an inventory of 

the drinking water system’s service 

lines. Water quality testing, compliance 

monitoring, and remediation activities 

in schools and other childcare facilities, 

as well as activities necessary to 

respond to a contaminant, are eligible 

uses of SLFRF funds.322 Remediation 


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would help a recipient determine whether an 

infrastructure project, such as a lead line 

replacement, is necessary. In contrast, as mentioned 

above, the costs of continual testing that is part of 

a drinking water or wastewater facilities’ operating 

costs would not be considered part of an 

infrastructure project. 

323See EPA, Approval of Class Exception from 

the Regulatory Prohibitions on the Use of Drinking 

Water State Revolving Fund for Rehabilitation of 

Dams and Reservoirs (July 14, 2021), available at 

https://www.epa.gov/system/files/documents/2021- 

07/dwsrf-class-deviation-dam-reservoir-rehab-2021_

0.pdf. 

324As noted in the EPA’s class deviation, 

examples of dam rehabilitation projects include 

spillway reconstruction or repair; dam resurfacing, 

patching, or other structural repairs, including 

minimal height increases if needed to maintain the 

structural integrity of the dam; grouting for seepage 

control or liquefaction remediation (e.g., epoxy 

resin, asphalt, or rock); repair or replacement of 

drainage systems; and seismic stability efforts (e.g., 

anchors). Examples of reservoir rehabilitation 

projects include sedimentation dredging and 

reservoir lining. 

activities such as replacement of 

faucets, internal plumbing, and fixtures 

in schools and childcare facilities are 

also an eligible use of SLFRF funds. 

Consistent with the EPA programs, 

replacement of lead pipes within a 

home is not eligible under the final rule 

because the vast majority of lead 

contamination cases can be solved by 

replacing lead service lines (including 

on public and private property) and 

faucets and fixtures themselves. As 

such, replacement of lead pipes within 

a home would not be considered a costeffective means for achieving the 

desired level of service and thus would 

not be a ‘‘necessary’’ investment. The 

provision of bottled water is also not an 

eligible use of SLFRF funds under this 

eligible use category, as it is not an 

investment in infrastructure. However, 

bottled water in areas with an action 

level exceedance for lead in water may 

be an eligible use of SLFRF funds under 

a separate eligible use category for 

‘‘remediation of lead paint and other 

lead hazards;’’ see Assistance to 

Households in Public Health and 

Negative Economic Impacts. 

Water filtration systems are eligible 

under the EPA grant programs and the 

final rule as long as they are installed as 

a permanent part of a facility’s system 

and not intended for temporary use. 

Conducting remediation, follow-up 

monitoring, and conducting public 

education and outreach about the 

availability of infrastructure programs, 

such as water testing and fixture 

replacement programs funded with 

SLFRF funds or otherwise, are also 

eligible projects. Finally, recipients 

should note that ‘‘remediation of lead 

paint and other lead hazards’’ is a 

separate eligible use category and a 

broader range of programs and services 

may be eligible under that section, 

including investments that are not 

infrastructure; see the eligible use for 

‘‘remediation of lead paint and other 

lead hazards’’ in section Assistance to 

Households in Public Health and 

Negative Economic Impacts. 

Dams and Reservoirs 

Public Comment: Many commenters 

requested that Treasury broaden 

eligibilities to include dams and 

reservoirs, infrastructure that 

commenters noted may in its current 

state be unsafe and could put 

surrounding communities at risk. Some 

commenters argued that dams and 

reservoirs play an important role in 

providing municipal water supply and 

water to irrigate farmland, including in 

areas impacted by recent droughts. 

Other commenters noted that a large 

number of dams are currently classified 

as high-hazard structures, the failure of 

which would have severe consequences 

for public safety and the local 

environment. With respect to reservoirs, 

commenters articulated that changing 

climate conditions have necessitated 

upgrades to reservoir infrastructure to 

ensure existing facilities can meet the 

local water needs of a community. 

Commenters noted that communities 

facing drought may also need to adjust 

or enhance reservoirs to maintain 

adequate water supply. 

In contrast, several commenters 

suggested that infrastructure projects 

related to dams and reservoirs should 

not be considered eligible uses of SLFRF 

funds. These commenters noted that 

alternate sources of funding exist for 

dam and reservoir projects and that 

dams and reservoir infrastructure could 

result in negative impacts to Tribal 

communities and negative 

environmental impacts, including harm 

to wildlife habitats. 

Treasury Response: Treasury 

understands that many dams and 

reservoirs in need of rehabilitation are 

dams and reservoirs whose primary 

purpose is to provide drinking water. As 

discussed above, SLFRF funds are 

available for projects related to the 

provision of drinking water. Moreover, 

since issuance of the interim final rule, 

the EPA has adopted a class deviation 

from the DWSRF regulations that 

permits such dam and reservoir 

rehabilitation projects in certain 

circumstances.323 In approving this 

class deviation, the EPA recognized that 

many dams used for drinking water are 

aging and deteriorating and pose a 

public health risk to communities; that 

current dam conditions do not meet 

state safety standards; and that reservoir 

capacity has diminished and requires 

dredging to meet drinking water needs 

of the existing population. 

Treasury’s final rule provides that 

funds may be used for rehabilitation of 

dams and reservoirs if the primary 

purpose of the dam or reservoir is for 

drinking water supply and the 

rehabilitation project is necessary for 

continued provision of drinking water 

supply. In considering whether a dam or 

reservoir project is necessary for the 

provision of drinking water supply, a 

recipient may take into consideration 

future population growth in certain 

circumstances, as discussed under 

‘‘Expansion of Drinking Water Service 

Infrastructure’’ below, but the project 

must in any case be designed to support 

no more than a reasonable level of 

projected increased need. The recipient 

must also determine that the project is 

cost-effective, i.e., that there are not 

significantly superior alternatives that 

are available, taking into consideration 

the relative costs and benefits of the 

project as compared to those 

alternatives. 

This change to the final rule would 

permit a wide variety of projects.324 The 

limitation in the final rule to 

rehabilitation of existing dams and 

reservoirs reflects the scope of the EPA 

class deviation referenced above and 

Treasury’s understanding of the 

significant need for investments in 

rehabilitation to address deterioration of 

dams and the diminished capacity of 

reservoirs. Further, Treasury expects 

that in many cases it would be 

considerably more difficult to 

demonstrate that construction of a new 

dam or reservoir would be necessary for 

the purpose of the provision of drinking 

water than is the case for rehabilitation 

of dams and reservoirs already serving 

that purpose for a particular population, 

particularly given opportunities to meet 

drinking water needs through water 

reuse and conversation efforts. For these 

reasons, and given that the relatively 

short period of availability of the funds 

makes new dam and reservoir 

construction with these funds less 

likely, Treasury has limited the scope of 

the final rule to dam and reservoir 

rehabilitation projects. 

As discussed above, Treasury has 

determined that ARPA does not 

authorize the use of SLFRF funds for 

uses other than the provision of 

drinking water and the management of 

wastewater and storm water. As such, 

the final rule does not include 

infrastructure projects related to dams 

and reservoirs as eligible uses of SLFRF 

funds unless they meet the conditions 

discussed above. 


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325See 40 CFR 35.3520(e)(5). 

326See Public Law 117–58, 40909(a)–(b) (Nov. 15, 

2021). 

327See Public Law 117–58 § 40909(c). 

Public Comment: Several commenters 

requested that the removal of dams and 

associated habitat restoration should be 

eligible uses of SLFRF funds, noting that 

in some cases, dam removal will 

improve water quality while removing 

long-term operational expenses for the 

recipient. 

Treasury Response: Dam removal 

projects and associated stream and 

habitat restoration projects are eligible 

uses of the CWSRF and continue to be 

eligible under the final rule when the 

removal implements either a nonpoint 

source management program plan or a 

National Estuary Program 

Comprehensive Conservation and 

Management Plan or when the removal 

will provide a water quality benefit. 

Habitat restoration projects more 

generally may also be eligible under the 

CWSRF and the final rule if they 

constitute a form of stormwater 

infrastructure. 

Expansion of Drinking Water Service 

Infrastructure 

Public Comment: Commenters asked 

for the ability to use funds for drinking 

water projects for the purpose of 

meeting needs arising from future 

growth, which, given the restrictions 

applicable to the DWSRF, was not 

permitted under the interim final rule. 

Treasury Response: As provided for in 

the SDWA, the DWSRF is meant to 

serve the public health needs of the 

existing population. The EPA regulation 

implementing the DWSRF program 

provides that projects needed primarily 

to serve future population growth are 

not eligible uses of the DWSRF. A 

project that is intended primarily to 

address public health or regulatory 

compliance issues for the existing 

service population may be sized for a 

‘‘reasonable’’ amount of population 

growth over the useful life of the 

project.325

ARPA does not include the same 

limitation as the SDWA. Accordingly, 

the final rule provides that recipients 

may use SLFRF funds for projects that 

are needed to support increased 

population in certain cases. ARPA 

limits projects to those investments that 

are ‘‘necessary.’’ As discussed above, 

Treasury interprets this to mean that the 

investments must be (1) responsive to 

an identified need to achieve or 

maintain an adequate minimum level of 

service, which for some eligible project 

categories may include a reasonable 

projection of increased need, whether 

due to population growth or otherwise 

and (2) a cost-effective means for 

meeting that need, taking into account 

available alternatives. For this eligible 

use category, expansion of drinking 

water service infrastructure, the project 

must also be projected to be sustainable 

over its estimated useful life. 

Investments must be determined to be 

necessary when they are initiated. 

Accordingly, Treasury is clarifying in 

the final rule that the need identified for 

a water or sewer project may include a 

need arising from reasonable 

expectations of future population 

growth, provided that it is necessary at 

the time the investment is initiated for 

the recipient to make the investment to 

meet this growth. For example, a 

recipient expecting increased 

population during the period of 

performance may install a drinking 

water treatment plant to meet that 

growth. In addition, a recipient 

expecting increased population growth 

outside the period of performance may 

install the treatment plant if the 

planning and construction timeline for 

the project would require work to begin 

during the performance period in order 

to meet the expected population growth. 

A recipient may install transmission 

lines as part of the development of new 

housing occurring during the period of 

performance. In this case, the housing 

development must be in progress; a 

recipient may not use the SLFRF funds 

to install a water main, for example, to 

an undeveloped tract in the expectation 

that in the future that tract will be 

developed with housing, because there 

would be no need for that investment to 

be made at the time it is initiated. 

For the reasons discussed above, if a 

project is undertaken to address 

expected growth in population, the 

project must also be sustainable, 

meaning that the project can continue 

providing the adequate minimum level 

of service for its estimated useful life, 

taking into account projected impacts of 

changes to the climate and other 

expected demands on the source of 

water. In considering how much of a 

source of water will be available in the 

future for the drinking water project, a 

recipient must consider that a source of 

water may be drawn upon or otherwise 

used for other current and expected 

uses, including use by fish and other 

wildlife. A drinking water project that is 

designed to address a growing 

population cannot be considered a 

necessary investment if the source of 

drinking water will cease to be available 

to meet the population’s needs before 

the end of the estimated useful life of 

the project. In such a case, a recipient 

should consider alternative sources for 

drinking water. See ‘‘Interpretation of 

Necessary Investments and Water and 

Sewer Infrastructure’’ above for more 

information. 

Non-Federal Matching Requirements for 

Authorized Bureau of Reclamation 

Projects 

The Infrastructure Investment and 

Jobs Act amends sections 602(c) and 

603(c) of the Social Security Act to add 

an additional eligible use of SLFRF 

funds, providing that SLFRF funds 

‘‘may be used for purposes of satisfying 

any non-Federal matching requirement 

required for [an authorized Bureau of 

Reclamation project].’’ 326

This amendment permits the use of 

SLFRF funds to meet non-federal 

matching requirements of any 

authorized Bureau of Reclamation 

project, regardless of whether the 

underlying project would be an eligible 

use of SLFRF funds under the water and 

sewer infrastructure eligible use 

category. These amendments are 

effective as of March 11, 2021, as if 

included in the ARPA at the time of its 

enactment.327 Treasury will provide 

further guidance to recipients on the 

scope of Bureau of Reclamation water 

projects and expenses covered by this 

provision. 

Floodplain Management and Flood 

Mitigation Projects 

Public Comment: Several commenters 

requested that projects to address 

floodwater, including floodplain 

management and flood mitigation 

projects, be included as an eligible use 

of SLFRF funds. Within this category of 

floodplain management and flood 

mitigation infrastructure, several 

commenters requested that the 

installation of levees, flood walls, sea 

walls, elevation projects, dredging, or 

nature-based flood mitigation projects 

be included as eligible projects. 

Treasury Response: Treasury notes 

that some floodplain management and 

flood mitigation infrastructure projects, 

including green infrastructure designed 

to protect treatment works from flood 

waters and flood impact are currently 

eligible under the CWSRF and therefore 

continue to be eligible under the final 

rule. 

Treasury has not included floodplain 

management and flood mitigation 

projects more generally as eligible under 

the final rule. Although floodplain 

management and flood mitigation are 

functions of many state and local 

governments, they are not the sort of 

generally-provided essential services 

included within the meaning of water 


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Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4417 

328See FAQ 6.8, 6.9, 6.11. Coronavirus State and 

Local Fiscal Recovery Funds, Frequently Asked 

Questions, as of July 19, 2021; https://

home.treasury.gov/system/files/136/SLFRPFAQ.pdf. 

329See FAQ 6.10. Id. 

330See FAQ 6.12. Id. 

331See FAQ 6.16. Id. 

332See FAQ 6.4, 6.17. Id. 

and sewer projects under the ARPA, as 

discussed above. 

Irrigation 

Public Comment: Some commenters 

requested that irrigation projects be an 

eligible use because they consider such 

projects to be critical infrastructure. 

Several commenters supported this 

request by noting that irrigation systems 

may be used to replenish aquifers and 

recharge wells, in addition to delivering 

water for irrigation. One commenter also 

noted that the national irrigation system 

is antiquated and in need of repair. 

Treasury Response: Some irrigation 

projects were eligible under the interim 

final rule and continue to be eligible 

under the final rule as a result of their 

inclusion as eligible projects under the 

CWSRF. For example, water efficient 

irrigation equipment that reduces the 

runoff of nutrients and implements a 

management program established under 

section 319 of the CWA and/or a 

conservation and management plan 

under section 320 of the CWA are 

eligible uses under the CWSRF and 

therefore continue to be an eligible use 

of SLFRF funds under the final rule. 

Likewise, projects to receive and 

distribute reclaimed water for irrigation 

systems or other agricultural use are 

eligible under the CWSRF and therefore 

continue to be an eligible use under the 

final rule. Unlike projects for the 

improvement of irrigation systems 

generally, these reclaimed water 

projects are related to wastewater 

treatment and stormwater management, 

which are within the scope of the 

meaning of water and sewer 

infrastructure for purposes of ARPA. 

Treasury considered commenter 

requests for inclusion of additional 

irrigation infrastructure and determined 

that irrigation projects more generally 

are not permitted under the final rule. 

Although these types of projects may be 

water-related infrastructure, they are not 

the sort of generally-provided essential 

services included within the meaning of 

water and sewer projects under ARPA, 

as discussed above. 

Consumer Incentive Programs 

Public Comment: One commenter 

requested that consumer incentive 

programs in the areas of water use 

efficiency, conservation, green 

infrastructure, reuse, and other 

distributed solutions be an allowable 

use of SLFRF. 

Treasury Response: The DWSRF and 

CWSRF eligibilities include the 

development and implementation of 

incentive and educational programs that 

address and promote water 

conservation, source water protection, 

and efficiency related to infrastructure 

improvements, e.g., incentives such as 

rebates to install green infrastructure 

such as rain barrels or promote other 

water conservation activities. Treasury 

clarifies that such project types were 

eligible under the interim final rule and 

continue to be eligible under the final 

rule. 

2. Broadband Infrastructure 

Under the ARPA, recipient 

governments may use SLFRF funds to 

make ‘‘necessary investments in . . . 

broadband infrastructure.’’ In the 

Supplementary Information to the 

interim final rule, Treasury interpreted 

necessary investments in infrastructure 

as investments ‘‘designed to provide an 

adequate minimum level of service and 

[that] are unlikely to be made using 

private sources of funds.’’ Treasury 

explained that, with respect to 

broadband specifically, such necessary 

investments include projects that 

‘‘establish [ ] or improve [ ] broadband 

service to underserved populations to 

reach an adequate level to permit a 

household to work or attend school, and 

that are unlikely to be met with private 

sources of funds.’’ 

Summary of Interim Final Rule, Public 

Comments, and Treasury Response 

Summary of Interim Final Rule: In 

implementing the ARPA, the interim 

final rule provided that eligible 

broadband infrastructure investments 

are limited to those that are designed to 

provide service to unserved or 

underserved households or businesses, 

defined as those that lack access to a 

wireline connection capable of reliably 

delivering at least minimum speeds of 

25 Mbps download and 3 Mbps upload. 

The interim final rule also provided that 

eligible projects under the SLFRF are 

limited to those that are designed to 

deliver, upon project completion, 

service that reliably meets or exceeds 

symmetrical upload and download 

speeds of 100 Mbps. In instances where 

it would not be practicable for a project 

to deliver such service speeds because 

of the geography, topography, or 

excessive costs associated with such a 

project, the interim final rule provided 

that the project would be required to be 

designed to deliver, upon project 

completion, service that reliably meets 

or exceeds 100 Mbps download speed 

and between at least 20 Mbps and 100 

Mbps upload speeds and be scalable to 

a minimum of 100 Mbps symmetrical 

for download and upload speeds. 

In addition, Treasury, in the 

Supplementary Information to the 

interim final rule, encouraged recipients 

to pursue a number of other objectives. 

First, Treasury encouraged recipients to 

prioritize investments in fiber-optic 

infrastructure wherever feasible and 

focus on projects that deliver a physical 

broadband connection by prioritizing 

projects that achieve last-mile 

connections. Second, Treasury 

encouraged recipients to integrate 

affordability options into their program 

design. Third, Treasury encouraged 

recipients to prioritize support for local 

networks owned, operated, or affiliated 

with local governments, nonprofits, and 

cooperatives. Fourth, Treasury 

encouraged recipients to avoid investing 

in locations with existing agreements to 

build reliable wireline service with 

minimum speeds of 100 Mbps 

download and 20 Mbps upload by 

December 31, 2024, in order to avoid 

duplication of efforts and resources. 

Finally, following release of the interim 

final rule, Treasury provided further 

guidance clarifying some aspects of 

broadband infrastructure eligibility, 

specifically on flexibility for recipients 

to determine eligible areas to be 

served,328 middle-mile projects,329 preproject development costs,330

broadband connections to schools or 

libraries,331 and the applicability of the 

National Environmental Policy Act 

(NEPA) and the Davis-Bacon Act.332

Summary of Public Comments: 

Treasury received several comments on 

the interim final rule’s requirements 

regarding eligible areas for investment 

and build-to speed standards, as well as 

Treasury’s encouragements in the 

Supplementary Information of the 

interim final rule. Many commenters 

found the interim final rule’s 

requirement to limit projects to those 

designed to provide service to unserved 

or underserved households or 

businesses to be appropriately focused 

on hard-to-reach areas. In contrast, other 

commenters argued that this 

requirement was too restrictive and that 

it would limit the ability for some 

recipients, particularly local 

governments, to invest in broadband 

infrastructure. 

Separately, some commenters 

supported the interim final rule’s 

requirement that eligible projects be 

built to reliable speeds of 100 Mbps 

symmetrical, with an exception for areas 

where it was impracticable, and 

encouragement that projects be built 

with fiber-optic infrastructure, while a 


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4418 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 

333See FAQ 6.10. Coronavirus State and Local 

Fiscal Recovery Funds, Frequently Asked 

Questions, as of July 19, 2021; https://

home.treasury.gov/system/files/136/SLFRPFAQ.pdf. 

334See FAQ 6.12. Id. 

335See FAQ 6.16. Id. 

336See FAQ 6.4, 6.17. Id. 

337 In the remainder of this Supplementary 

Information, ‘‘25/3 Mbps’’ refers to broadband 

infrastructure that is designed to reliably meet or 

exceed at least 25 Mbps download speeds and 3 

few others argued that the interim final 

rule should remain technology-neutral 

and that lower speed standards would 

be more appropriate for today’s usage 

needs. 

Summary of Treasury Response: In 

response to the comments, the final rule 

expands eligible areas for investment by 

requiring recipients to invest in projects 

designed to provide service to 

households and businesses with an 

identified need for additional 

broadband infrastructure investment, 

which would include but not be limited 

to a lack of broadband service reliably 

delivering certain speeds. In addition, as 

discussed further below, the final rule 

further supports the expansion of 

affordable access to broadband service 

for households by requiring that 

recipients use a provider that 

participates in a qualifying affordability 

plan. Treasury encourages recipients to 

prioritize projects that are designed to 

provide service to locations not 

currently served by a wireline 

connection that reliably delivers at least 

100 Mbps of download speed and 20 

Mbps of upload speed. 

The final rule maintains the interim 

final rule’s requirement that eligible 

projects be designed to, upon 

completion, reliably meet or exceed 

symmetrical 100 Mbps download and 

upload speeds. As was the case under 

the interim final rule, in cases where it 

is not practicable, because of the 

excessive cost of the project or 

geography or topography of the area to 

be served by the project, eligible 

projects may be designed to reliably 

meet or exceed 100 Mbps download 

speed and between at least 20 Mbps and 

100 Mbps upload speed and be scalable 

to a minimum of 100 Mbps download 

speed and 100 Mbps upload speed. 

Treasury continues to encourage 

recipients to prioritize investments in 

fiber-optic infrastructure wherever 

feasible and to focus on projects that 

will achieve last-mile connections, 

whether by focusing directly on funding 

last-mile projects or by ensuring that 

funded middle-mile projects have 

commitments in place to support new 

and/or improved last-mile service. 

The final rule requires recipients to 

address the affordability needs of lowincome consumers in accessing 

broadband networks funded by SLFRF, 

given that such a project cannot be 

considered a necessary investment in 

broadband infrastructure if it is not 

affordable to the population the project 

would serve. Recipients must require 

the service provider for a completed 

broadband infrastructure investment 

project that provides service to 

households to either participate in the 

Federal Communications Commission’s 

(FCC) Affordable Connectivity Program 

(ACP), or otherwise provide access to a 

broad-based affordability program to 

low-income consumers in the proposed 

service area of the broadband 

infrastructure that provides benefits to 

households commensurate with those 

provided under the ACP. 

Treasury also recognizes the 

importance of affordable broadband 

access for all consumers beyond those 

that are low-income. As part of their 

project selection process, recipients are 

encouraged to consult with the 

community on the general affordability 

needs of the target markets in the 

proposed service area. Additionally, 

recipients are encouraged to require that 

services provided by a broadband 

infrastructure project include at least 

one low-cost option offered without 

data usage caps and at speeds that are 

sufficient for a household with multiple 

users to simultaneously telework and 

engage in remote learning. Recipients 

will be required to report speed, pricing, 

and any data allowance information as 

part of mandatory reporting to Treasury. 

The final rule also clarifies that 

subsidies to households and 

communities impacted by the pandemic 

to access the internet, broadband 

adoption programs, digital literacy 

programs, and device programs are 

eligible programs to respond to the 

public health and negative economic 

impacts of the pandemic under sections 

602(c)(1)(A) and 603(c)(1)(A). See 

section Assistance to Households in 

Negative Economic Impacts. 

Treasury continues to encourage 

recipients to prioritize support for 

broadband networks owned, operated 

by, or affiliated with local governments, 

nonprofits, and cooperatives. In 

addition, to the extent recipients are 

considering deploying broadband to 

locations where there are existing 

enforceable federal or state funding 

commitments for reliable service at 

speeds of at least 100 Mbps download 

speed and 20 Mbps upload speed, 

recipients must ensure that SLFRF 

funds are designed to address an 

identified need for additional 

broadband investment that is not met by 

existing federal or state funding 

commitments. Recipients must also 

ensure that SLFRF funds will not be 

used for costs that will be reimbursed by 

the other federal or state funding 

streams. Further, Treasury highlights 

that recipients are subject to the 

prohibition on use of grant funds to 

procure or obtain certain 

telecommunications and video 

surveillance services or equipment as 

outlined in 2 CFR 200.216 and 2 CFR 

200.471 and clarifies that modernization 

of cybersecurity for existing and new 

broadband networks are eligible uses of 

funds under sections 602(c)(1)(D) and 

603(c)(1)(D). 

Finally, this Supplementary 

Information to the final rule 

incorporates and confirms guidance 

issued by Treasury following the 

interim final rule regarding middle-mile 

projects,333 pre-project development 

costs,334 broadband connections to 

schools or libraries,335 and applicability 

of the National Environmental Policy 

Act (NEPA) and Davis-Bacon Act.336

The remainder of this section 

provides additional details on the final 

rule. Specifically, these sections 

address: (1) Eligible areas for 

investment; (2) build-to speed 

standards; (3) affordability; (4) public 

networks; (5) duplication of efforts and 

resources; (6) cybersecurity; and (7) use 

of funds to meet non-federal match 

under the Infrastructure Investment and 

Jobs Act. 

Eligible Areas for Investment 

The interim final rule limited eligible 

broadband investments to projects 

focused on delivering service to 

unserved or underserved locations, 

defined as households or businesses 

that lack access to a wireline connection 

capable of reliably delivering at least 

minimum speeds of 25 Mbps download 

and 3 Mbps upload. This targeted 

approach was generally consistent with 

certain speed thresholds used in other 

federal programs to identify eligible 

areas for federal investment in 

broadband infrastructure, such as the 

FCC’s Rural Digital Opportunity Fund 

(RDOF) program and the National 

Telecommunication and Information 

Administration’s (NTIA’s) Broadband 

Infrastructure Program, and generally 

aligns with the FCC’s benchmark for an 

‘‘advanced telecommunications 

capability’’ for wireline broadband 

services. 

Public Comment: Many commenters 

discussed the disadvantages of such an 

approach. Some commenters, including 

several local government recipients, 

argued that limiting investments to 

locations without access to reliable 

wireline 25/3 Mbps 337 was too 


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Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4419 

Mbps upload speeds. ‘‘100 Mbps’’ symmetrical 

refers to broadband infrastructure that is designed 

to reliably meet or exceed at least 100 Mbps 

download speeds and 100 Mbps upload speeds. 

338See FAQ 6.11. Coronavirus State and Local 

Fiscal Recovery Funds, Frequently Asked 

Questions, as of July 19, 2021; https://

home.treasury.gov/system/files/136/SLFRPFAQ.pdf. 

339Legacy technologies such as copper telephone 

lines (typically using Digital Subscriber Line 

technology) and early versions of cable system 

technology (DOCSIS 2.0 or earlier) typically lag on 

speeds, latency, and other factors, as compared to 

more modern technologies like fiber-optic. See, e.g., 

https://www.fcc.gov/sites/default/files/tech_

transitions_network_upgrades_that_may_affect_

your_service.pdf (comparing copper to fiber and 

noting that copper wire networks have ‘‘limited 

speeds,’’ are ‘‘susceptible to signal interference/ 

loss,’’ and have a ‘‘relatively short life’’); https:// 

Continued 

restrictive because some urban 

jurisdictions are already mostly or 

entirely covered by a network with at 

least 25/3 Mbps speeds yet lack 

widespread broadband adoption for 

various reasons. Commenters suggested 

that recipients would benefit from 

greater flexibility to provide necessary 

investments in broadband access in 

areas that are nominally covered by 

speeds of at least 25/3 Mbps, such as to 

provide affordable broadband access in 

low-income areas or to address service 

quality and reliability issues. Further, 

commenters argued that Treasury’s 

requirement that new projects meet 

minimum reliable speeds of 100 Mbps 

symmetrical was inconsistent with the 

requirement that broadband 

infrastructure projects focus on those 

with access to significantly lower 

speeds, and further noted that several 

states have already expanded the focus 

of their broadband programs beyond 

those without reliable access to speeds 

of 25/3 Mbps. Commenters argued that 

if the limitation to unserved and 

underserved households and businesses 

were maintained, the definition of 

unserved and underserved households 

and businesses should be revised to 

include households and businesses 

currently served by higher standards. 

Commenters proposed a number of 

alternative cutoff speeds, including 25/ 

25 Mbps, 50/10 Mbps, and 100 Mbps 

symmetrical. Others expressed support 

for providing flexibility for recipients to 

make their own determination on 

eligible areas for investment. These 

commenters referenced studies 

indicating that 25/3 Mbps is inadequate 

for today’s modern household or 

business needs. 

Some commenters advocated for 

unserved and underserved areas to be 

prioritized while providing flexibility 

for recipients to serve areas beyond 

those designated as unserved or 

underserved. Reflecting the perceived 

restrictiveness of the interim final rule 

approach, some commenters asked for 

assurance that projects conducted under 

other categories of SLFRF eligible uses, 

specifically to respond to the public 

health and negative economic impacts 

of the pandemic under sections 

602(c)(1)(A)–(C) and 603(c)(1)(A)–(C), 

were not barred by the presence of 25/ 

3 Mbps service, including ‘‘gap 

networks,’’ which are networks 

designed to offer low-cost or no-cost 

internet access for lower-income 

households with low broadband 

adoption rates. 

Commenters suggested additional 

factors to be incorporated in the 

consideration of locations that are 

eligible to be served. Many commenters 

suggested that affordability should be 

considered a key factor when 

determining whether a community has 

access to broadband, as the presence of 

25/3 Mbps service does not necessarily 

mean the service is financially 

accessible to the area’s residents. 

Commenters noted that surveys indicate 

that affordability, not lack of coverage, 

is the most significant barrier for most 

Americans who do not have robust 

broadband service in their households. 

Some advocated that the final rule allow 

for investments in areas with existing 

reliable wireline access at or above 

25/3 Mbps as long as existing broadband 

service has been unaffordable for a 

certain segment of the population; 

others advocated that Treasury presume 

eligibility when investments are made 

in certain areas, such as Qualified 

Census Tracts or neighborhoods with 

persistent poverty, or are made by Tribal 

governments. Separately, some 

commenters noted that Treasury should 

provide more clarification on what 

constitutes a ‘‘reliabl[e]’’ connection, 

including providing details as to 

latency, jitter, and other technical 

specifications that would meet that 

standard, and what it means for certain 

technologies, such as copper and other 

outdated technologies, to be deemed 

presumptively unreliable. 

Other commenters supported the 

interim final rule’s approach on eligible 

areas for investment or suggested 

tightening eligibility even further. They 

argued that higher speed thresholds 

beyond 25/3 Mbps would likely lead to 

investments in or building of new 

broadband infrastructure in areas 

already served by broadband at speeds 

these commenters considered sufficient; 

these areas, commenters suggested, are 

less in need of federal assistance and 

permitting investments here could 

divert funding away from rural areas to 

more densely populated areas. 

Treasury Response: The final rule 

expands eligible areas for investment by 

requiring recipients to invest in projects 

designed to provide service to 

households and businesses with an 

identified need for additional 

broadband infrastructure investment. 

Recipients have flexibility to identify a 

need for additional broadband 

infrastructure investment: Examples of 

need include lack of access to a 

connection that reliably meets or 

exceeds symmetrical 100 Mbps 

download and upload speeds, lack of 

affordable access to broadband service, 

or lack of reliable broadband service. 

Recipients are encouraged to prioritize 

projects that are designed to provide 

service to locations not currently served 

by a wireline connection that reliably 

delivers at least 100 Mbps of download 

speed and 20 Mbps of upload speed, as 

many commenters indicated that those 

without such service constitute hard-toreach areas in need of subsidized 

broadband deployment. 

Households and businesses with an 

identified need for additional 

broadband infrastructure investment do 

not have to be the only ones in the 

service area served by an eligible 

broadband infrastructure project. 

Indeed, serving these households and 

businesses may require a holistic 

approach that provides service to a 

wider area, for example, in order to 

make ongoing service of certain 

households or businesses within the 

service area economical. 

Consistent with further guidance 

issued by Treasury,338 in determining 

areas for investment, recipients may 

choose to consider any available data, 

including but not limited to 

documentation of existing broadband 

internet service performance, federal 

and/or state collected broadband data, 

user speed test results, interviews with 

community members and business 

owners, reports from community 

organizations, and any other 

information they deem relevant. 

In evaluating such data, recipients 

may take into account a variety of 

factors, including whether users 

actually receive internet service at or 

above the speed thresholds at all hours 

of the day, whether factors other than 

speed such as latency, jitter, or 

deterioration of the existing connections 

make their user experience unreliable, 

and whether the existing service is 

being delivered by legacy technologies, 

such as copper telephone lines 

(typically using Digital Subscriber Line 

technology) or early versions of cable 

system technology (DOCSIS 2.0 or 

earlier),339 and other factors related to 


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data.fcc.gov/download/measuring-broadbandamerica/2020/2020-Fixed-Measuring-BroadbandAmerica-Report.pdf (comparing fiber with DSL and 

cable technologies on a number of dimensions); 

https://www.eff.org/wp/case-fiber-home-today-whyfiber-superior-medium-21st-century-broadband 

(providing a technical background comparing fiber 

technology to other legacy technologies). 

340Using the Federal Communications 

Commission (FCC) Broadband Speed Guide, a 

household with two telecommuters and two to 

three remote learners today is estimated to need 100 

Mbps download to work simultaneously. See 

Federal Communications Commission, Broadband 

Speed Guide, available at https://www.fcc.gov/ 

consumers/guides/broadband-speed-guide (last 

visited October 28, 2021). 

341United States’ Mobile and Broadband Internet 

Speeds—Speedtest Global Index, available at 

https://www.speedtest.net/global-index/unitedstates#fixed. 

342Bennett Cyphers, The Case for Fiber to the 

Home, Today: Why Fiber is a Superior Medium for 

21st Century Broadband, Electronic Frontier 

Foundation (October 16, 2019), https://www.eff.org/ 

wp/case-fiber-home-today-why-fiber-superiormedium-21st-century-broadband. 

343See FAQ 6.10, Coronavirus State and Local 

Fiscal Recovery Funds, Frequently Asked 

Questions, as of July 19, 2021; https://

home.treasury.gov/system/files/136/SLFRPFAQ.pdf. 

the services to be provided by the 

project. In addition, recipients may 

consider the actual experience of 

current broadband customers when 

making their determinations; whether 

there is a provider serving the area that 

advertises or otherwise claims to offer 

broadband at a given speed is not 

dispositive. 

Build-To Speed Standards 

The interim final rule provided that a 

recipient may use funds to make 

investments in broadband infrastructure 

that is designed to, upon completion, 

reliably meet or exceed symmetrical 100 

Mbps download and upload speeds. In 

cases where it is not practicable, 

because of the excessive cost of the 

project or the geography or topography 

of the area to be served by the project, 

eligible projects may be designed to 

reliably meet or exceed 100 Mbps 

download speed and between at least 20 

Mbps and 100 Mbps upload speed, so 

long as it is scalable to a minimum of 

100 Mbps download speed and 100 

Mbps upload speed. Relatedly, Treasury 

in the SUPPLEMENTARY INFORMATION to 

the interim final rule encouraged 

recipients to prioritize investments in 

fiber-optic infrastructure wherever 

feasible and to prioritize projects that 

achieve last-mile connections. 

Public Comment: Many commenters 

discussed the advantages of setting 

minimum symmetrical download and 

upload speeds of reliable 100 Mbps as 

the speed threshold for new projects. 

Some commenters indicated support for 

the interim final rule’s standard as it 

takes into account growing demands on 

internet use resulting from pandemic 

broadband usage and suggested that 

such a standard will help to ensure that 

networks built with SLFRF funds 

remain valuable for years to come, even 

as demands continue to accelerate, 

particularly on upload speeds. Some 

also indicated that the interim final rule 

standard has the effect of prioritizing 

the use of fiber-optic infrastructure to 

deliver such speeds, which some noted 

was a ‘‘gold standard’’ future-proof 

technology, although some commenters 

noted that other technologies like fixed 

wireless have been shown to deliver 

such speeds in certain circumstances. 

Other commenters suggested that 100 

Mbps symmetrical speeds were 

unnecessary given current broadband 

usage needs and that such high 

standards may have the potential to 

slow down expansion to unserved or 

underserved rural areas. Some argued 

that setting this symmetrical threshold 

may limit the type of technologies that 

can be used, thereby decreasing 

competition and limiting flexibility to 

recipients whose communities might be 

better served by technologies such as 

wireless solutions or inexpensive gap 

networks. Commenters suggested 

alternate minimum speeds, ranging from 

25/3 Mbps (which some argued best 

balances reaching all communities and 

maximizing the impact of federal funds) 

to 100/20 Mbps (which some argued 

best serves the typical broadband usage 

patterns of households and businesses, 

including new pandemic-driven needs). 

A few commenters suggested a higher 

minimum speed, such as gigabit speeds, 

advocating that such speeds were 

necessary for a network to last at least 

a decade. 

Many commenters supported the 

interim final rule’s lower speed 

standards for projects where it is 

impracticable to meet minimum reliable 

speeds of 100 Mbps symmetrical, as it 

provides flexibility for recipients to 

invest in hard-to-reach areas, such as 

those in mountainous regions. A few 

commenters indicated that Treasury 

should more clearly define the 

characteristics of a location eligible for 

this exception. Some indicated that the 

minimum standard for all new projects 

should be 100 Mbps symmetrical. In 

contrast, others argued that scalability to 

100 Mbps symmetrical should not be a 

requirement to meet today’s demands, 

particularly in hard-to-reach areas. 

Some commenters requested that 

Treasury clarify eligibility for middlemile projects as these projects 

potentially provide connectivity to farreaching areas, while other commenters 

suggested that last-mile projects 

generally require more capital 

investment and are therefore most in 

need of government support. 

Treasury Response: The final rule 

maintains the interim final rule’s 

requirement that eligible projects be 

designed to, upon completion, reliably 

meet or exceed symmetrical 100 Mbps 

download and upload speeds, with the 

interim final rule’s exception for 

projects where it is impracticable to 

build to such speeds due to excessive 

cost, geography, or topography of the 

area to be served by the project. Given 

the build time associated with 

broadband infrastructure projects, these 

standards will enable SLFRF funds to 

fund lasting infrastructure that will be 

able to accommodate increased network 

demand once the network is 

complete,340 while providing flexibility 

for certain locations to meet lower speed 

standards where 100 Mbps symmetrical 

speeds are impracticable. 

To illustrate the accelerating need for 

higher upload speeds, by one measure, 

mean upload speeds as of October 2021 

increased to 75.21 Mbps as compared to 

62.11 Mbps a year earlier.341

Jurisdictions are increasingly 

responding to the growing demands of 

their communities for high speeds; for 

example, Illinois requires 100 Mbps 

symmetrical service as the construction 

standard for their state broadband grant 

programs. The 100 Mbps symmetrical 

standard accounts for increased 

pandemic internet usage and provides 

adequate upload speeds for individuals 

and businesses to accommodate 

interactive applications such as virtual 

learning and videoconferencing, while 

also helping ensure that funding is 

responsibly used to provide a true and 

lasting benefit for years to come. 

Treasury continues to encourage 

recipients to prioritize investments in 

fiber-optic infrastructure wherever 

feasible, as such advanced technology 

enables the next generation of 

application solutions for all 

communities and is capable of 

delivering superior, reliable 

performance and is generally most 

efficiently scalable to meet future 

needs.342 In designing these projects, 

recipients should ensure that the 

broadband infrastructure provides 

‘‘reliable’’ service at required speeds 

and are not required to rely on 

providers’ advertised speeds in their 

assessments. 

Consistent with further guidance 

issued by Treasury,343 while recipients 

are permitted to make investments in 

‘‘middle-mile’’ connections that 

otherwise satisfy the requirements of the 

final rule, Treasury continues to 

encourage recipients to focus on 


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344The Executive Office of the President, 

Community-Based Broadband Solutions (January 

2015), https://obamawhitehouse.archives.gov/sites/ 

default/files/docs/community-based_broadband_

report_by_executive_office_of_the_president.pdf. 

projects that will achieve last-mile 

connections—whether by focusing 

directly on funding last-mile projects or 

by ensuring that funded middle-mile 

projects have commitments in place to 

support new and/or improved last-mile 

service. 

Affordability 

The interim final rule encouraged 

recipients to consider ways to integrate 

affordability options into their program 

design but did not require recipients to 

take particular actions. The interim final 

rule also provided that assisting 

households with internet access and 

digital literacy is an eligible use of 

SLFRF funds under sections 

602(c)(1)(A) and 603(c)(1)(A) to respond 

to the negative economic impacts of 

COVID–19. 

Public Comment: Many commenters 

suggested that Treasury provide 

recipients with a broader set of tools to 

tackle what the commenters 

characterized as an affordability crisis in 

the broadband sector. As noted above, 

some commenters proposed that 

Treasury consider affordability when 

determining whether an area is 

unserved or underserved by broadband. 

Some commenters indicated that the 

final rule should allow for the 

construction of broadband networks in 

low-income neighborhoods including 

low-cost or no-cost gap networks, even 

in areas with existing service at the 

speeds required under the interim final 

rule. Other commenters voiced support 

for direct subsidies to low-income 

communities to afford broadband 

service, which would provide 

additional incentives for providers to 

serve these communities. 

Treasury Response: In response to 

many commenters that highlighted the 

importance of affordability in providing 

meaningful access to necessary 

broadband infrastructure, the final rule 

provides additional requirements to 

address the affordability needs of lowincome consumers in accessing 

broadband networks funded by SLFRF. 

Recipients must require the service 

provider for a completed broadband 

infrastructure investment project that 

provides service to households to: 

• Participate in the Federal 

Communications Commission’s (FCC) 

Affordable Connectivity Program (ACP); 

or 

• Otherwise provide access to a 

broad-based affordability program to 

low-income consumers in the proposed 

service area of the broadband 

infrastructure that provides benefits to 

households commensurate with those 

provided under the ACP. 

Recipients must require providers to 

participate in or provide access to these 

programs through the life of the ACP. 

This requirement will no longer apply 

once the SLFRF-funded broadband 

infrastructure is no longer in use. 

Furthermore, Treasury also recognizes 

the importance of affordable broadband 

access for all consumers beyond those 

that are low income. As part of their 

project selection process, recipients are 

encouraged to consult with the 

community on the general affordability 

needs of the target markets in the 

proposed service area. Additionally, 

recipients are encouraged to require that 

services provided by a broadband 

infrastructure project include at least 

one low-cost option offered without 

data usage caps at speeds that are 

sufficient for a household with multiple 

users to simultaneously telework and 

engage in remote learning. Treasury will 

require recipients to report speed, 

pricing, and any data allowance 

information as part of their mandatory 

reporting to Treasury. 

Further, Treasury is clarifying that, as 

a response to the public health and 

negative economic impacts of the 

pandemic, recipients may provide 

households and communities impacted 

by the pandemic with subsidies to help 

pay for internet service, digital literacy 

programs, broadband adoption 

programs, and device programs that 

provide discounted or no-cost devices 

for low-income households to access the 

internet. For further discussion of this 

eligible use category, see the section 

internet Assistance in Assistance to 

Households in Public Health and 

Negative Economic Impacts. 

Public Networks 

The interim final rule encouraged 

recipients to prioritize support for local 

networks owned, operated, or affiliated 

with local governments, nonprofits, and 

cooperatives. 

Public Comment: Many commenters 

voiced their support for Treasury’s 

encouragement that recipients work 

with governmental or community 

entities to establish local networks, 

arguing that they have been shown to 

effectively provide broadband access to 

areas that would otherwise be left with 

unaffordable or insufficient service. 

These commenters suggested that, since 

these entities are less driven by 

financial returns to investment than 

private providers, in some 

circumstances they may be able to 

provide robust service at a lower price 

as compared to private providers, along 

with potentially increasing local 

competition in a service area. 

Other commenters argued against 

Treasury’s encouragement, remarking 

that private businesses have a robust 

track record of serving hard-to-reach 

customers. These commenters argued 

that commercial providers have greater 

technical and operational expertise in 

deploying and operating broadband 

networks and may be able to construct 

broadband networks with greater 

efficiency. Additionally, some 

commenters argued that providing what 

they considered an unfair competitive 

advantage for government- or 

community-owned or operated 

networks may hurt consumers over 

time. 

Treasury Response: The final rule 

maintains the interim final rule’s 

encouragement for recipients to 

prioritize support for broadband 

networks owned, operated by, or 

affiliated with local governments, 

nonprofits, and cooperatives, given that 

these networks have less pressure to 

generate profits and a commitment to 

serve entire communities.344 This 

encouragement provides flexibility for 

recipients to select providers that best 

fit their needs, while noting the critical 

role that networks owned, operated, or 

affiliated with local governments and 

community organizations can play in 

providing sufficient coverage, affordable 

access, or increased competition in the 

broadband sector. 

Duplication of Efforts and Resources 

Public Comment: Some commenters 

raised concerns that Treasury’s 

encouragement in the interim final rule 

that recipients avoid funding projects in 

locations with an existing agreement to 

provide service that reliably delivers 

100/20 Mbps by December 31, 2024 was 

too restrictive. Commenters noted that 

many plans do not always lead to a 

successful and complete deployment, as 

issues may arise that prevent such 

infrastructure from deploying on time or 

at all, and that several existing federal 

grants were designed and awarded 

before the onset of the COVID–19 

pandemic and do not meet the critical 

broadband needs highlighted by the 

pandemic. Other commenters argued 

that Treasury’s encouragement to avoid 

duplication of resources should be 

strengthened, as investing in areas with 

existing agreements would be an 

inefficient duplication of efforts. 

Treasury Response: Given the final 

rule’s revised requirements on eligible 

areas for investment, this 


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345For more on the importance of cybersecurity 

to the reliability and resiliency of broadband 

networks, see: Federal Communications 

Commission, https://docs.fcc.gov/public/ 

attachments/FCC-10-63A1.doc; Brookings Institute, 

Protecting the Cybersecurity of America’s Networks 

(February 11, 2021), https://www.brookings.edu/ 

blog/techtank/2021/02/11/protecting-thecybersecurity-of-americas-networks/. 

346See Infrastructure Investment and Jobs Act, 

Public Law 117–58 (2021). 

Supplementary Information to the final 

rule also modifies the interim final 

rule’s requirements around duplication 

of resources. Since recipients must 

ensure that the objective of the 

broadband projects is to serve locations 

with an identified need for additional 

broadband investment, the final rule 

provides that, to the extent recipients 

are considering deploying broadband to 

locations where there are existing 

enforceable federal or state funding 

commitments for reliable service at 

speeds of at least 100 Mbps download 

speed and 20 Mbps upload speed, 

recipients must ensure that SLFRF 

funds are designed to address an 

identified need for additional 

broadband investment that is not met by 

existing federal or state funding 

commitments. Recipients must also 

ensure that SLFRF funds will not be 

used for costs that will be reimbursed by 

the other federal or state funding 

streams. 

Cybersecurity 

Public Comment: Several commenters 

expressed concern about the 

cybersecurity of new broadband projects 

funded with SLFRF funds and urged 

Treasury to prohibit recipients from 

utilizing SLFRF funds to procure 

equipment from certain providers from 

the People’s Republic of China that may 

pose a national security risk. These 

commenters pointed out that the 2019 

National Defense Authorization Act 

(NDAA) and the FCC’s Universal 

Service Fund have similar prohibitions. 

Further, several commenters requested 

that Treasury explicitly include 

cybersecurity costs as an eligible use for 

broadband infrastructure investment 

given the growing threat of cyber-attacks 

and cyber-intrusions into the nation’s 

infrastructure. 

Treasury Response: Treasury 

highlights that investments in 

broadband infrastructure must be 

carried out in ways that comply with 

applicable federal laws, including the 

2019 NDAA. Among other requirements 

contained in 2 CFR part 200, 2 CFR 

200.216 implements certain provisions 

of the NDAA and contains prohibitions 

on the use of federal financial assistance 

to procure or obtain certain 

telecommunications and video 

surveillance services or equipment 

provided or produced by designated 

entities, including certain entities 

owned or controlled by the People’s 

Republic of China. In addition, 2 CFR 

200.471 provides that certain 

telecommunications and video 

surveillance costs associated with 2 CFR 

200.216 are unallowable. 

Further, the final rule allows for 

modernization of cybersecurity for 

existing and new broadband 

infrastructure as an eligible use under 

sections 602(c)(1)(D) and 603(c)(1)(D) as 

such investments are necessary for the 

reliability and resiliency of broadband 

infrastructure.345 Recipients may 

provide necessary investments in 

cybersecurity, including modernization 

of hardware and software, for existing 

and new broadband infrastructure 

regardless of their speed delivery 

standards. The final rule maintains the 

interim final rule’s provision that allows 

for broader modernization of 

cybersecurity, including hardware, 

software, and protection of critical 

infrastructure as an eligible provision of 

government services, to the extent of 

revenue loss due to the pandemic, 

under sections 602(c)(1)(C) and 

603(c)(1)(C). 

Use of Funds To Meet Non-Federal 

Match Under the Infrastructure 

Investment and Jobs Act 

The Infrastructure Investment and 

Jobs Act specifies that, except as 

otherwise provided, an entity using 

funding under section 60102 of the law 

for broadband deployment ‘‘shall 

provide, or require a subgrantee to 

provide, a contribution, derived from 

non-Federal funds (or funds from a 

Federal regional commission or 

authority) . . . of not less than 25 

percent of project costs.’’ 346 It further 

states that the matching contribution 

may include funds provided to an 

eligible entity or subgrantee under the 

American Rescue Plan Act for the 

purpose of deployment of broadband 

service, which includes funds provided 

under the SLFRF program. 

SLFRF and the program established 

under section 60102 of the 

Infrastructure Investment and Jobs Act 

are separate programs with separate 

requirements. While section 60102 

allows states and other eligible entities 

to use SLFRF funds as the source of 

matching funds for broadband 

deployment, the requirements of the 

SLFRF program still apply. As such, 

recipients that use SLFRF funds to meet 

the section 60102 matching requirement 

will continue to be subject to the 

requirements of the SLFRF program. 

III. Restrictions on Use 

While recipients have considerable 

flexibility to use funds to address the 

diverse needs of their communities, 

some restrictions on use of funds apply. 

The ARPA includes two statutory 

provisions that further define the 

boundaries of the statute’s eligible uses. 

First, section 602(c)(2)(A) of the Social 

Security Act provides that states and 

territories may not ‘‘use the funds . . . 

to either directly or indirectly offset a 

reduction in . . . net tax revenue . . . 

resulting from a change in law, 

regulation, or administrative 

interpretation during the covered period 

that reduces any tax . . . or delays the 

imposition of any tax or tax increase.’’ 

Second, sections 602(c)(2)(B) and 

603(c)(2) prohibit all recipients, except 

Tribal governments, from using funds 

for deposit into any pension fund. These 

restrictions support use of funds only 

for the congressionally permitted 

purposes described in the Eligible Uses 

section by providing a backstop against 

the use of funds for purposes outside of 

the eligible use categories provided for 

in the statute. 

In addition to the restrictions on use 

of funds provided for in the ARPA 

statute, the interim final rule noted that 

several uses of funds would be 

ineligible under any eligible use 

category, including as a response to the 

public health and negative economic 

impacts of the pandemic or as a 

‘‘government service’’ under the 

revenue loss eligible use category. 

Specifically, use of funds for debt 

service, to replenish financial reserves, 

or to satisfy an obligation arising from 

a judicial settlement or judgment were 

ineligible uses of funds under the 

eligible use categories for public health 

and negative economic impacts and 

revenue loss. These restrictions apply to 

all recipients. 

Recipients should note that 

restrictions on use of funds for debt 

service, to replenish financial reserves, 

or to satisfy an obligation arising from 

a judicial settlement or judgment apply 

to all eligible use categories, not just the 

eligible use categories in which they 

were discussed in the interim final rule. 

Recipients are also subject to other 

restrictions on use of funds in the 

ARPA, the Award Terms and 

Conditions, and other federal laws. As 

discussed further below, uses of funds 

may not conflict with the overall 

statutory purpose of the ARPA to reduce 

the spread of COVID–19. Per the Award 

Terms and Conditions, recipients must 

adopt and abide by policies to prevent 

conflicts of interest. Finally, recipients 

are reminded that other federal laws 


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Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4423 

347 In this sub-section, ‘‘recipient governments’’ 

refers only to states and territories. In other 

sections, ‘‘recipient governments’’ refers more 

broadly to eligible governments receiving funding 

from the SLFRF. 

348For brevity, this phrase is referred to as 

‘‘changes in law, regulation, or interpretation’’ for 

the remainder of this SUPPLEMENTARY INFORMATION. 

also apply to uses of funds, including 

environmental and civil rights laws. 

To enhance clarity, this 

SUPPLEMENTARY INFORMATION for the 

final rule consolidates these restrictions 

on use of funds into one section and 

makes clear that they apply to all 

eligible use categories and any use of 

funds under the program by recipients 

to whom each specific restriction 

applies. 

This section discusses the 

aforementioned restrictions, public 

comments received, and Treasury’s 

response to these comments. For clarity, 

Treasury has divided the following 

discussion into (A) statutory restrictions 

under the ARPA, which include (1) 

offsetting a reduction in net tax revenue, 

and (2) deposits into pension funds, and 

(B) other restrictions on use, which 

include (1) debt service and 

replenishing reserves, (2) settlements 

and judgments, and (3) general 

restrictions. 

A. Ineligible Uses of Funds Under the 

ARPA Statute 

1. Offset a Reduction in Net Tax 

Revenue 

For states and territories (recipient 

governments 347), section 602(c)(2)(A)— 

the offset provision—prohibits the use 

of SLFRF funds to directly or indirectly 

offset a reduction in net tax revenue 

resulting from a change in law, 

regulation, or administrative 

interpretation 348 during the covered 

period. If a state or territory uses SLFRF 

funds to offset a reduction in net tax 

revenue resulting from a change in law, 

regulation, or interpretation, the ARPA 

provides that the state or territory must 

repay to Treasury an amount equal to 

the lesser of (i) the amount of the 

applicable reduction attributable to the 

impermissible offset and (ii) the amount 

of SLFRF funds received by the state or 

territory. A state or territory that uses 

SLFRF funds to offset a reduction in net 

tax revenue does not forfeit its entire 

allocation of SLFRF funds (unless it 

misused the full allocation to offset a 

reduction in net tax revenue) or any 

non-SLFRF funding. 

The interim final rule implements 

these conditions by establishing a 

framework for states and territories to 

determine the cost of changes in law, 

regulation, or interpretation that reduce 

tax revenue and to identify and value 

the sources of funds that will offset— 

i.e., cover the cost of—any reduction in 

net tax revenue resulting from such 

changes. The interim final rule 

recognizes three sources of funds that 

may offset a reduction in net tax 

revenue other than SLFRF funds: 

Organic revenue growth, increases in 

revenue due to policy changes (e.g., an 

increase in a tax rate), and certain cuts 

in spending. 

Specifically, the interim final rule 

establishes a step-by-step process for 

determining whether, and the extent to 

which, SLFRF funds have been used to 

offset a reduction in net tax revenue, 

based on information reported by the 

recipient government: 

• First, each year, each recipient 

government will identify and value the 

changes in law, regulation, or 

interpretation that would result in a 

reduction in net tax revenue, as it would 

in the ordinary course of its budgeting 

process. The sum of these values in the 

year for which the government is 

reporting is the amount it needs to ‘‘pay 

for’’ with sources other than SLFRF 

funds (total value of revenue reducing 

changes). 

• Second, the interim final rule 

recognizes that it may be difficult to 

predict how a change would affect net 

tax revenue in future years and, 

accordingly, provides that if the total 

value of the changes in the year for 

which the recipient government is 

reporting is below a de minimis level, 

as discussed below, the recipient 

government need not identify any 

sources of funding to pay for revenue 

reducing changes and will not be 

subject to recoupment. 

• Third, a recipient government will 

consider the amount of actual tax 

revenue recorded in the year for which 

it is reporting. If the recipient 

government’s actual tax revenue is 

greater than the amount of tax revenue 

received by the recipient for the fiscal 

year ending 2019, adjusted annually for 

inflation, the recipient government will 

not be considered to have violated the 

offset provision because there will not 

have been a reduction in net tax 

revenue. 

• Fourth, if the recipient 

government’s actual tax revenue is less 

than the amount of tax revenue received 

by the recipient government for the 

fiscal year ending 2019, adjusted 

annually for inflation, in the reporting 

year the recipient government will 

identify any sources of funds that have 

been used to permissibly offset the total 

value of covered tax changes other than 

SLFRF funds. These are: 

Æ State or territory tax changes that 

would increase any source of general 

fund revenue, such as a change that 

would increase a tax rate; and 

Æ Spending cuts in areas not being 

replaced by SLFRF funds. 

The recipient government will 

calculate the value of revenue reduction 

remaining after applying these sources 

of offsetting funding to the total value of 

revenue reducing changes—that is, how 

much of the tax change has not been 

paid for. The recipient government will 

then compare that value to the 

difference between the baseline and 

actual tax revenue. A recipient 

government will not be required to 

repay to Treasury an amount that is 

greater than the recipient government’s 

actual tax revenue shortfall relative to 

the baseline (i.e., fiscal year 2019 tax 

revenue adjusted for inflation). This 

‘‘revenue reduction cap,’’ together with 

Step 3, ensures that recipient 

governments can use organic revenue 

growth to offset the cost of revenue 

reductions. 

• Finally, if there are any amounts 

that could be subject to recoupment, 

Treasury will provide notice to the 

recipient government of such amounts 

along with an explanation of such 

amounts. This process is discussed in 

greater detail in section Remediation 

and Recoupment of this Supplementary 

Information. 

Together, these steps allow Treasury 

to identify the amount of reduction in 

net tax revenue that both is attributable 

to covered changes and has been 

directly or indirectly offset with SLFRF 

funds. 

Overview of Comments: Many 

commenters supported the framework 

established under the interim final rule. 

These commenters argued that the offset 

provision, and the interim final rule’s 

implementation of the offset provision, 

was essential to ensuring SLFRF funds 

are used in a manner consistent with the 

statute’s defined eligible uses and, in 

particular, to support the use of SLFRF 

funds to build public sector capacity. 

Several commenters argued that the 

framework should be made more 

restrictive; for example, some comments 

advocated that the offset provision be 

applied to local governments. 

Other commenters argued that the 

offset provision and the interim final 

rule’s implementation of the offset 

provision is too restrictive, with some 

asserting that the offset provision 

prohibits states from making changes to 

reduce taxes. Many of these commenters 

argued that the offset provision presents 

constitutional concerns. These 

commenters asserted that the offset 

provision is ambiguous and the 

restriction is unrelated to the purpose of 

the ARPA. These commenters also 


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4424 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 

349See, e.g., State of West Virginia v. U.S. 

Department of the Treasury, No. 7:21–cv–00465– 

LSC, 2021 WL 2952863 (N.D. Ala. Jul. 14, 2021); 

State of Ohio v. Yellen, No. 1:21–cv–181, 2021 WL 

2712220 (S.D. Ohio Jul. 1, 2021). 

350National Fed’n of Indep. Bus. v. Sebelius 

(NFIB), 567 U.S. 519, 580 (2012) (plurality opinion); 

see, e.g., South Dakota v. Dole, 483 U.S. 203, 206– 

208 (1987); Gruver v. Louisiana Bd. of Supervisors 

for Louisiana State Univ. Agric. & Mech. Coll., 959 

F.3d 178, 183 (5th Cir.), cert. denied, 141 S. Ct. 901 

(2020). For additional discussion of these issues, 

see, e.g., Brief Reply for Appellants, Ohio v. Yellen, 

No. 21–3787 (6th Cir. Oct. 26, 2021). 

351Sabri v. United States, 541 U.S. 600, 608 

(2004). 

352The new federal funds offered by the 

Affordable Care Act totaled $100 billion per year. 

Even the dissenting Justices agreed that ‘‘Congress 

could have made just the new funding provided 

under the ACA contingent on acceptance of the 

terms of the Medicaid Expansion,’’ although they 

disagreed with the majority about whether that 

funding condition was severable. NFIB at 687–688 

(joint dissent). 

353For example, a state law that sets its earned 

income tax credit (EITC) at a fixed percentage of the 

federal EITC will see its EITC payments 

automatically increase—and thus its tax revenue 

reduced—because of the federal government’s 

expansion of the EITC in the ARPA See, e.g., Tax 

argued that the generous amount of 

SLFRF funds provided to those 

governments gave recipient 

governments little choice as to whether 

to accept the SLFRF funds and, as a 

result, the offset provision is coercive. 

In describing these concerns and 

arguments, several of these commenters 

referenced litigation regarding the offset 

provision.349 Many of these commenters 

also expressed concern regarding the 

interim final rule’s implementation of 

the offset provision. Some of these 

commenters argued that Treasury lacked 

the authority to implement the 

provision, asserting that the significance 

of the provision required Congress to 

make an explicit delegation of 

rulemaking authority and provide 

clearer principles by which Treasury 

should implement the provision. 

Finally, one commenter argued that the 

offset provision should only apply if the 

recipient expressly and intentionally 

uses SLFRF funds to offset a reduction 

in revenue, arguing that the term 

‘‘offset’’ implies a deliberate use SLFRF 

funds to ‘‘pay for’’ a tax cut. 

As discussed in the interim final rule, 

the offset provision does not prevent a 

recipient government from enacting a 

broad variety of tax changes. Rather, the 

offset provision prevents a recipient 

government from using SLFRF funds to 

offset a revenue reduction resulting 

from a tax cut. A recipient government 

would only be considered to have used 

SLFRF funds to offset a reduction in net 

tax revenue resulting from changes in 

law, regulation, or interpretation if, and 

to the extent that, the recipient 

government could not identify sufficient 

funds from sources other than SLFRF 

funds to offset the reduction in net tax 

revenue. Only if sufficient funds from 

other sources cannot be identified to 

cover the full cost of the reduction in 

net tax revenue resulting from changes 

in law, regulation, or interpretation, will 

the remaining amount not covered by 

these sources be considered to have 

been offset by SLFRF funds, in 

contravention of the offset provision. 

Consistent with the statutory text, the 

approach taken in the interim final rule 

recognizes that, because money is 

fungible, even if SLFRF funds are not 

explicitly or directly used to cover the 

costs of changes that reduce net tax 

revenue, those funds may be used in a 

manner inconsistent with the statute by 

indirectly being used to substitute for 

the state’s or territory’s funds that 

would otherwise have been needed to 

cover the costs of the reduction. As 

discussed below, the scope of changes 

in law, regulation, or interpretation is 

further limited to those that the 

recipient government voluntarily 

enacted during the covered period. 

Congress has the authority under the 

Spending Clause in Article I, section 8 

of the Constitution to specify the 

permissible and impermissible uses of 

federal grants. The Supreme Court has 

repeatedly ‘‘upheld Congress’s authority 

to condition the receipt of funds on the 

States’ complying with restrictions on 

the use of those funds, because that is 

the means by which Congress ensures 

that the funds are spent according to its 

view of the ‘general Welfare.’ ’’ 350 ‘‘The 

power to keep a watchful eye on 

expenditures . . . is bound up with 

congressional authority to spend in the 

first place.’’ 351 Assertions that the 

amount of SLFRF funds are sufficiently 

large to be coercive are inconsistent 

with the Supreme Court’s reasoning in 

NFIB, which distinguished between 

conditions placed on new federal funds 

and conditions placed on existing 

federal funds and not based on the size 

of funds.352 Further, the conditions 

placed on the use of SLFRF funds under 

the ARPA—both the eligible uses and 

additional limitations on deposits into 

pension funds and the offset 

provision—were well known to 

recipient governments prior to recipient 

governments requesting to receive 

SLFRF funds. Finally, the ARPA 

provides Treasury with the express 

authority ‘‘to issue such regulations as 

may be necessary or appropriate to carry 

out’’ section 602, which includes the 

offset provision. 

A number of commenters expressed 

concern regarding the burden associated 

with complying with the offset 

provision and the interim final rule. 

Similarly, other commenters argued that 

the framework provided in the interim 

final rule complicated implementation 

of the offset provision. Treasury took 

several steps to minimize burden for 

recipient governments in the interim 

final rule. For example, the interim final 

rule incorporates the types of 

information and modeling already used 

by states and territories in their own 

fiscal and budgeting processes. By 

incorporating existing budgeting 

processes and capabilities, states and 

territories will be able to assess and 

evaluate the relationship of tax and 

budget decisions to uses of SLFRF funds 

based on information they likely have or 

can readily obtain. This approach 

ensures that recipient governments have 

the information they need to understand 

the implications of their decisions 

regarding the use of SLFRF funds—and, 

in particular, whether they are using the 

funds to directly or indirectly offset a 

reduction in net tax revenue resulting 

from a change in law, regulation, or 

interpretation, making the funds 

potentially subject to recoupment. To 

further reduce burden, Treasury is 

considering whether the scope of 

reporting requirements can be further 

tailored. 

As described in greater detail below, 

Treasury is finalizing its 

implementation of the offset provision 

largely without change. This approach 

is consistent with the text of the ARPA. 

The remainder of this section discusses 

and responds to comments on specific 

aspects of the framework. 

1. Definitions 

Covered change. The offset provision 

is triggered by a reduction in net tax 

revenue resulting from ‘‘a change in 

law, regulation, or administrative 

interpretation.’’ Consistent with this 

language, the interim final rule defines 

a ‘‘covered change’’ to include any final 

legislative or regulatory action, a new or 

changed administrative interpretation, 

and the phase-in or taking effect of any 

statute or rule where the phase-in or 

taking effect was not prescribed prior to 

the start of the covered period. Thus, the 

offset provision applies only to actions 

for which the change in policy occurs 

during the covered period; it excludes 

regulations or other actions that 

implement a change or law 

substantively enacted prior to March 3, 

2021. For example, covered changes do 

not include a change in rate that is 

triggered automatically and based on 

statutory or regulatory criteria in effect 

prior to the covered period.353 Changed 


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Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4425 

Policy Center, How do state earned income tax 

credits work?, https://www.taxpolicycenter.org/ 

briefing-book/how-do-state-earned-income-taxcredits-work/ (last visited May 9, 2021). 

354Assistance must be consistent with eligible 

uses of SLFRF funds. See section Eligible Uses of 

this SUPPLEMENTARY INFORMATION. 

355See Statement on State Fiscal Recovery Funds 

and Tax Conformity, April 7, 2021, available at 

https://home.treasury.gov/news/press-releases/ 

jy0113. 

356U.S. Census Bureau, Annual Survey of State 

and Local Government Finances Glossary, https:// 

www.census.gov/programs-surveys/state/about/ 

glossary.html (last visited Apr. 30, 2021). 

administrative interpretations would 

not include corrections to replace prior 

inaccurate interpretations; such 

corrections would instead be treated as 

changes implementing legislation 

enacted or regulations issued prior to 

the covered period. The operative 

change in those circumstances is the 

underlying legislation or regulation that 

occurred prior to the covered period. 

Moreover, only changes within the 

control of the state or territory are 

considered covered changes. Finally, 

covered changes do not include changes 

that simply conform with recent 

changes in federal law (including those 

to conform to recent changes in federal 

taxation of unemployment insurance 

benefits and taxation of loan forgiveness 

under the Paycheck Protection 

Program). 

Scope of Covered Changes 

Public Comment: Several commenters 

argued that the definition of covered 

change, and thus the limitations of the 

offset provision, should apply to 

subsidies for businesses. Similarly, 

other commenters requested that 

Treasury clarify that the offset provision 

applies to tax abatements and 

reductions in corporate taxes, even if 

administered by a sub-unit of the 

recipient government. Citing to 

empirical research and other evidence, 

these commenters argued that these 

types of economic development policies 

were poorly administered, reduced 

public sector capacity, and were 

ineffective at achieving stated objectives 

of creating jobs, increasing income, and 

increasing economic growth. On the 

other hand, some commenters argued 

that, because subsidies were 

economically similar to some tax cuts, 

neither action should be considered a 

covered change and subject to the offset 

provision. Finally, other commenters 

requested that Treasury clarify whether 

covered changes must be broad-based 

policies or whether administrative 

decisions applicable to individuals 

would be considered covered changes. 

Treasury Response: Section 

602(c)(2)(A) applies to any change that 

‘‘reduces any tax (by providing for a 

reduction in a rate, a rebate, a 

deduction, a credit, or otherwise or 

delays the imposition of any tax or tax 

increase.’’ Accordingly, and consistent 

with this statutory text, the final rule 

applies to covered changes that reduce 

any tax, which can include tax 

abatements, but does not apply to loans, 

grants, or other types of interventions 

that do not reduce tax revenue.354 In 

addition, by including changes in 

regulation or administrative 

interpretation, in addition to changes in 

law, within the scope of the offset 

provision, the ARPA recognizes that a 

recipient government may make a 

covered change through its legislature or 

may delegate the authority to make a 

covered change including, but not 

limited to, to a sub-unit of government. 

Treasury has revised the definition of 

‘‘covered change’’ in the final rule using 

the statutory language above to make 

clear that the offset provision only 

applies to such changes in law, 

regulation, or administrative 

interpretation. With respect to the 

question of whether covered changes 

could include administrative decisions 

applicable to individuals, as discussed 

above, a covered change includes a 

change in law, regulation, or 

administrative interpretation that 

reduces any tax. Such changes may 

apply to one or more individuals or 

entities, provided that—consistent with 

the statutory text—they result from a 

change in law, regulation, or 

administrative interpretation. 

Prior Enactment and Phase-In 

Public Comment: A number of 

commenters expressed concern, or 

requested clarification, regarding 

changes that were enacted prior to the 

covered period but take effect or phasein during the covered period. Several 

commenters argued that the definition 

of covered change should include 

changes that were made prior to the 

covered period but that phase-in during 

the covered period. 

Treasury Response: As discussed 

above, the offset provision is triggered 

by a reduction in net tax revenue 

resulting from ‘‘a change in law, 

regulation, or administrative 

interpretation’’ made during the covered 

period. Consistent with the statutory 

text, ‘‘covered change’’ is defined to 

include any final legislative or 

regulatory action, a new or changed 

administrative interpretation, and the 

phase-in or taking effect of any statute 

or rule where the phase-in or taking 

effect was not prescribed prior to the 

start of the covered period. 

Conformity 

Public Comment: A number of 

commenters requested clarification on 

the scope of covered changes. 

Specifically, several commenters 

requested clarification on the scope of 

changes that would be considered as 

conforming to recent changes in federal 

law. These commenters requested that 

Treasury clarify whether actions to 

selectively conform with federal law 

would be considered covered changes 

and requested clarification regarding the 

extent to which changes would be 

considered ‘‘recent.’’ For example, these 

commenters requested clarification 

regarding conformance with the Global 

Intangible Low-Taxed Income provision 

of the 2017 Tax Cuts and Jobs Act. Some 

commenters further argued that changes 

that selectively conform or decouple 

from the Internal Revenue Code should 

be included within scope of covered 

changes and thus subject to the offset 

provision. 

Treasury Response: The final rule 

maintains the treatment of changes that 

simply conform with recent changes in 

federal law, such as those to conform to 

recent changes in federal taxation of 

unemployment insurance benefits and 

taxation of loan forgiveness under the 

Paycheck Protection Program 355 and 

including other changes over the past 

several years. Regardless of the 

particular method of conformity and the 

effect on net tax revenue, Treasury 

views such changes as permissible 

under the offset provision. 

Accordingly, and for the reasons 

discussed above, Treasury is 

maintaining the definition of covered 

change without change. 

Tax revenue. The interim final rule’s 

definition of ‘‘tax revenue’’ is based on 

the Census Bureau’s definition of taxes, 

used for its Annual Survey of State 

Government Finances.356 It provides a 

consistent, well-established definition 

with which states and territories will be 

familiar and is consistent with the 

approach taken in section Revenue Loss 

of this SUPPLEMENTARY INFORMATION

describing the implementation of 

sections 602(c)(1)(C) and 603(c)(1)(C) of 

the Social Security Act regarding 

revenue loss. A number of commenters 

expressed concern and requested 

clarification regarding the definition of 

‘‘tax revenue.’’ These comments and 

responses are discussed in section 

Revenue Loss of this Supplemental 

Information and, for the reasons 

discussed above, Treasury is finalizing 

the definition of tax revenue without 


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4426 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 

357As discussed in section Revenue Loss of this 

Supplementary Information, for purposes of 

measuring revenue lost due to the pandemic under 

sections 602(c)(1)(C) and 603(c)(1)(C), recipients 

must adjust the amount of revenue lost to reflect 

changes that resulted from a tax increase or 

decrease. These adjustments do not apply to or 

affect the definition of tax revenue. 

358U.S. Department of Commerce, Bureau of 

Economic Analysis, GDP Price Deflator, https://

www.bea.gov/data/prices-inflation/gdp-pricedeflator (last visited Apr. 30, 2021). The FY 2019 

baseline revenue is adjusted annually for inflation 

to allow for direct comparison of actual tax revenue 

in each year (reported in nominal terms) to baseline 

revenue in common units of measurement; without 

inflation adjustment, each dollar of reported actual 

tax revenue would be worth less than each dollar 

of baseline revenue expressed in 2019 terms. 

359Economy Statement by Catherine Wolfram, 

Acting Assistant Secretary for Economy Policy, for 

the Treasury Borrowing Advisory Committee 

November 1, 2021 (Nov. 1, 2021), available at 

https://home.treasury.gov/news/press-releases/ 

jy0453. 

360One commenter requested clarification that 

references to fiscal year refer to the fiscal year of 

the recipient. ‘‘Reporting year’’ is defined in the 

interim final rule and final rule to mean ‘‘a single 

year or partial year within the covered period, 

aligned to the current fiscal year of the State or 

Territory during the covered period.’’ 

361By permitting recipient governments to use 

actual or estimated values, the interim final rule 

and final rule provide flexibility to recipients and 

thus minimizes burden. 

change and maintaining a consistent 

definition of ‘‘tax revenue.’’ 357

Baseline. For purposes of measuring a 

reduction in net tax revenue, the interim 

final rule measures actual changes in tax 

revenue relative to a revenue baseline 

(baseline). The baseline is calculated as 

fiscal year 2019 (FY 2019) tax revenue 

indexed for inflation in each year of the 

covered period, with inflation 

calculated using the Bureau of 

Economic Analysis’s Implicit Price 

Deflator.358

Public Comment: Some commenters 

expressed concern regarding the choice 

of FY 2019 as the baseline, arguing that 

the choice lacked justification and 

would make the offset provision more 

restrictive as applied to recipient 

governments that experienced a decline 

in revenue independent of making any 

covered changes. 

Treasury Response: Measuring a 

‘‘reduction’’ in net tax revenue requires 

identification of a baseline. In other 

words, a ‘‘reduction’’ can be assessed 

only by comparing two amounts. The 

Act defines ‘‘covered period’’ to begin 

on March 3, 2021, and thus the baseline 

year must end prior to March 3, 2021. 

As discussed in the interim final rule, 

FY 2019 is the last full fiscal year prior 

to the COVID–19 public health 

emergency, and thus is consistent with 

the statutory definition and does not 

include the extraordinary effects of the 

pandemic that began in 2020. Further, 

as discussed above, the interim final 

rule recognizes three potential ways that 

a recipient government may offset or 

‘‘pay for’’ a reduction in net tax revenue 

due to a covered change: Increases in 

taxes, decreases in spending, and 

organic revenue growth. U.S. gross 

domestic product rebounded to exceed 

its pre-pandemic level in 2021,359

suggesting that an FY 2019 prepandemic baseline is a reasonable 

comparator for future revenue levels 

and provides recipients with flexibility 

to identify organic growth as a 

permissible offset. Finally, this baseline 

year is consistent with the approach 

directed by sections 602(c)(1)(C) and 

603(c)(1)(C), which identify the ‘‘most 

recent full fiscal year of the [state, 

territory, or Tribal government] prior to 

the emergency’’ as the comparator for 

measuring revenue loss. For these 

reasons, Treasury is finalizing the 

definition of ‘‘baseline’’ without change. 

The interim final rule includes several 

other definitions that are applicable to 

the implementation of the offset 

provision, such as the term ‘‘reporting 

year.’’ 360 Commenters did not express 

concern regarding other definitions in 

the interim final rule. 

2. Framework 

The interim final rule provides a stepby-step framework, to be used in each 

reporting year, to determine whether a 

state or territory used SLFRF funds to 

offset a reduction in net tax revenue. 

Consistent with section 602(c)(2) and 

the interim final rule, the final rule 

applies to states and territories: 

(1) Covered changes that reduce tax 

revenue. Under the interim final rule, a 

recipient government identifies and 

values covered changes that the 

recipient government predicts will have 

the effect of reducing tax revenue in a 

given reporting year, similar to the way 

it would in the ordinary course of its 

budgeting process. The interim final 

rule states that the value of these 

covered changes may be reported based 

on estimated values produced by a 

budget model, incorporating reasonable 

assumptions, that aligns with the 

recipient government’s existing 

approach for measuring the effects of 

fiscal policies, and that measures these 

effects relative to a current law baseline. 

If the recipient would prefer, the 

covered changes may also be reported 

based on actual values using a statistical 

methodology to isolate the change in 

year-over-year revenue attributable to 

the covered change(s), relative to the 

current law baseline prior to the 

change(s).361 Further, estimation 

approaches may not use dynamic 

methodologies that incorporate the 

projected effects of macroeconomic 

growth because macroeconomic growth 

is accounted for separately in the 

framework. 

Estimation 

Public Comment: A number of 

commenters expressed concern that 

estimating the value of covered changes 

required a number of assumptions and 

that the actual effects of covered 

changes on tax revenue would be 

difficult to predict. Several commenters 

expressed support for the interim final 

rule’s approach to dynamic scoring 

methodologies, and one commenter 

argued that the final rule should 

prohibit the use of prior cash balances 

in calculations of permissible tax cuts. 

Treasury Response: Treasury 

recognizes that estimating the effects of 

covered changes requires assumptions 

and that many other factors influence 

the amount of tax revenue received. The 

interim final rule addresses these 

concerns in several ways. First, in 

general and where possible, reporting 

should be produced by the agency of the 

recipient government responsible for 

estimating the costs and effects of fiscal 

policy changes. This approach offers 

recipient governments the flexibility to 

determine their reporting methodology 

based on their existing budget scoring 

practices and capabilities. In addition, 

by relying on scoring methodologies 

that do not incorporate projected effects 

of macroeconomic growth, the 

estimation of the value of covered 

changes relies on fewer assumptions 

and thus provide greater consistency 

among states and territories. Finally, as 

discussed below, the interim final rule 

includes a de minimis threshold, below 

which the sum of covered changes will 

be deemed not to have any revenuereducing effects. 

Timing of the Impact of Covered 

Changes 

Public Comment: Several commenters 

expressed concern that recipient 

governments, to evade the offset 

provision, may backload the costs of 

certain covered changes outside of the 

covered period, and advocated that 

covered changes be instead evaluated as 

the net present value in the year that the 

covered change is enacted. These 

commenters argued that some tax cuts 

could have effects on tax revenue for 

many decades or could be structured to 

take effect after the end of the covered 

period. 

Treasury Response: As discussed in 

section Timeline for Use of SLFRF 

Funds, SLFRF funds must be used to 

cover costs incurred prior to December 

31, 2024. Accordingly, SLFRF funds 


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362 Data provided by the Urban-Brookings Tax 

Policy Center for state-level EITC changes for 2004– 

2017. 

generally would not be able to offset a 

reduction in net tax revenue occurring 

after December 31, 2024. 

For these reasons, Treasury is 

maintaining this element of the interim 

final rule without change. 

(2) In excess of the de minimis. Under 

the framework established in the 

interim final rule, after establishing that 

a covered change occurred, the recipient 

government next calculates the total 

value of all covered changes in the 

reporting year resulting in revenue 

reductions, identified in Step 1. If the 

total value of the revenue reductions 

resulting from these changes is below 

the de minimis level, the recipient 

government is deemed not to have any 

revenue-reducing changes for the 

purpose of determining the recognized 

net reduction. If the total is above the de 

minimis level, the recipient government 

must identify sources of in-year revenue 

to cover the full costs of changes that 

reduce tax revenue. Under the interim 

final rule, the de minimis level is 

calculated as 1 percent of the reporting 

year’s baseline. 

Public Comment: Many commenters 

supported the inclusion of the de 

minimis, noting that the de minimis 

protects recipients from penalty 

resulting from minor or incidental 

changes, minimizes administrative 

burden, and enhances predictability of 

the application of the offset provision. 

Some commenters expressed concern 

that the fixed threshold could result in 

cliff effects. 

Treasury Response: A clear de 

minimis threshold supports recipient 

governments’ compliance with the offset 

provision. A de minimis level 

recognizes the inherent challenges and 

uncertainties that recipient governments 

face, and thus allows relatively small 

reductions in tax revenue without 

consequence. In other words, states and 

territories may make many small 

changes to alter the composition of their 

tax revenues or implement other 

policies with marginal effects on tax 

revenues. They may also make changes 

based on projected revenue effects that 

turn out to differ from actual effects, 

unintentionally resulting in minor 

revenue changes that are not fairly 

described as ‘‘resulting from’’ tax law 

changes. However, a de minimis does 

not automatically result in 

consequences under the offset 

provision, since a recipient government 

could demonstrate that other, nonSLFRF funds to offset a net reduction in 

tax revenue. Accordingly, any cliff 

effects associated with a clear de 

minimis threshold are mitigated by 

other aspects of the framework. 

Public Comment: Commenters 

expressed a range of views regarding the 

amount of the de minimis. Some 

commenters argued that the de minimis 

was too generous, noting that the choice 

of 1 percent could, in some cases, 

permit reductions in net tax revenue of 

hundreds of millions of dollars. These 

commenters advocated that the de 

minimis be lowered (e.g., to 25 basis 

points) or be tied to a fixed amount. 

Other commenters argued that the 

choice of de minimis was not well 

supported by the statute, advocated for 

a larger de minimis and suggested that 

the amount be tied to the recipient 

government’s total expenditures in the 

prior fiscal year. 

Treasury Response: Treasury adopted 

a de minimis threshold as an 

administrative accommodation for the 

reasons discussed above. As discussed 

in the interim final rule, Treasury 

determined that the 1 percent de 

minimis level reflects the historical 

reductions in revenue due to minor 

changes in state fiscal policies and was 

determined by assessing the historical 

effects of state-level tax policy changes 

in state EITCs implemented to effect 

policy goals other than reducing net tax 

revenues.362

For these reasons, Treasury is 

adopting the 1 percent de minimis 

without change. 

(3) Safe harbor. Next, under the 

interim final rule, if the revenue 

reduction caused by the covered 

changes exceeds the 1 percent de 

minimis threshold, the recipient 

government compares the reporting 

year’s actual tax revenue to the baseline. 

If actual tax revenue is greater than the 

baseline, Treasury will deem the 

recipient government not to have any 

recognized net reduction for the 

reporting year, and therefore to be in a 

safe harbor and outside the ambit of the 

offset provision. This approach is 

consistent with the ARPA, which 

contemplates recoupment of SLFRF 

funds only in the event that such funds 

are used to offset a reduction in net tax 

revenue. If net tax revenue has not been 

reduced, the offset provision does not 

apply. In the event that actual tax 

revenue is above the baseline, the 

organic revenue growth that has 

occurred, plus any other revenue-raising 

changes, by definition must have been 

enough to offset the in-year costs of any 

covered changes. One commenter 

argued that the offset for organic growth 

be adjusted to reflect population growth. 

To minimize administrative burden, and 

for the reasons discussed above, 

Treasury is maintaining the 

measurement of actual tax revenue 

without adjustment for population 

growth. 

(4) Consideration of other sources of 

funding. The recipient government will 

then identify and calculate the total 

value of changes that could pay for 

revenue reduction due to covered 

changes and sum these items. This 

amount can be used to pay for up to the 

total value of revenue-reducing changes 

in the reporting year. These changes 

consist of two categories: 

(a) Tax and other increases in 

revenue. The recipient government must 

identify and consider covered changes 

in policy that the recipient government 

predicts will have the effect of 

increasing general revenue in a given 

reporting year. Recipient governments 

should use the same approach to 

identify and value covered changes that 

increase tax revenue as applied to 

covered changes that reduce tax 

revenue. For the reasons discussed 

above, Treasury is adopting these 

aspects of identifying and valuing 

covered changes without change. 

(b) Covered spending cuts. A recipient 

government also may cut spending in 

certain areas to pay for covered changes 

that reduce tax revenue, up to the 

amount of the recipient government’s 

net reduction in total spending as 

described below. These changes must be 

reductions in government outlays in an 

area where the recipient government has 

not spent SLFRF funds. To better align 

with existing reporting and accounting, 

the interim final rule considers the 

department, agency, or authority from 

which spending has been cut and 

whether the recipient government has 

spent SLFRF funds on that same 

department, agency, or authority. If the 

recipient government has not spent 

SLFRF funds in a department, agency, 

or authority, the full amount of the 

reduction in spending counts as a 

covered spending cut, up to the 

recipient government’s net reduction in 

total spending. If they have spent SLFRF 

funds in such department, agency, or 

authority, the SLFRF funds generally 

would be deemed to have replaced the 

amount of spending cut and only 

reductions in spending above the 

amount of SLFRF funds spent on the 

department, agency, or authority would 

count. This approach—allowing only 

spending reductions in areas where the 

recipient government has not spent 

SLFRF funds to be used as an offset for 

a reduction in net tax revenue—aims to 

prevent recipient governments from 

using SLFRF funds to supplant state or 

territory funding in the eligible use 


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4428 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 

363This cap is applied in section 35.8(c) of the 

final rule, calculating the amount of funds used in 

violation of the tax offset provision. 

364See Reporting Guidance, Section C.11, 

available at https://home.treasury.gov/system/files/ 

136/SLFRF-Compliance-and-ReportingGuidance.pdf. 

areas, and then using those state or 

territory funds to offset tax cuts. Such 

an approach helps ensure that SLFRF 

funds are not used to ‘‘indirectly’’ offset 

revenue reductions due to covered 

changes. 

Department, Agency, or Authority 

Public Comment: Several commenters 

supported the interim final rule’s 

approach to considering spending cuts 

at the department, agency, or authority 

level, on the basis that this approach is 

supported by the statutory language 

prohibiting SLFRF funds from being 

used to ‘‘directly or indirectly’’ offset a 

reduction in net tax revenue. On the 

other hand, some commenters argued 

that the methodology for identifying 

offsetting spending cuts was too 

restrictive; specifically, that 

measurement at the agency or 

department-level may not adequately 

account for the size and various 

programs that could occur in one agency 

or department. One commenter argued 

that recipient governments should 

instead be permitted to consider 

spending cuts on a more granular subunit of a department but noted that this 

additional flexibility would come at the 

cost of transparency and clarity. 

Treasury Comment: Treasury 

recognizes that some recipients may 

vary in their budgeting processes, with 

some budgeting on a department level 

and others budgeting at more or less 

granular sub-units of government. 

Relying on spending at a department, 

agency, or authority level allows 

recipient governments to report how 

SLFRF funds have been spent using 

reporting units already incorporated 

into their budgeting process. 

Spending Cuts Baseline 

Under the interim final rule, to 

calculate the amount of spending cuts 

that are available to offset a reduction in 

tax revenue, the recipient government 

must first consider whether there has 

been a reduction in total net spending, 

excluding SLFRF funds (net reduction 

in total spending). This approach 

ensures that reported spending cuts 

actually create fiscal space, rather than 

simply offset other spending increases. 

A net reduction in total spending is 

measured as the difference between 

total spending in each reporting year, 

excluding SLFRF funds spent, relative 

to total spending for the recipient’s 

fiscal year ending in 2019, adjusted for 

inflation. Measuring reductions in 

spending relative to 2019 reflects the 

fact that the fiscal space created by a 

spending cut persists so long as 

spending remains below its original 

level, even if it does not decline further, 

relative to the same amount of revenue. 

Public Comment: Several commenters 

expressed concern regarding the 

measurement of spending cuts relative 

to the recipient’s FY 2019, for example 

arguing that the choice did not take into 

account increases in spending in 2020. 

As one commenter noted, the fiscal year 

2020 required extraordinary 

intervention by recipient governments 

and the ongoing public health 

emergency continues to require 

extraordinary intervention. 

Treasury Response: FY 2019 provides 

a reasonable and relatively generous 

baseline for considering spending 

because it is the last full fiscal year prior 

to the COVID–19 public health 

emergency and governments’ 

extraordinary efforts to address the 

impact of the pandemic. This approach 

also aligns with the FY 2019 baseline for 

measuring revenue loss. Measuring 

spending cuts from year to year would, 

by contrast, not recognize any available 

funds to offset revenue reductions 

unless spending continued to decline, 

failing to reflect the actual availability of 

funds created by a persistent change and 

limiting the discretion of states and 

territories. 

For the reasons discussed above, 

Treasury is adopting the approach taken 

in the interim final rule without change. 

(5) Identification of amounts subject 

to recoupment. If a recipient 

government (i) reports covered changes 

that reduce tax revenue (Step 1); (ii) to 

a degree greater than the de minimis 

(Step 2); (iii) has experienced a 

reduction in net tax revenue (Step 3); 

and (iv) lacks sufficient revenue from 

other, permissible sources to pay for the 

entirety of the reduction (Step 4), then 

the recipient government will be 

considered to have used SLFRF funds to 

offset a reduction in net tax revenue, up 

to the amount that revenue has actually 

declined. That is, the maximum value of 

the reduction revenue due to covered 

changes that a recipient government 

must cover is capped at the difference 

between the baseline and actual tax 

revenue.363 In the event that the 

baseline is above actual tax revenue but 

the difference between them is less than 

the sum of revenue reducing changes 

that are not paid for with other, 

permissible sources, organic revenue 

growth has implicitly offset a portion of 

the reduction. The revenue reduction 

cap implements this approach for 

permitting organic revenue growth to 

cover the cost of tax cuts. 

Finally, a recipient government may 

request reconsideration of any amounts 

identified in a notice from Treasury as 

subject to recoupment under this 

framework. Comments and responses to 

the recoupment process are discussed in 

section Remediation and Recoupment of 

this Supplemental Information. 

3. Reporting 

To facilitate the implementation of 

the framework above, and in addition to 

reporting required on eligible uses, 

recipient governments are required to 

report certain information. The interim 

final rule indicated that Treasury would 

provide additional guidance at a later 

date and that, on an annual basis, it 

expected each recipient government 

would be required to provide the 

following information: 

• Actual net tax revenue for the 

reporting year; 

• Each revenue-reducing change 

made to date during the covered period 

and the in-year value of each change; 

• Each revenue-raising change made 

to date during the covered period and 

the in-year value of each change; and 

• Each covered spending cut made to 

date during the covered period, the inyear value of each cut, and 

documentation demonstrating that each 

spending cut is covered as prescribed 

under the interim final rule. 

Since the adoption of the interim final 

rule, Treasury has provided guidance on 

reporting regarding eligible uses and has 

required recipient governments to 

indicate whether they have made 

covered changes and the value of such 

changes.364

Reporting Burden 

Public Comment: Some commenters 

argued that the framework for 

identifying and reporting impermissible 

offsets was burdensome and that the 

burdens should be accounted for under 

Executive Order 13132 (Federalism, 

August 4, 1999). 

Treasury Response: Taking into 

consideration comments received 

regarding burden, Treasury is 

considering a tiered approach to 

reporting on the offset provision. 

Specifically, under this approach, a 

recipient would only be required to 

report information to the extent needed 

to determine whether SLFRF funds had 

been used to offset a reduction in net tax 

revenue. For example, a recipient 

government would be required to report 


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Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4429 

365 ‘‘[G]overnment services would not include 

interest or principal on any outstanding debt 

instrument, including, for example, short-term 

revenue or tax anticipation notes, or fees or 

issuance costs associated with the issuance of new 

debt. For the same reasons, government services 

would not include satisfaction of any obligation 

arising under or pursuant to a settlement agreement, 

judgment, consent decree, or judicially confirmed 

debt restructuring in a judicial, administrative, or 

regulatory proceeding, except if the judgment or 

settlement required the provision of government 

services.’’ 86 FR 26796–97 (May 17, 2021). 

information regarding permissible 

offsets only if it had also reported 

covered changes that were in excess of 

the de minimis and had reported a net 

reduction in tax revenue. Treasury will 

provide additional guidance and 

instructions on the reporting 

requirements at a later date. 

As discussed in section Regulatory 

Analyses of this Supplemental 

Information, Treasury maintains that the 

final rule does not have federalism 

implications within the meaning of 

Executive Order 13132 (Federalism, 

August 4, 1999). In the ARPA, Congress 

requires states and territories to repay 

the Secretary for amounts used in 

violation of the prohibition on using 

SLFRF funds to offset reductions in net 

tax revenue, and it authorizes the 

Secretary to issue regulations to carry 

out this limitation and other 

requirements of the statute. Section 6(b) 

of Executive Order 13132 contemplates 

that certain regulations will be required 

by statute, as is the case with the 

interim final rule and the final rule, in 

which case section 6(b)(2)(B)’s 

requirement to include a federalism 

summary impact statement in the 

Supplementary Information to the 

regulation does not apply. 

Notwithstanding the above, Treasury 

has engaged in efforts to consult and 

work cooperatively with affected state, 

local, and Tribal government officials 

and associations in the process of 

developing the interim final rule. 

Reporting Transparency 

Public Comment: Several commenters 

argued that information supporting the 

net tax offset calculation should be 

publicly available. Some of these 

commenters requested that reporting be 

made available in a machine-readable 

format, and others advocated that 

recipient governments disclose this 

information on their local budget 

agency’s website. These commenters 

argued that making information 

regarding tax changes publicly available 

would increase transparency and 

accountability. Further, several 

commenters suggested that Treasury 

provide a mechanism for citizens to 

register their concerns about particular 

tax actions. 

Treasury Response: As discussed in 

other sections, reporting requirements 

promote transparency and 

accountability for the general public and 

constituents of recipient governments to 

understand how state, local, and Tribal 

governments have used SLFRF funds. 

Since the publication of the interim 

final rule, Treasury issued 

supplementary reporting guidance in 

the Compliance and Reporting Guidance 

and in the User Guide: Treasury’s Portal 

for Recipient Reporting (User Guide), 

which addresses the particular content 

and form of required reporting. Treasury 

will continue to issue updated guidance 

prior to each reporting period clarifying 

any modifications to requested report 

content and will continue to consider 

how reporting can best support 

transparency and accountability while 

minimizing recipient administrative 

burden. Further, as discussed in the 

section Remediation and Recoupment, 

Treasury may address potential 

violations of this final rule based on 

both information submitted from 

recipients, either through quarterly 

reports or self-reporting, and from other 

sources of information (e.g., information 

submitted from the public). 

2. Deposit Into Pension Funds 

Background: Subsection 602(c)(2)(B) 

of the Social Security Act provides that 

‘‘[n]o State or territory may use funds 

made available under this section for 

deposit into any pension fund.’’ 

Similarly, subsection 603(c)(2) of the 

Social Security Act provides that ‘‘[n]o 

metropolitan city, nonentitlement unit 

of local government, or county may use 

funds made available under this section 

for deposit into any pension fund.’’ 

For purposes of this restriction on 

pension deposits, the interim final rule 

defined deposit to mean ‘‘an 

extraordinary payment of an accrued, 

unfunded liability.’’ The interim final 

rule also specified that a deposit does 

not include routine contributions made 

as part of a payroll obligation, such as 

the normal cost component of a pension 

contribution or the component that 

consists of amortization of unfunded 

liabilities calculated by reference to the 

employer’s payroll costs. The interim 

final rule applied the restriction on 

pension deposits to all recipients. 

Public Comment: Several commenters 

observed that the statutory restriction on 

deposits into pension funds does not 

apply to Tribal governments. 

Treasury Response: In response, 

Treasury is clarifying in the final rule 

that the pension restriction does not 

apply to Tribal governments. 

Public Comment: Treasury also 

received a comment expressing concern 

that the interim final rule permitted 

recipients to make a larger than usual 

pension contribution, so long as the 

timing of that contribution aligns with 

the historical timing of contributions. 

Treasury Response: The interim final 

rule prohibited the use of SLFRF funds 

from the ARPA to make extraordinary 

payments, and the SUPPLEMENTARY

INFORMATION to the interim final rule 

said that a payment would be an 

extraordinary payment if it reduces a 

liability incurred prior to the start of the 

COVID–19 public health emergency and 

occurs outside the recipient’s regular 

timing for making the payment. At the 

same time, however, as suggested by the 

comment Treasury received, a payment 

made at the regular time for pension 

contributions may very well be an 

extraordinary payment, for example, if it 

is larger than a regular payment would 

have been. Such a payment would be a 

restricted use. 

Public Comment: Other commenters 

asked which pension contributions are 

permitted. 

Treasury Response: To be an eligible 

use of SLFRF funds, a use must (1) be 

eligible under one of the eligible use 

categories and (2) not contravene any of 

the applicable restrictions on uses of 

funds. Some pension contributions may 

be eligible because they both fit within 

an eligible use category and do not 

contravene the restriction on deposits 

into pension funds (i.e., they are not an 

extraordinary payment of an accrued, 

unfunded liability). For example, 

payroll and covered benefits for public 

health and safety staff responding to 

COVID–19 are an eligible use of funds 

to respond to the public health and 

negative economic impacts of the 

pandemic; routine pension 

contributions as part of an employee’s 

regular covered benefits are permissible 

under that eligible use category. 

B. Other Restrictions on Use of Funds 

1. Debt Service and Replenishing 

Financial Reserves 

The SUPPLEMENTARY INFORMATION to 

the interim final rule provided that debt 

service is not an eligible use of funds 

either to respond to the public health 

emergency or its negative economic 

impacts or as a provision of government 

services to the extent of revenue loss.365

The interim final rule also provided that 

replenishing financial reserves (e.g., 

rainy day funds) is not an eligible use 

of funds either to respond to the public 

health emergency or its negative 

economic impacts or as a provision of 


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366 ‘‘In addition, replenishing financial reserves 

(e.g., rainy day or other reserve funds) would not 

be considered provision of a government service, 

since such expenses do not directly relate to the 

provision of government services.’’ 

367Table Z.1 of the Financial Accounts of the 

United States, Board of Governors of the Federal 

Reserve System, and Table 1.1.5 of National Income 

and Product Accounts, Bureau of Economic 

Analysis. 

government services to the extent of 

revenue loss.366

As explained in greater detail below, 

Treasury, in the final rule, has retained 

these restrictions and is clarifying that 

these restrictions on the use of SLFRF 

funds apply to all eligible use 

categories. 

Public Comments 

Several commenters suggested that 

debt service and reserve replenishment 

should qualify as the provision of a 

government service and be an eligible 

use of funds, up to the amount of 

revenue loss due to the pandemic. Many 

commenters indicated that they had 

been forced to borrow money or dip into 

reserve funds to continue providing 

government services during the public 

health emergency and that using SLFRF 

funds for resulting debt service or 

reserve replenishment costs should 

therefore be considered a government 

service. 

Many comments from Tribal 

governments noted that their 

governments depend on revenue from 

Tribal enterprises to pay government 

debts and provide services. The 

comments suggest that it should be an 

eligible use of SLFRF to replace lost 

revenue from these enterprises that 

would typically be used to pay debt 

service costs. Other commenters argued 

that paying the interest or principal on 

debt should in some cases be considered 

provision of government services and an 

eligible use of funds as such 

expenditures facilitate the provision of 

government services. 

Some commenters argued that debt 

costs or reserve drawdowns during the 

public health emergency constitute a 

negative economic impact to recipient 

governments, and thus debt service or 

reserve replenishment should be an 

eligible use to respond to that negative 

economic impact. For example, several 

commenters suggested that there should 

be a specific carve-out allowing the use 

of SLFRF funds for debt service on debt 

incurred for government services after 

January 27, 2020, the start of the public 

health emergency, or short-term debt 

incurred for this purpose. Others 

suggested that recipient governments 

should be able to service debt, up to the 

amount of debt incurred in direct 

response to the pandemic. These 

commenters generally reasoned that the 

cost of responding to the public health 

emergency and its negative economic 

impacts prior to APRA’s passage 

constitutes a negative economic impact 

of the pandemic. 

Some commenters argued that the 

specific impacts of the pandemic on the 

travel, tourism, and hospitality sector 

had affected their ability to meet debt 

service costs. For example, some 

commenters explained that specific tax 

streams (e.g., hotel room taxes) or 

revenue sources (e.g., hospitality 

generally) are tied to specific debt 

instruments and that these revenue 

sources had declined during the public 

health emergency; commenters argued 

that this constitutes a negative economic 

impact that SLFRF funds should be 

permitted to address. 

Finally, some commenters questioned 

why servicing debt incurred after March 

3, 2021 for an otherwise eligible project 

(e.g., a broadband infrastructure project) 

would not be an eligible use of funds. 

On the other hand, many commenters 

expressed support for the interim final 

rule’s prohibition on use of funds for 

debt service and reserve replenishment. 

These commenters largely argued that 

SLFRF funds should be used to provide 

current services to communities in 

response to the public health emergency 

and that use of funds for debt service or 

reserve replenishment represented, 

respectively, payment for past costs or 

savings for potential future costs. In 

addition to the prohibition on debt 

service and reserve replenishment, some 

commentors suggested that the final rule 

should also prevent funds from being 

used for state UI trust fund 

replenishment or for paying off debt 

owed through UI trust funds. One 

commenter argued that Treasury should 

further restrict recipient governments, 

for example by preventing recipients 

from making cuts to an allowable budget 

item, filling the budget gap with SLFRF 

funds, and then using the savings from 

the initial cut for debt service or reserve 

replenishment. 

Treasury Response 

The final rule maintains the 

restriction on the use of funds for debt 

service or reserve replenishment for the 

reasons described below and clarifies 

that this restriction applies to all eligible 

use categories. 

First, debt service and reserve 

replenishment costs do not constitute 

the provision of services to constituents. 

As noted in the interim final rule, 

financing expenses—such as issuance of 

debt or payment of debt service—do not 

provide services or aid to citizens. 

Similarly, contributions to rainy day 

funds and similar financial reserves 

constitute savings for future spending 

needs. As such, these expenses do not 

respond to the current and ongoing 

public health and negative economic 

impacts of the pandemic, nor do they 

provide a government service. 

Second, payments from the SLFRF are 

intended to be used prospectively (see 

section Timeline for Use of SLFRF 

Funds). The interim final rule provided 

that funds may be used for costs 

incurred beginning on March 3, 2021, 

which Treasury has maintained in the 

final rule. Use of funds for debt service 

on indebtedness issued prior to March 

3, 2021 necessarily entails using funds 

for costs incurred during prior time 

periods, rather than the present 

response to the public health emergency 

and its negative economic impacts or to 

provide government services. 

Third, SLFRF funds provide 

recipients with substantial latitude to 

use funds to support the diverse needs 

in their communities. With SLFRF 

resources available, recipients have less 

need to incur debt for otherwise-eligible 

SLFRF uses. 

Finally, given the strong performance 

of overall revenues and low municipal 

bond yields, state and local 

governments generally do not face high 

levels of fiscal stress. Limits on debt 

service or replenishment of reserves 

would not have a substantial impact on 

recipients’ ability to provide services. 

The ratio of state and local debt-to-GDP, 

which spiked briefly during the 

pandemic, has recovered to its prepandemic level and remains well below 

levels seen during the Great 

Recession.367

2. Settlements and Judgments 

The interim final rule also provided 

that satisfaction of any obligation arising 

under or pursuant to a settlement 

agreement, judgment, consent decree, or 

judicially confirmed debt restructuring 

in a judicial, administrative, or 

regulatory proceeding would not be an 

eligible use of funds to respond to the 

public health and negative economic 

impacts of the pandemic or as a 

government service provided under the 

revenue loss eligible use category. 

However, if the judgment or settlement 

requires the recipient to provide 

services that are otherwise eligible 

under an SLFRF eligible use category, 

specifically if the settlement or 

judgment requires the recipient to 

provide services to respond to the 

COVID–19 public health emergency or 

its negative economic impacts or to 

provide government services, then those 

costs are eligible uses of SLFRF funds. 


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368See Sec. 602(a)(1); 603(a)(1); 602(c)(1); 

603(c)(1). 369See 35.6(b); Coronavirus State and Local Fiscal 

Recovery Funds, 86 FR at 26786. 

370Specifically, the Award Terms and Conditions 

provide that ‘‘[r]ecipient understands and agrees it 

must maintain a conflict of interest policy 

consistent with 2 CFR 200.318(c), and that such 

conflict-of-interest policy is applicable to each 

activity funded under this award. Recipients and 

subrecipients must disclose in writing to Treasury 

or the pass-through agency, as appropriate, any 

potential conflict of interest affecting the awarded 

funds in accordance with 2 CFR 200.112.’’ 

371An exception is statutes that do not apply 

unless explicitly stated, including, e.g., the National 

Environmental Policy Act and the Davis-Bacon Act. 

In other words, satisfaction of a 

settlement or judgment itself is not itself 

an eligible use of funds, unless the 

settlement requires the recipient to 

provide services or incur other costs 

that are eligible uses of SLFRF funds. 

In the final rule, Treasury is 

maintaining the interim final rule 

approach and clarifying that it applies 

to all eligible use categories and any use 

of funds under the SLFRF program. 

3. General Restrictions 

In addition to the above restrictions, 

there are three general restrictions that 

apply to SLFRF funds. These 

restrictions, which reflect existing laws 

and regulations, the Award Terms and 

Conditions, and application of the 

ARPA statute, applied under the interim 

final rule, and they continue to apply 

under the final rule. 

A primary purpose of the SLFRF in 

the ARPA is to support efforts to stop 

the spread of COVID–19.368 As 

discussed above, recipients of SLFRF 

funds are required to comply with the 

Award Terms and Conditions 

established for the use of such funds. 

The interim final rule and final rule 

implement this objective by, in part, 

providing that recipients may use 

SLFRF funds for COVID–19 mitigation 

and prevention.369 See section Public 

Health in Public Health and Negative 

Economic Impacts. 

The CDC has provided 

recommendations and guidelines to 

help mitigate and prevent COVID–19 

and has identified vaccines and masks 

as two of the best tools to prevent the 

spread of COVID–19. The interim final 

rule and final rule help support 

recipients in stopping the spread of 

COVID–19 through these 

recommendations and guidelines. 

Consistent with the purpose of the 

ARPA and as implemented through the 

interim final rule and final rule, a 

recipient may not use SLFRF funds for 

a program, service, or capital 

expenditure that includes a term or 

condition that undermines efforts to 

stop the spread of COVID–19. A 

program or service that imposes 

conditions on participation or 

acceptance of the service that would 

undermine efforts to stop the spread of 

COVID–19 or discourage compliance 

with recommendations and guidelines 

in CDC guidance for stopping the spread 

of COVID–19 is not a permissible use of 

SLFRF funds. 

In other words, recipients may not use 

funds for a program that undermines 

practices included in the CDC’s 

guidelines and recommendations for 

stopping the spread of COVID–19. This 

includes programs that impose a 

condition to discourage compliance 

with practices in line with CDC 

guidance (e.g., paying off fines to 

businesses incurred for violation of 

COVID–19 vaccination or safety 

requirements), as well as programs that 

require households, businesses, 

nonprofits, or other entities not to use 

practices in line with CDC guidance as 

a condition of receiving funds (e.g., 

requiring that businesses abstain from 

requiring mask use or employee 

vaccination as a condition of receiving 

SLFRF funds). 

Second, a recipient may not use 

SLFRF funds in violation of the conflict 

of interest requirements contained in 

the Award Terms and Conditions or the 

Office of Management and Budget’s 

Uniform Guidance, including any selfdealing or violation of ethics rules. 

Recipients are required to establish 

policies and procedures to manage 

potential conflicts of interest.370

Treasury may provide further guidance 

on the types of activities or conflicts 

that the recipient’s policies and 

procedures must cover. 

Lastly, recipients should also be 

cognizant that federal, state, and local 

laws and regulations, outside of SLFRF 

program requirements, may apply. 

Recipients may not use revenue loss 

funds, for instance, to violate other 

background laws that limit the scope of 

activities that may be conducted as 

‘‘government services,’’ including other 

state and federal laws. State and local 

procurement, contracting, and conflictsof-interest laws and regulations may 

include applicable requirements, 

including, for example, required 

procurement processes for contractor 

selection or competitive price setting. 

Furthermore, recipients are also 

required to comply with other federal, 

state, and local background laws, 

including environmental laws 371 and 

federal civil rights and 

nondiscrimination requirements, which 

include prohibitions on discrimination 

on the basis of race, color, national 

origin, sex, (including sexual orientation 

and gender identity), religion, disability, 

or age, or familial status (having 

children under the age of 18). 

IV. Program Administration Provisions 

The interim final rule included 

several sections that described the 

processes and requirements for 

administering the program on an 

ongoing basis, specifically: Distribution 

of funds, transfer of funds, use of funds 

for program administration, reporting on 

the use of funds, and remediation and 

recoupment of funds used for ineligible 

purposes. 

To enhance clarity, this 

SUPPLEMENTARY INFORMATION for the 

final rule organizes these issues into one 

section on Program Administration 

Provisions. Recipients should also 

consult Treasury’s Compliance and 

Reporting Guidance for additional 

information on program administration 

processes and requirements, including 

the applicability of the Uniform 

Guidance. 

A. Payments in Tranches to Local 

Governments and Certain States 

Section 602(b)(6)(A)(ii) of the Social 

Security Act authorizes the Secretary to 

withhold payment of up to 50 percent 

of the amount allocated to each state 

and territory for a period of up to 12 

months from the date on which the state 

or territory provides its statutorilyrequired certification to the Secretary. 

The Social Security Act requires any 

such withholding be based on the 

unemployment rate in the state or 

territory as of the date of the 

certification. 

Under the interim final rule, Treasury 

provided that it would withhold 50 

percent of the amount allocated from 

any state that had an unemployment 

rate less than two percentage points 

above its unemployment rate in 

February 2020 as of the date the state 

submitted its initial certification for 

payment of funds pursuant to section 

602(d)(1) of the Social Security Act. 

Based on data available at the time of 

the issuance of the interim final rule, 

this threshold was expected to result in 

a majority of states being paid in two 

tranches. Treasury did not split the 

payments of any territories. 

Public Comment: One commenter 

asked Treasury to allow a state to 

request release of the portion of the 

state’s second tranche payment after the 

state could demonstrate that it had 

allocated the entirety of the first 

tranche, a need to continue ongoing 

programs, and a desire to avoid 

borrowing costs. Another commenter 

asked Treasury to clarify whether states 

that received half their funding in the 


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372Treasury’s Update on Interpretation for the 75 

Percent Budget Cap Calculation can be found at: 

https://home.treasury.gov/system/files/136/NEUUpdate-75-Percent-Budget-Cap.pdf. 

373The Guidance on Distribution of Funds to 

Nonentitlement Units of Local Government can be 

found at this link: https://home.treasury.gov/ 

system/files/136/NEU_Guidance.pdf. The 

Nonentitlement Unit of Local Government 

Definitional and Data Methodology can be found at 

this link: https://home.treasury.gov/system/files/ 

136/NEU_Methodology.pdf. 374Treasury has interpreted NEU to generally 

include both incorporated places and MCDs with 

active functioning governments, subject to the state 

determining, in the case of weak-MCD States, that 

a weak MCD has the legal and operational capacity 

to accept SLFRF funds and provides a broad range 

of services that would constitute eligible uses under 

ARPA. More details can be found in the 

Nonentitlement Unit of Local Government 

Definitional and Data Methodology, available at 

https://home.treasury.gov/system/files/136/NEU_

Methodology.pdf. 

first payment would receive their 

second half payment within 12 months. 

Similarly, some recipients requested 

clarification on whether they could 

obligate second tranche funds before 

receipt or use second tranche funds for 

costs incurred prior to receipt. 

Treasury Response: The final rule 

maintains the approach in the interim 

final rule with two modifications. As 

described in the interim final rule, 

splitting payments for most states 

provides consistency with payments to 

local governments and encourages states 

to adapt their use of funds to 

developments that arise in the course of 

the economic recovery. Moreover, 

SLFRF funds may be used for costs 

incurred during the period of 

performance. Recipients may use their 

jurisdiction’s budgeting and 

procurement practices and laws to 

determine how and when second 

tranche funds may be obligated. 

The final rule makes two adjustments 

for operational purposes. First, the final 

rule provides that Treasury expects to 

make all second tranche payments to 

states available beginning 12 months 

from the date that funding was first 

made available by Treasury (May 10, 

2021) regardless of when each 

individual state submitted its initial 

certification. This should increase 

clarity and consistency on the timing of 

second tranche payments for both states 

and Treasury. Second, also to ease 

recipient states’ administrative burden, 

the final rule strikes a requirement from 

the interim final rule that states must 

certify for their second tranche 

payments and file all required reports at 

least 30 days prior to the date on which 

their second payment is made available. 

The final rule simply requires that states 

certify for their second tranche payment 

and file all required reports before 

receiving their second tranche payment, 

with no 30 day wait period required. 

B. Payments to Nonentitlement Units of 

Local Government (NEUs) and Units of 

Local Government (UGLGs) Within NonUGLG Counties 

The interim final rule established 

requirements related to distributions of 

SLFRF funds by states and territories to 

NEUs and UGLGs within non-UGLG 

counties. Specifically, the interim final 

rule provided that the total distribution 

to an NEU cannot exceed 75 percent of 

the most recent budget for the NEU (the 

75 percent budget cap); a requirement 

set forth in section 603(b)(2)(C)(iii) of 

the Social Security Act. The interim 

final rule SUPPLEMENTARY INFORMATION

defined the NEU’s budget for purposes 

of calculating the 75 percent budget cap 

as the NEU’s ‘‘most recent annual total 

operating budget, including its general 

fund and other funds, as of January 27, 

2020.’’ The interim final rule further 

provided that states and territories must 

permit NEUs without formal budgets as 

of January 27, 2020 to self-certify their 

most recent annual expenditures as of 

January 27, 2020 for the purpose of 

calculating the 75 percent budget cap. 

Further, the interim final rule 

prohibited states and territories from 

placing additional conditions or 

requirements on distributions to NEUs 

beyond those required by the statute, 

the interim final rule, or Treasury’s 

guidance and from offsetting any debt 

owed by such NEUs against such 

distributions. 

Commenters predominantly focused 

on the definition of an NEU’s budget for 

purposes of calculating the 75 percent 

budget cap, NEU allocations and 

eligibility, and the prohibition on states 

and territories imposing additional 

conditions or requirements in the NEU 

distribution process. 

Definition of NEU Budget 

Public Comment: Commenters 

suggested that Treasury provide greater 

clarification on the definition of an 

NEU’s ‘‘most recent budget’’ for 

purposes of the 75 percent budget cap 

calculation. Treasury provided updated 

guidance on its interpretation of the 75 

percent budget cap on June 30, 2021, 

and a commenter suggested that 

Treasury incorporate such updated 

interpretation into the SUPPLEMENTARY

INFORMATION of the final rule. 

Treasury Response: Consistent with 

the Update on Interpretation for the 75 

Percent Budget Cap Calculation 

published on June 30, 2021,372 the 

SUPPLEMENTARY INFORMATION of the final 

rule defines an NEU’s budget for 

purposes of calculating the 75 percent 

budget cap as its total annual budget, 

including both operating and capital 

expenditure budgets, in effect as of 

January 27, 2020. The guidance also 

gives states and territories flexibility to 

provide further guidance to their NEUs 

to operationalize the 75 percent budget 

cap. Given the variance in local 

financial accounting, this updated 

definition will better facilitate states’ 

and territories’ distribution of SLFRF 

funds to NEUs. 

Allocations and Eligibility 

Public Comment: Many commenters 

provided feedback on specific allocation 

calculations and eligibility of local 

governments for NEU funding. 

Commenters addressed how a locality 

was classified as an NEU or 

metropolitan city, deviations between 

Treasury’s allocation calculations and 

earlier estimates from other sources, 

treatment of unincorporated areas, 

sources for population data, and 

Treasury’s allocation of NEU funding to 

states and territories based on the 

population of a state and territory 

outside of its metropolitan cities. Two 

commenters proposed that Treasury 

provide an appeal process for localities 

that were not identified on the List of 

Local Governments used by states and 

territories as part of the process in 

which a state or territory determines the 

eligibility of an NEU in accordance with 

Treasury guidance, or for Minor Civil 

Divisions (MCDs) that were denied 

funding as part of a facts-andcircumstances test undertaken by a 

weak-MCD state. 

Treasury Response: Neither the 

interim final rule nor the final rule 

addresses eligibility or allocations 

issues, and comments on these topics 

are outside the scope of this rulemaking. 

These questions are addressed in other 

Treasury guidance, including the 

Guidance on Distribution of Funds to 

Non-entitlement Units of Local 

Government and Non-entitlement Unit 

of Local Government Definitional and 

Data Methodology guidance documents 

available on Treasury’s website.373

Because Treasury interpreted the 

definition of an NEU 374 in accordance 

with the statute and established an NEU 

distribution process in May 2021, the 

final rule does not incorporate an 

appeals process regarding the 

definitions or the facts-andcircumstances test used for eligibility 

determinations. 

Prohibition on Additional Conditions or 

Requirements in the NEU Distribution 

Process 

Public Comment: One commenter 

expressed support for Treasury’s 

prohibition on states and territories 


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placing additional conditions or 

requirements on distributions to NEUs. 

This prohibition restricts states and 

territories from imposing limitations on 

NEUs’ use of SLFRF funds based on an 

NEU’s proposed spending plan or other 

policies, offsetting any debt owed by an 

NEU against the NEU’s distribution, or 

providing funding on a reimbursement 

model. In particular, the commenter 

noted that a reimbursement model 

would lead to inequities in accessing 

SLFRF funds. 

Treasury Response: The final rule 

maintains and finalizes the prohibition 

on states and territories placing 

additional conditions or requirements 

on distributions to NEUs as well as to 

any UGLGs within counties that are 

non-UGLGs. Such conditions or 

requirements may contravene the 

statutory requirement that states and 

territories make distributions based on 

population and within the statutorily 

defined timeframe. 

Other Provisions 

Treasury did not receive substantive 

comments on the requirement that states 

and territories permit NEUs without 

formal budgets as of January 27, 2020 to 

self-certify their most recent annual 

expenditures as of January 27, 2020 for 

the purpose of calculating the 75 

percent budget cap, or Treasury’s 

interpretation of the 75 percent budget 

cap applying only to a consolidated 

government’s NEU allocation under 

section 603(b)(2) but not to a 

consolidated government’s county 

allocation under section 603(b)(3). 

Further, Treasury did not receive 

substantive comments on the interim 

final rule’s allowance that states and 

territories be able to use SLFRF funds 

under section 602(c)(1)(A) to fund 

expenses related to administering 

payments to NEUs and units of general 

local government. As such, the final rule 

maintains these provisions as written in 

the interim final rule without 

modification. 

Treasury received some comments 

that are not addressed because they are 

beyond the scope of the NEU provision 

of the interim final rule or not 

authorized by the statute, including 

comments related to state accounting 

practices, re-allocations of NEU 

allocations that exceed the 75 percent 

budget cap, and concerns around 

eligible uses under SLFRF that small 

local governments may find particularly 

salient. 

C. Timeline for Use of SLFRF Funds 

The interim final rule provided that 

‘‘[a] recipient may only use funds to 

cover costs incurred during the period 

beginning March 3, 2021 and ending 

December 31, 2024.’’ The interim final 

rule also provides that the period of 

performance will run until December 

31, 2026, which will provide recipients 

an additional two years during which 

they may expend funds for costs 

incurred (i.e., obligated). 

As explained in more detail below, in 

the final rule Treasury is maintaining 

these time periods. Treasury will retain 

March 3, 2021 as the first date when 

costs may be incurred, to provide for 

forward-looking or prospective use of 

funds and to align with the start date of 

the ‘‘covered period’’ as such term is 

used in section 602(c)(2)(A). The 

deadline for costs to be incurred— 

which the final rule clarifies means 

obligated—December 31, 2024, is 

specified in the ARPA statute, and 

Treasury will retain December 31, 2026 

as the end of the period of performance 

to provide a reasonable amount of time 

for recipients to liquidate obligations 

incurred by the statutory deadline. 

Public Comments. Some commenters 

expressed concerns about costs incurred 

before March 3, 2021 not being covered 

and recommended the ‘‘start date’’ be 

changed to January 2020 to coincide 

with the declaration of the public health 

emergency. These commenters argued 

that recipient governments began 

incurring costs to respond to COVID–19 

and its economic impacts in January 

2020 and that prior federal fiscal relief, 

such as relief provided in the 

Coronavirus Aid, Relief, and Economic 

Security Act, did not fully compensate 

recipient governments for these costs. 

These commenters recommended that 

costs incurred before March 3, 2021 that 

otherwise fit within eligible use 

categories for SLFRF should be 

permissible uses of funds. 

Some commenters asked Treasury to 

clarify whether local governments are 

subject to the same covered period as 

states and territories beginning March 3, 

2021. Commenters noted that section 

603(g) of the Social Security Act does 

not contain the same definition of 

‘‘covered period’’ as section 602(g)(1) of 

the Social Security Act, which 

references a statutory provision that 

only applies to states and territories. 

Many commenters requested that the 

deadline for costs to be incurred and the 

period of performance be extended due 

to the longer timeline for completing 

water and sewer projects. One 

commenter requested that recipients be 

able to split projects into different 

phases so that funds could be expended 

on larger, longer term projects (e.g., by 

obligating funds on one portion of the 

project by the statutory deadline). One 

commenter recommended that the 

period of performance be extended for 

at least two additional years beyond the 

expenditure deadline set forth in the 

interim final rule, i.e., until December 

31, 2028. One commenter wrote that the 

final rule should allow for extended 

projects (e.g., over a time horizon of 

more than ten years) for recipients 

working to develop long-term water 

supplies to prepare for extreme drought. 

Treasury Response. In the final rule, 

Treasury is maintaining March 3, 2021 

as the date when recipients may begin 

to incur costs using SLFRF funds. As 

described in the interim final rule, use 

of SLFRF funds is forward looking and 

the eligible use categories provided by 

statute are all prospective in nature. 

While recipients may identify and 

respond to negative economic impacts 

that occurred during 2020, the costs 

incurred to respond to these impacts 

remain prospective. Further, Treasury 

considers the beginning of the covered 

period for purposes of determining 

compliance with section 602(c)(2)(A) to 

be a relevant reference point for this 

purpose that provides some flexibility 

for recipients that began incurring costs 

in the anticipation of enactment of the 

ARPA or in advance of the issuance of 

the interim final rule and receipt of 

payment. 

Finally, establishing an earlier start 

date would permit governments to use 

funds received in 2021 to satisfy 

obligations incurred in 2020. This use 

raises a substantial risk of SLFRF funds 

being used to supplant other recipient 

funds previously used to pay for such 

2020 obligations, freeing funds for 

recipients to use for any purpose rather 

than eligible uses of SLFRF funds under 

the ARPA. Permitting such usage would 

undermine the provisions setting forth 

permissible and impermissible uses in 

the statute. Therefore, a reading of the 

statute permitting use of funds prior to 

March 3, 2021 would be inconsistent 

with the statutory structure. 

In the final rule, Treasury is also 

maintaining the deadlines by which 

funds must be obligated (i.e., December 

31, 2024) and by which such obligations 

must be liquidated (i.e., December 31, 

2026). The December 31, 2024 deadline 

by which eligible costs must be incurred 

is established by statute. Treasury is 

finalizing its interpretation of 

‘‘incurred’’ to be equivalent to the 

definition of ‘‘obligation,’’ based on the 

definition used for purposes of the 

Uniform Guidance. Treasury is also 

maintaining the period of performance, 

which will run through December 31, 

2026, and provides the deadline by 

which recipients must expend obligated 

funds. Most recipients received SLFRF 

funds in the spring and summer of 2021, 


lotter on DSK11XQN23PROD with RULES2
4434 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 

375Coronavirus State and Local Fiscal Recovery 

Funds, Frequently Asked Questions, as of July 19, 

2021; https://home.treasury.gov/system/files/136/ 

SLFRPFAQ.pdf. 376See FAQ 4.10. Id. 

meaning that they have over three years 

to obligate and over five years to expend 

funds. This provides a sufficient amount 

of time for recipients to plan and 

execute projects. 

D. Transfers of Funds 

Under section 602(c)(3) of the Social 

Security Act, a state, territory, or Tribal 

government may transfer SLFRF funds 

to a ‘‘private nonprofit organization . . . 

a Tribal organization . . . a public 

benefit corporation involved in the 

transportation of passengers or cargo, or 

a special-purpose unit of state or local 

government.’’ Similarly, section 

603(c)(3) authorizes a local government 

to transfer SLFRF funds to the same 

entities (other than Tribal 

organizations). Separately, section 

603(c)(4) authorizes a local government 

to transfer SLFRF funds to the state in 

which it is located. 

Entities Eligible for a Transfer Under 

Sections 602(c)(3) and 603(c)(3) 

Regarding transfers permitted under 

sections 602(c)(3) and 603(c)(3) of the 

Act, the interim final rule 

Supplementary Information clarified 

that the lists of transferees in these 

sections are not exclusive and that state, 

local, territorial, and Tribal governments 

may transfer funds to other constituent 

units of government or private entities 

beyond those specified in the statute. 

Public Comment: Several commenters 

supported Treasury’s interpretation of 

eligible transferees in sections 602(c)(3) 

and 603(c)(3) as nonexclusive. However, 

many commenters asked for greater 

clarity as to whether specific entities not 

listed in Treasury’s examples of eligible 

subrecipients, such as nonprofits and 

Tribal governments, were eligible 

transferees. One commenter also asked 

whether a recipient may transfer SLFRF 

funds to a higher level of government, 

such as a locality to the county in which 

it is located. 

Treasury Response: The final rule 

clarifies that, in addition to the entities 

enumerated in sections 602(c)(3) and 

603(c)(3), recipients may transfer SLFRF 

funds to any entity to carry out as a 

subrecipient an eligible use of funds by 

the transferor, as long as they comply 

with the Award Terms and Conditions 

and other applicable requirements, 

including the Uniform Guidance at 2 

CFR 200.331–200.333. Eligible 

subrecipients include, but are not 

limited to, other units of government 

(including Tribal governments), 

nonprofits and other civil society 

organizations, and private entities. 

Further, the final rule clarifies that 

transfers may be made to both 

constituent or non-constituent units of 

government. For example, county A 

may transfer SLFRF funds to county B 

as long as county B abides by the use 

restrictions applicable to county A and 

the transfer would constitute an eligible 

use of the funds by county A. County A 

must receive a benefit proportionate to 

the amount transferred. 

As detailed in the interim final rule 

Supplementary Information, once 

transfers are received, the transferee 

must abide by the restrictions on use 

applicable to the transferor under the 

ARPA and other applicable law, 

regulations, and program guidance. 

Further, the transferor remains 

responsible for monitoring and 

overseeing the subrecipient’s use of 

SLFRF funds and other activities related 

to the award to ensure that the 

subrecipient complies with the statutory 

and regulatory requirements and the 

Award Terms and Conditions. 

Recipients also remain responsible for 

reporting to Treasury on their 

subrecipients’ use of payments from the 

SLFRF for the duration of the award. 

Pooling Funds 

Public Comment: Several commenters 

asked for clarification about whether 

they may pool SLFRF funds for a project 

with other recipients, including when 

doing so involves a transfer to another 

entity, such as a regional organization or 

government that undertakes projects on 

behalf of a number of local 

governments. Commenters also asked 

for clarification on the oversight and 

reporting obligations that would result 

from such transfers. 

Treasury Response: Consistent with 

guidance issued following the interim 

final rule,375 the final rule clarifies that 

recipients may pool SLFRF funds for 

projects, provided that the project is 

itself an eligible use of SLFRF funds for 

each recipient that is contributing to the 

pool of funds and that recipients are 

able to track the use of funds in line 

with the reporting and compliance 

requirements of the SLFRF. In general, 

when pooling funds for regional 

projects, recipients may expend funds 

directly on the project or transfer funds 

to another government or other entity 

that is undertaking the project on behalf 

of multiple recipients. To the extent 

recipients undertake regional projects 

via transfer to another organization or 

government, recipients would need to 

comply with the rules on transfers 

specified in the final rule 

SUPPLEMENTARY INFORMATION. A 

recipient may transfer funds to a 

government outside its boundaries (e.g., 

county transfers to a neighboring 

county), provided that the transferor can 

document that the transfer constitutes 

an eligible expense of the transferor 

government and that its jurisdiction 

receives a benefit proportionate to the 

amount transferred. 

Blending and Braiding of Funds 

Treasury is clarifying in the final rule 

that, consistent with further guidance 

issued by Treasury following the 

interim final rule,376 recipients may 

fund a project with both SLFRF funds 

and other sources of funding, provided 

that the costs are eligible costs under 

each source program and are compliant 

with all other related statutory and 

regulatory requirements and policies. 

The recipient must comply with 

applicable reporting requirements for all 

sources of funds supporting the SLFRF 

projects and with any requirements and 

restrictions on the use of funds from the 

supplemental funding sources and the 

SLFRF program. Specifically, 

• All funds provided under the 

SLFRF program must be used for 

projects, investments, or services that 

are eligible under the SLFRF program. 

SLFRF funds may not be used to fund 

an activity that is not, in its entirety, an 

eligible use under the SLFRF program. 

For example: 

Æ SLFRF funds may be used in 

conjunction with other sources of funds 

to make an investment in water 

infrastructure that is eligible under 

section 602 or 603 of the Social Security 

Act and the final rule. 

Æ SLFRF funds could not be used to 

fund the entirety of a water 

infrastructure project that was partially, 

although not entirely, an eligible use 

under Treasury’s final rule. However, 

the recipient could use SLFRF funds 

only for a smaller component project 

that does constitute an eligible use, 

while using other funds for the 

remaining portions of the larger planned 

water infrastructure project that do not 

constitute an eligible use. In this case, 

the ‘‘project’’ for SLFRF purposes under 

this program would be only the eligible 

use component of the larger project. 

• In addition, because SLFRF funds 

must be obligated by December 31, 

2024, and recipients must expend all 

funds under the award no later than 

December 31, 2026, recipients must be 

able to, at a minimum, determine and 

report to Treasury on the amount of 

SLFRF funds obligated and expended 

and when such funds were obligated 

and expended. 


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Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4435 

377U.S. Department of the Treasury, Recipient 

Compliance and Reporting Responsibilities, as of 

November 5, 2021; https://home.treasury.gov/ 

policy-issues/coronavirus/assistance-for-state-localand-tribal-governments/state-and-local-fiscalContinued 

Scope of a 603(c)(4) Transfer 

Unlike in the case of a transfer under 

sections 602(c)(3) or 603(c)(3), the 

interim final rule SUPPLEMENTARY

INFORMATION specified that transfers 

from a local government to the state 

under section 603(c)(4) will result in a 

cancellation or termination of the award 

on the part of the transferor local 

government and a modification of the 

award to the transferee state. 

Public Comment: Two commenters 

suggested that Treasury expand section 

603(c)(4) beyond transfers from 

localities to the state to include transfers 

from counties to their constituent local 

governments, which would incentivize 

counties to augment funds to address 

the needs of local governments. These 

commenters noted that counties are 

disincentivized to make transfers under 

section 603(c)(3), as is currently 

allowed, as such transfers would require 

that counties provide oversight and 

monitoring over its subrecipients. 

Treasury Response: Section 603(c)(4), 

by its terms, applies only to transfers 

from local governments to states. 

Accordingly, the final rule must 

maintain the interim final rule’s 

limitation of section 603(c)(4) transfers 

as applicable only to transfers from local 

governments to states. Expansions of 

section 603(c)(4) transfer authority 

beyond transfers from local 

governments to states were not 

explicitly authorized by Congress. As 

such, transfers under section 603(c)(4) 

may only be made by local governments 

to the state in which they are located. 

Congress enumerated two separate 

transfer provisions for local 

governments—section 603(c)(3) and 

section 603(c)(4)—that use different 

language and were intended to operate 

differently. Section 603(c)(4) contains 

prefatory language (‘‘Notwithstanding 

paragraph (1)’’—a reference to the 

eligible SLFRF uses) that section 

603(c)(3) does not. In other words, 

section 603(c)(4) transfers are not 

required to constitute an eligible use of 

the funds from the perspective of the 

transferor local government, but section 

603(c)(3) transfers are required to 

constitute an eligible use. A transfer to 

accomplish an eligible use fits within 

the recipient-subrecipient framework. 

Further, treating section 603(c)(3) 

transfers as leading to a cancellation of 

the award for the transferor local 

government would result in scenarios 

that are inconsistent with the statutory 

language. An award cancellation 

pursuant to a section 603(c)(3) transfer 

would result in either (1) nongovernmental entities becoming award 

recipients under the program, which 

would contravene the purpose of SLFRF 

or (2) transfers to governmental and 

non-governmental entities being treated 

in a distinct and inconsistent manner. 

That is, section 603(c)(3) transfers to 

governmental entities would lead to 

award cancellation but section 603(c)(3) 

transfers to non-governmental entities 

would lead to a recipient-subrecipient 

relationship. Therefore, in the final rule, 

Treasury maintains its distinct 

treatment of a section 603(c)(3) transfer 

and section 603(c)(4) transfer. 

The final rule clarifies that a transfer 

under section 603(c)(4) will result in a 

modification, termination, or 

cancellation of the award on the part of 

the transferor local government and a 

modification of the award to the 

transferee state or territory. As detailed 

in the SUPPLEMENTARY INFORMATION to 

the interim final rule, the transferor 

must provide notice of the transfer to 

Treasury in a format specified by 

Treasury. Until the local government 

provides such notice and Treasury 

provides confirmation of its acceptance 

of the notice, the local government will 

remain responsible for ensuring that the 

SLFRF award is being used in 

accordance with the Award Terms and 

Conditions, section 602 or 603 of the 

Social Security Act, the final rule, and 

program guidance including reporting 

on such uses of the award funds to 

Treasury. 

A state that receives a transfer from a 

local government under section 

603(c)(4) will be bound, by statute, by 

all of the use restrictions set forth in 

section 602(c) with respect to the use of 

those SLFRF funds, including the 

prohibitions on use of such SLFRF 

funds to offset certain reductions in 

taxes or to make deposits into pension 

funds. The state will be responsible as 

the prime recipient for the use and 

reporting on any funds transferred 

under section 603(c)(4) by the local 

government. Such transferred funds will 

be subject to the Award Terms and 

Conditions previously accepted by the 

state in connection with its SLFRF 

award. 

Subrecipient Transfers 

Public Comment: Commenters sought 

clarification as to how funds may be 

transferred from a recipient to another 

entity. For instance, one commenter 

requested that recipients be able to 

advance funds to subrecipients as 

opposed to reimbursing subrecipients 

for expenses incurred. 

Treasury Response: Treasury did not 

specify in the interim final rule whether 

recipients may advance funds to 

subrecipients. This omission was not 

intended to prevent recipients from 

advancing funds to subrecipients, 

consistent with the various methods 

permitted under the Uniform Guidance. 

Given the broad flexibility that 

recipients have in selecting eligible uses 

and the broad variety of potential 

subrecipients, Treasury believes that 

specifying a single method of 

advancement or reimbursement would 

add unnecessary administrative 

difficulty to program administration. 

Recipients may determine the optimal 

payment structure for the transfer of 

funds (e.g., advance payments, 

reimbursement basis, etc.) from 

recipients to subrecipients. Ultimately, 

recipients must comply with the eligible 

use requirements and any other 

applicable laws or requirements and are 

responsible for the actions of their 

subrecipients. 

E. Administrative Expenses 

The interim final rule permitted, 

under the heading ‘‘[e]xpenses to 

improve efficacy of public health or 

economic relief programs,’’ use of funds 

for ‘‘[a]dministrative costs associated 

with the recipient’s COVID–19 public 

health emergency assistance programs, 

including services responding to the 

COVID–19 public health emergency or 

its negative economic impacts, that are 

not federally funded.’’ 

Following release of the interim final 

rule, Treasury issued Compliance and 

Reporting Guidance that provided that 

‘‘recipients may use funds for 

administering the SLFRF program, 

including costs of consultants to 

support effective management and 

oversight, including consultation for 

ensuring compliance with legal, 

regulatory, and other requirements. 

Further, costs must be reasonable and 

allocable as outlined in 2 CFR 200.404 

and 2 CFR 200.405. Pursuant to the 

SLFRF Award Terms and Conditions, 

recipients are permitted to charge both 

direct and indirect costs to their SLFRF 

award as administrative costs. Direct 

costs are those that are identified 

specifically as costs of implementing the 

SLFRF program objectives, such as 

contract support, materials, and 

supplies for a project. Indirect costs are 

general overhead costs of an 

organization where a portion of such 

costs are [sic] allocable to the SLFRF 

award such as the cost of facilities or 

administrative functions like a director’s 

office.’’ 377 Several commenters 


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4436 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 

recovery-funds/recipient-compliance-and-reportingresponsibilities. 

378 Id. 

379Coronavirus Relief Fund for States, Tribal 

Governments, and Certain Eligible Local 

Governments, 86 FR at 4192. 

380See FAQ 4.11. Coronavirus State and Local 

Fiscal Recovery Funds, Frequently Asked 

Questions, as of July 19, 2021; https://

home.treasury.gov/system/files/136/SLFRPFAQ.pdf. 

381See U.S. Government Accountability Office, 

Principles of Federal Appropriations Law, Third 

Edition, Volume II, p. 10–99, GAO–06–382SP 

(February 2006), https://www.gao.gov/assets/gao06-382sp.pdf. 

requested clarity on which 

administrative expenses are permissible 

uses of funds and how recipients should 

structure administrative costs. 

In the final rule, Treasury is clarifying 

that direct and indirect administrative 

expenses are permissible uses of SLFRF 

funds and are a separate eligible use 

category from ‘‘[e]xpenses to improve 

efficacy of public health or economic 

relief programs,’’ which refers to efforts 

to improve the effectiveness of public 

health and economic programs through 

use of data, evidence, and targeted 

consumer outreach. For details on 

permissible direct and indirect 

administrative costs, recipients should 

refer to Treasury’s Compliance and 

Reporting Guidance.378 Costs incurred 

for the same purpose in like 

circumstances must be treated 

consistently as either direct or indirect 

costs. 

F. Treatment of Loans 

The interim final rule allowed 

recipients to use SLFRF funds to make 

loans for uses that are otherwise eligible 

(for example, for small business 

assistance). Subsequent guidance 

clarified how recipients must track and 

dispose of program income from loans, 

consistent with the statutory 

requirements for the timing of SLFRF 

expenditures. 

SLFRF funds must be used to cover 

‘‘costs incurred’’ by the recipient 

between March 3, 2021 and December 

31, 2024. The interim final rule 

provided that SLFRF funds must be 

obligated by December 31, 2024 and 

expended by December 31, 2026. In 

using SLFRF funds to make loans, 

recipients must be able to determine the 

amount of funds used to make a loan 

and must comply with restrictions on 

the timing of the use of funds and with 

restrictions in the Uniform Guidance. 

When SLFRF funds are used as the 

principal for loans, there is an 

expectation that a significant share of 

the loaned funds will be repaid. Thus, 

recipients may not simply consider the 

full amount of loaned funds to be 

permanently expended and must 

appropriately account for the return of 

loaned funds. 

For loans that mature or are forgiven 

on or before December 31, 2026, the 

recipient must account for the use of 

funds on a cash flow basis, consistent 

with Treasury’s guidance regarding 

loans made by recipients using 

payments from the Coronavirus Relief 

Fund.379 Recipients may use SLFRF 

funds to fund the principal of the loan 

and in that case must track repayment 

of principal and interest (i.e., ‘‘program 

income,’’ as defined under 2 CFR 200). 

When the loan is made, recipients must 

report the principal of the loan as an 

expense. 

Repayment of principal may be reused only for eligible uses and is subject 

to restrictions on the timing of the use 

of funds. Interest payments received 

prior to the end of the period of 

performance will be considered an 

addition to the total award and may be 

used for any purpose that is an eligible 

use of funds under the statute and final 

rule. Recipients are not subject to 

restrictions under 2 CFR 200.307(e)(1) 

with respect to such payments. 

For loans with maturities longer than 

December 31, 2026, the recipient must 

estimate the cost to the recipient of 

extending the loan over the life of the 

loan. In other words, at origination, the 

recipient must measure the projected 

cost of the loan and may use SLFRF 

funds for the projected cost of the loan. 

Recipients have two options for 

estimating this amount: They may 

estimate the subsidy cost (i.e., net 

present value of estimated cash flows) 

or the discounted cash flow under 

current expected credit losses (i.e., 

CECL method). See further guidance 

issued by Treasury for further 

explanation.380

Public Comment: Many commenters 

asked for further clarification on the 

treatment of loans and the calculation of 

‘‘costs incurred.’’ Some commenters 

requested that grants made for eligible 

activities prior to December 31, 2024 to 

a revolving loan fund, an economic 

development corporation, a land bank, 

or a similar facility should be 

considered obligated and expended at 

the time of the grant. This would allow 

funds to be expended by the grantee 

beyond the covered period and for 

funds returned to the grantee to be reinvested in further uses outside of the 

covered period. 

Treasury Response: The final rule 

maintains the treatment of loans from 

the interim final rule and subsequent 

guidance, as discussed above. This 

approach is consistent with the 

statutory requirement that funds be used 

for costs incurred for eligible purposes 

by December 31, 2024 and is consistent 

with standard accounting practices and 

the Uniform Guidance. 

G. Use of Funds for Match or Cost-Share 

Requirements 

As a general matter and as referenced 

in the SUPPLEMENTARY INFORMATION to 

the interim final rule, funds provided 

under one federal program may not be 

used by a recipient to meet the nonfederal match or cost-share 

requirements of another federal 

program. 

However, Treasury has since 

determined that, consistent with this 

general principle and the requirements 

of the Uniform Guidance at 2 CFR 

200.306(b)(5), the funds available under 

sections 602(c)(1)(C) and 603(c)(1)(C) of 

the Social Security Act for the provision 

of government services, up to the 

amount of the recipient’s reduction in 

revenue due to the public health 

emergency, generally may be used to 

meet the non-federal cost-share or 

matching requirements of other federal 

programs. Federal funds that constitute 

revenue sharing to state and local 

governments may generally be used to 

meet non-federal match 

requirements.381 The broad eligible uses 

of the SLFRF funds available under 

sections 602(c)(1)(C) and 603(c)(1)(C) of 

the Social Security Act, combined with 

the purpose of these provisions (which 

is to provide general fiscal assistance to 

governments facing revenue losses due 

to the public health emergency), 

demonstrate that these funds are 

revenue sharing. They thus should 

generally be permitted to be used to 

meet the non-federal match and costshare requirements of other federal 

programs. As such, the SLFRF funds 

available for the provision of 

government services, up to the amount 

of the recipient’s reduction in revenue 

due to the public health emergency, 

may be used to meet the non-federal 

match requirements of the Drinking 

Water State Revolving Fund and Clean 

Water State Revolving Fund programs 

administered by the EPA, for example. 

Pursuant to 2 CFR 200.306(b) of the 

Uniform Guidance, if funds are legally 

available to meet the match or costshare requirements of an agency’s 

federal program, such awarding agency 

is required to accept such funds for the 

purpose of that program’s match or costshare requirements except in the 

circumstances enumerated in that 

section. The Office of Management and 

Budget has authority under 2 CFR 


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Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4437 

382U.S. Department of the Treasury, Recipient 

Compliance and Reporting Responsibilities, as of 

November 5, 2021; https://home.treasury.gov/ 

policy-issues/coronavirus/assistance-for-state-localand-tribal-governments/state-and-local-fiscalrecovery-funds/recipient-compliance-and-reportingresponsibilities. 383 Id. 

200.102 of the Uniform Guidance to 

issue waivers of this requirement on 

request of the relevant awarding agency. 

Analogous requirements and waiver 

authorities may be present in other 

regulations. If a recipient seeks to use 

SLFRF funds to satisfy match or costshare requirements for a federal grant 

program, it should first confirm with the 

relevant awarding agency that no waiver 

has been granted for that program, that 

no other circumstances enumerated 

under 2 CFR 200.306(b) would limit the 

use of SLFRF funds to meet the match 

or cost-share requirement, and that there 

is no other statutory or regulatory 

impediment to using the SLFRF funds 

for the match or cost-share requirement. 

Note that SLFRF funds may not be used 

as the non-federal share for purposes of 

a state’s Medicaid and CHIP programs 

because the Office of Management and 

Budget has approved a waiver as 

requested by the Centers for Medicare & 

Medicaid Services pursuant to 2 CFR 

200.102 of the Uniform Guidance and 

related regulations. 

SLFRF funds beyond those that are 

available under sections 602(c)(1)(C) or 

603(c)(1)(C) of the Social Security Act 

for the provision of government services 

may not be used to meet the non-federal 

match or cost-share requirements of 

other federal programs other than as 

specifically provided for by statute. For 

example, as discussed in other sections 

of this final rule, section 40909 of the 

Infrastructure Investment and Jobs Act 

provides that SLFRF funds may be used 

to meet the non-federal match 

requirements of any authorized Bureau 

of Reclamation project, and section 

60102 of the Infrastructure Investment 

and Jobs Act provides that the SLFRF 

may be used to meet the non-federal 

match requirements of the broadband 

infrastructure program authorized under 

that section (see sections Water and 

Sewer Infrastructure and Broadband 

Infrastructure). 

H. Reporting 

The interim final rule established 

Treasury’s authority to collect 

information from recipients through 

requested reports and any additional 

requests for information. The interim 

final rule also provided Treasury 

flexibility to extend or accelerate 

reporting deadlines and to modify 

requested content for the Interim 

Report, Project and Expenditure reports, 

and Recovery Plan Performance reports. 

The SUPPLEMENTARY INFORMATION of 

the interim final rule provided initial 

guidance on the reporting requirements 

for the SLFRF funds. States (defined to 

include the District of Columbia), 

territories, metropolitan cities, counties, 

and Tribal governments were required 

to submit one interim report and 

quarterly Project and Expenditure 

reports thereafter. Non-entitlement units 

of local government were not required 

to submit an interim report. States, 

territories, and metropolitan cities and 

counties with a population greater than 

250,000 residents were also required to 

submit an annual Recovery Plan 

Performance report to Treasury. The 

Supplementary Information of the 

interim final rule provided guidance on 

the deadlines and content required for 

each type of report. 

Public Comment: Treasury received 

many comments on the content and 

specific data elements required of 

program reporting. Some commenters 

expressed enthusiasm for including 

particular details in reporting to 

promote transparency. Other 

commenters requested that Treasury 

streamline reporting requirements to 

avoid imposing undue administrative 

burdens and compliance costs. Many 

commenters requested further 

clarification on or amendments to 

particular elements of reporting content. 

Some commenters requested that 

reports and specific reporting elements 

be public, including a request for a 

public website with a number of 

programmatic data metrics about the use 

of SLFRF funds. Some commenters 

sought clarification and guidance for 

using the reporting portal, which allows 

recipients to upload the required 

information, or requested user 

modifications to the portal. Finally, 

some commenters requested that 

Treasury provide example materials and 

reporting metrics to aid recipient 

understanding. 

Treasury Response: Since the 

publication of the interim final rule, 

Treasury issued supplementary 

reporting guidance in the Compliance 

and Reporting Guidance and in the User 

Guide: Treasury’s Portal for Recipient 

Reporting (User Guide).382 Treasury has 

addressed many of these comments in 

the Compliance and Reporting Guidance 

and User Guide and will continue to 

issue updated guidance prior to each 

reporting period clarifying any 

modifications to requested report 

content. Treasury notes that the interim 

final rule did not address the specific 

content and data elements required in 

reporting, the reporting portal or 

submission process, and the specific 

form of reporting (e.g., example 

templates, machine readability); 

comments on these topics are outside 

the scope of the final rule and, as noted, 

are addressed instead in Compliance 

and Reporting Guidance. 

Reporting Deadlines 

Public Comment: Treasury received 

comments requesting various changes to 

reporting deadlines to ease compliance 

burdens. For example, Treasury 

received several comments requesting 

that Treasury delay early reporting 

deadlines for various reasons, including 

to align with the timeline for issuing a 

final rule and to allow for more time for 

recipients to determine SLFRF 

allocations. Commenters also requested 

changes to the immediacy of reporting, 

for example requesting that Treasury 

allow expenses to be reported with a lag 

instead of the quarter in which they 

were accrued or that reports be due 90 

days after period close instead of 30 

days after the close of a reporting 

period. Some commenters requested 

changes to the reporting frequency, for 

example to report biannually rather than 

quarterly. 

Treasury Response: Treasury has 

clarified reporting deadlines in the 

Compliance and Reporting guidance.383

Treasury is retaining the reporting 

deadline of 30 days after the close of the 

reporting period to ensure timely 

accounting of the use of SLFRF funds; 

this timeline also aligns with practices 

in many other federal programs. The 

final rule maintains Treasury’s 

discretion to extend or delay reporting 

deadlines. 

Administrative Costs for Reporting and 

Compliance 

Public Comment: Many commenters 

sought clarification about whether 

various administrative costs related to 

reporting and compliance were eligible 

uses of funds and asked for clarification 

on the limits of such use. 

Treasury Response: Treasury notes 

that administrative costs are generally 

allowable uses of SLFRF funds, 

including for reporting. For additional 

information on administrative expenses, 

please see section Administrative 

Expenses under Program 

Administration Provisions. 

Uniform Guidance 

Public Comment: The SUPPLEMENTARY

INFORMATION of the interim final rule 

clarified that SLFRF funds were 

generally subject to the provisions of the 

Uniform Administrative Requirements, 

Cost Principles, and Audit 


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384 Id. 

385Treasury will also consider the tax offset 

provision on an annual basis. 

386Funds subject to recoupment cannot later be 

returned. 

Requirements for Federal Awards (2 

CFR part 200) (the Uniform Guidance), 

including the cost principles and 

restrictions on general provisions for 

selected items of cost. Treasury received 

many comments requesting clarification 

about or modifications to the 

applicability of the Uniform Guidance 

on various issues. 

For example, one commenter 

requested that Treasury remove 

requirements that expenditures of funds 

be made in conformance with the 

Uniform Guidance, particularly in case 

of expenditures made during period 

from March 3, 2021 to the release of the 

interim final rule, while other 

comments requested that Treasury raise 

the single-audit threshold from 

$750,000 to $5 million. Commenters 

sought clarification on items such as: 

The applicability of the Uniform 

Guidance for funds that are used for the 

provision of government services, the 

applicability of particular sections of the 

cost principles provided in subpart E of 

the Uniform Guidance, the applicability 

of the procurement provisions of the 

Uniform Guidance, and requirements 

for subrecipient reporting. 

Treasury Response: Recipients of 

SLFRF funds are subject to the 

provisions of the Uniform Guidance (2 

CFR part 200) from the date of award to 

the end of the period of performance on 

December 31, 2026 unless otherwise 

specified in this rule or programspecific guidance. Costs must follow the 

requirements in 2 CFR 200 Subpart E, 

Cost Principles, including procurement 

standards. Recipients that receive an 

aggregate amount of federal financial 

assistance in a given fiscal year that 

exceeds the Single Audit threshold are 

subject to the requirements in 2 CFR 200 

Subpart F, Audit Requirements, unless 

otherwise specified in program-specific 

guidance. 

SLFRF funds transferred to 

subrecipients are also subject to 

reporting and Uniform Guidance 

requirements. Additional information 

about the definition of subrecipients is 

available in the section Distinguishing 

Subrecipients versus Beneficiaries. 

Recipients should refer to the 

Assistance Listing for details on the 

specific provisions of the Uniform 

Guidance that do not apply to this 

program. The Assistance Listing is 

available on SAM.gov. Additional 

changes to compliance and reporting 

guidelines, including any clarifications 

on Uniform Guidance requirements, 

will be addressed in Compliance and 

Reporting Guidance and the User 

Guide.384

I. Remediation and Recoupment 

Sections 602(e) and 603(e) of the 

Social Security Act provide the 

Secretary with the power to recoup 

‘‘funds used in violation’’ of the Social 

Security Act. The interim final rule 

implemented these provisions by 

establishing a process for recoupment. 

Treasury may identify funds used in 

violation of the Social Security Act 

based on information submitted by 

recipients, including as part of reporting 

requirements, as well as information 

from other sources.385 If a potential 

violation is identified, Treasury will 

provide the recipient an initial written 

notice of the amount subject to 

recoupment along with an explanation 

of such amounts. A recipient then has 

60 calendar days following receipt of a 

recoupment notice to submit a request 

for reconsideration containing any 

information it believes supports its use 

of funds. Within 60 calendar days of 

receipt of the request for 

reconsideration, the interim final rule 

provided that a recipient will receive a 

final notice of the Secretary’s decision 

to affirm, withdraw, or modify the 

recoupment notice. If the recipient did 

not submit a request for reconsideration, 

the initial notice of recoupment would 

be deemed a final notice. A recipient 

would then be required to repay any 

amounts subject to recoupment within 

120 calendar days of either the initial 

recoupment notice, if the recipient does 

not request reconsideration, or the final 

recoupment notice, if the recipient does 

request reconsideration. 

Public Comments 

Treasury received several comments 

on the process for recoupment. For 

instance, some commenters, including 

many Tribal governments, requested 

additional time to file a request for 

reconsideration and submit repayment 

to ensure that small entities have the 

time necessary to carry out any 

logistical steps and consult with 

counsel. Treasury was also asked to 

align its recoupment process with that 

of the Office of the Inspector General 

and other departmental administrative 

processes to resolve findings, agency 

decisions, and related timelines. One 

commenter asked if the 120-calendarday time limit for repayment was based 

on the initial notice, rather than a final 

decision issued by the Secretary. 

Several commenters expressed concern 

regarding the recoupment process, 

arguing that consideration of ‘‘all 

relevant facts and circumstances’’ 

provided Treasury with too much 

authority and created ambiguity. Other 

commenters urged Treasury to establish 

a robust enforcement and compliance 

program and process and advocated for 

the creation of a whistleblower 

mechanism or public complaint process 

to allow public and private entities to 

report suspected misuses of funds. 

Finally, some commenters requested 

clarification regarding the process after 

a violation is identified and becomes 

final. One commenter also asked to 

allow recipients to amend reports 

deemed to contain ineligible expenses 

and inform recipients how the agency 

intends to resolve instances where a use 

was later deemed unacceptable. Another 

commenter asked if recouped funds 

could be released back to the recipient. 

Commenters also expressed concern 

about Treasury’s authority to recoup 

funds used in violation of the tax offset 

provision. Some commenters requested 

additional clarity around when tax cuts 

would trigger Treasury’s recoupment 

authority and the duration of Treasury’s 

authority to seek recoupment of such 

funds. 

Treasury Response 

The final rule largely preserves the 

process established in the interim final 

rule but includes several adjustments to 

clarify certain elements. 

Like the interim final rule, the final 

rule provides that, after an initial 

determination is made that a recipient 

has used SLFRF funds in violation of 

the law, a recipient may submit a 

request for reconsideration concerning 

any amounts identified in a notice 

provided by Treasury. If a recipient 

chooses to seek reconsideration of the 

initial notice, the recipient must submit 

a request for reconsideration as 

provided under the final rule. If a 

recipient does not request 

reconsideration, the initial notice that 

the recipient received will be deemed 

the final notice.386 Treasury has 

clarified that a recipient must invoke 

and exhaust the procedures available 

under section 35.10 of the final rule 

prior to seeking judicial review of a 

recoupment decision. Consistent with 

Section 602(b)(6)(A)(ii)(III) of the Social 

Security Act, if a state or territory is 

required to repay funds pursuant to the 

Secretary’s recoupment authority, the 

Secretary may reduce the amount 

payable to the state or territory in a 

second tranche payment by the amount 

that the state or territory would be 

required to repay as recoupment. 

In the final rule, Treasury has 

clarified that, if it identifies a potential 


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388Treasury may address potential violations 

based on information submitted from recipients, 

either through quarterly reports or self-reported 

information, and from other sources of information 

as Treasury deems necessary and appropriate (e.g., 

press, information submitted from the public). 

389Treasury intends to work with recipients to 

support the use of SLFRF funds consistent with the 

law. 

violation,387 it may request additional 

information from a recipient before 

initiating the recoupment process and, 

where necessary, provide written notice 

to the recipient along with an 

explanation of such amounts potentially 

subject to recoupment. Furthermore, 

Treasury has also made clear that it 

retains the ability to expedite or extend 

timelines in any adjudication or preadjudication process pursuant to section 

35.4(b) of the final rule, although the 

general timelines set forth in the interim 

final rule are maintained in the final 

rule. 

This process is intended to provide 

the recipient with an adequate 

opportunity to present additional 

information regarding its uses of funds 

and provides flexibility for recipients to 

determine the information relevant to 

the particular facts and circumstances. It 

is also flexible enough to align with 

other adjudication procedures in other 

ARPA recovery programs administered 

by the Office of Recovery Programs at 

Treasury. As discussed above, the initial 

notice will provide recipients with an 

explanation of the identified potential 

violation in order to provide recipients 

with a meaningful opportunity to 

respond. Such initial notice will 

generally include information regarding 

the specific use of SLFRF funds and the 

source of such information.388 This 

process also will allow the Secretary to 

take into consideration the information 

provided by recipients, along with other 

relevant information, to ensure SLFRF 

funds are used in a manner consistent 

with the Social Security Act. 

Finally, Treasury expects to work 

with recipients to support the use of 

SLFRF funds consistent with the law. 

For example, Treasury may request 

additional information from a recipient 

before initiating the recoupment 

process. In addition, Treasury may 

pursue other forms of remediation and 

monitoring in conjunction with, or as an 

alternative to, recoupment.389 These 

efforts may include working with 

recipients to identify and substitute 

permissible uses of SLFRF funds or 

amending uses of SLFRF funds to 

comply with applicable restrictions. 

In response to comments regarding 

the amount of time provided to respond 

to an initial notice, the final rule 

clarifies that Treasury retains the ability 

to expedite or extend timelines in any 

adjudication or pre-adjudication process 

pursuant to section 35.4(b) of the final 

rule, although the general timelines set 

forth in the interim final rule are 

maintained in the final rule. 

V. Regulatory Analyses 

Executive Orders 12866 and 13563 

Regulatory Impact Assessment 

This final rule is a ‘‘significant 

regulatory action’’ under section 3(f) of 

Executive Order 12866 for the purposes 

of Executive Orders 12866 and 13563 

because it is likely to have an annual 

effect on the economy of $100 million 

or more. 

As explained below, this regulation 

meets a substantial need: ensuring that 

recipients—states, territories, Tribal 

governments, and local governments— 

of SLFRF funds fully understand the 

requirements and parameters of the 

program as set forth in the statute and 

deploy funds in a manner that best 

reflects Congress’ intent to provide 

necessary relief to recipient 

governments adversely impacted by the 

COVID–19 public health emergency. 

Furthermore, as required by Executive 

Orders 12866 and 13563, Treasury has 

weighed the costs and benefits of this 

final rule and varying alternatives and 

has reasonably determined that the 

benefits of the final rule to recipients 

and their communities far outweigh any 

costs. 

The rule has been reviewed by the 

Office of Management and Budget 

(OMB) in accordance with Executive 

Order 12866. 

Executive Orders 12866 and 13563 

Under Executive Order 12866, OMB 

must determine whether this regulatory 

action is ‘‘significant,’’ and therefore, 

subject to the requirements of the 

Executive Order and subject to review 

by OMB. Section 3(f) of Executive Order 

12866 defines a significant regulatory 

action as an action likely to result in a 

rule that may, among other things, have 

an annual effect on the economy of $100 

million or more. This rule is likely to 

have an annual effect on the economy 

of $100 million or more, and therefore, 

it is subject to review by OMB under 

section 3(f) of Executive Order 12866. 

Treasury has also reviewed these 

regulations under Executive Order 

13563, which supplements and 

explicitly reaffirms the principles, 

structures, and definitions governing 

regulatory review established in 

Executive Order 12866. To the extent 

permitted by law, section 1(b) of 

Executive Order 13563 requires that an 

agency: (1) Propose or adopt regulations 

only upon a reasoned determination 

that their benefits justify their costs 

(recognizing that some benefits and 

costs are difficult to quantify); (2) tailor 

its regulations to impose the least 

burden on society, consistent with 

obtaining regulatory objectives taking 

into account, among other things, and to 

the extent practicable, the costs of 

cumulative regulations; (3) select, in 

choosing among alternative regulatory 

approaches, those approaches that 

maximize net benefits (including 

potential economic, environmental, 

public health and safety, and other 

advantages; distributive impacts; and 

equity); (4) to the extent feasible, specify 

performance objectives, rather than the 

behavior or manner of compliance a 

regulated entity must adopt; and (5) 

identify and assess available alternatives 

to direct regulation, including providing 

economic incentives—such as user fees 

or marketable permits—to encourage the 

desired behavior, or providing 

information that enables the public to 

make choices. Executive Order 13563 

also requires an agency ‘‘to use the best 

available techniques to quantify 

anticipated present and future benefits 

and costs as accurately as possible.’’ 

OMB’s Office of Information and 

Regulatory Affairs (OIRA) has 

emphasized that these techniques may 

include ‘‘identifying changing future 

compliance costs that might result from 

technological innovation or anticipated 

behavioral changes.’’ 

Based on the analysis that follows and 

the reasons stated elsewhere in this 

document, Treasury believes that this 

final rule is consistent with the 

principles set forth in Executive Orders 

12866 and 13563. This Regulatory 

Impact Analysis discusses the need for 

regulatory action, the potential benefits, 

and the potential costs. Treasury has 

assessed the potential costs and 

benefits, both quantitative and 

qualitative, of this regulatory action, and 

is issuing this final rule only on a 

reasoned determination that the benefits 

exceed the costs. In choosing among 

alternative regulatory approaches, 

Treasury selected those approaches that 

would maximize net benefits. 

Need for Regulatory Action 

This final rule implements the $350 

billion SLFRF program of the ARPA, 

which Congress passed to help states, 

territories, Tribal governments, and 

localities respond to the ongoing 

COVID–19 public health emergency and 

its economic impacts. As the agency 

charged with execution of these 

programs, Treasury has concluded that 

this final rule is needed to ensure that 

recipients of SLFRF funds fully 


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390See, e.g., Gabriel Chodorow-Reich et al., Does 

state Fiscal Relief During Recessions Increase 

Employment? Evidence from the American 

Recovery and Reinvestment Act, 4 American 

Economic Journal 118–145 (2012) http://dx.doi.org/ 

10.1257/pol.4.3.118. 

391See, e.g., Fitzpatrick, supra note 278. 

understand the requirements and 

parameters of the program as set forth in 

the statute and deploy funds in a 

manner that best reflects Congress’ 

mandate for targeted fiscal relief. This 

final rule governs the use of $350 billion 

in grant funds from the federal 

government to states, territories, Tribal 

governments, and localities, generating 

a significant macroeconomic effect on 

the U.S. economy. Treasury has sought 

to implement the program in ways that 

maximize its potential benefits while 

minimizing its costs. It has done so by: 

aiming to target relief in key areas 

according to the congressional mandate; 

offering clarity to states, territories, 

Tribal governments, and localities while 

maintaining their flexibility to respond 

to local needs; and limiting 

administrative burdens. 

Analysis of Benefits 

Relative to a pre-statutory baseline, 

the SLFRF funds provide a combined 

$350 billion to state, local, and Tribal 

governments for fiscal relief and support 

for costs incurred responding to the 

COVID–19 pandemic. Treasury believes 

that this transfer will generate 

substantial additional economic 

activity, although given the flexibility 

accorded to recipients in the use of 

funds, it is not possible to precisely 

estimate the extent to which this will 

occur and the timing with which it will 

occur. Economic research has 

demonstrated that state fiscal relief is an 

efficient and effective way to mitigate 

declines in jobs and output during an 

economic downturn.390 Absent such 

fiscal relief, fiscal austerity among state, 

local, and Tribal governments could 

exert a prolonged drag on the overall 

economic recovery, as occurred 

following the 2007–2009 recession.391

This final rule provides benefits 

across several areas by implementing 

the four eligible use categories, as 

defined in statute: strengthening the 

response to the COVID–19 public health 

emergency and its negative economic 

impacts; replacing lost revenue to ease 

fiscal pressure on state, local, and Tribal 

governments that might otherwise lead 

to harmful cutbacks in employment or 

government services; providing 

premium pay to essential workers; and 

making necessary investments in water, 

sewer, and broadband infrastructure. 

These benefits are achieved in the 

final rule through a broadly flexible 

approach that sets clear guidelines on 

eligible uses of SLFRF funds and 

provides state, local, and Tribal 

government officials discretion within 

those eligible uses to direct SLFRF 

funds to areas of greatest need within 

their jurisdiction. While preserving 

recipients’ overall flexibility, the final 

rule includes several provisions that 

implement statutory requirements and 

will help support use of SLFRF funds to 

achieve the intended benefits. 

Preserving flexibility for recipients not 

only serves an important public policy 

goal by allowing them to meet 

particularized and diverse needs of their 

local communities but also enhances the 

economic benefits of the final rule by 

allowing recipients to choose eligible 

uses of funds that provide the highest 

utility in their jurisdictions. 

In implementing the ARPA, Treasury 

has also prioritized supporting 

underserved communities that have 

been disproportionately impacted by the 

pandemic. The SLFRF program as 

implemented by the final rule provides 

even greater flexibility to recipients for 

uses of funds in underserved 

communities, recognizing that preexisting health and economic disparities 

in these communities amplified the 

impact of the pandemic there. In 

general, investments in improving 

health outcomes and economic 

opportunities provide high economic 

returns, so this approach is likely to 

achieve substantial near-term economic 

and public health benefits, in addition 

to the longer-term benefits arising from 

the allowable investments in water, 

sewer, and broadband infrastructure. 

The remainder of this section clarifies 

how Treasury’s approach to key 

provisions in the final rule will 

contribute to greater realization of 

benefits from the program. 

Public Health and Negative Economic 

Impacts 

The eligible use category for 

responding to the public health and 

negative economic impacts of the 

pandemic covers a wide range of 

eligible uses of funds. Treasury 

addresses several key uses of funds in 

this analysis, as well as ways that 

Treasury has structured this eligible use 

to minimize recipient administrative 

burden while also maintaining targeting 

of the funding to entities that 

experienced negative impacts from the 

pandemic. 

Government Employment: In order to 

bolster the government’s ability to 

effectively administer services, the final 

rule allows for a broader set of eligible 

uses to restore and support public sector 

employment relative to the interim final 

rule. In particular, eligible uses include 

hiring up to a pre-pandemic baseline 

that is adjusted for historic 

underinvestment in the public sector by 

allowing funds to be used to pay for 

payroll and covered benefits associated 

with the recipient increasing its number 

of employees up to 7.5 percent above its 

pre-pandemic baseline. Eligible uses 

also include providing additional funds 

for employees who experienced pay 

cuts or were furloughed, avoiding 

layoffs, providing worker retention 

incentives, and paying for ancillary 

administrative costs related to hiring. 

Treasury believes this expanded 

approach, relative to the interim final 

rule, provides useful flexibility to 

recipients, which may increase a state or 

local government’s ability to effectively 

deliver services to its residents. While 

the interim final rule already explicitly 

permitted using funds to restore 

recipients’ workforces up to prepandemic levels, the final rule’s 

inclusion of an upward adjustment 

factor recognizes that, as the population 

or economy of a jurisdiction grows over 

time, more workers are generally needed 

to effectively meet responsibilities. It 

also provides recipients greater room to 

employ funds toward building back the 

public sector workforce after years of 

chronic underinvestment since the 

Great Recession. Treasury arrived at the 

7.5 percent adjustment factor through an 

analysis of data from the Bureau of 

Labor Statistics on state and local 

government employment and data from 

the Census Bureau on population to 

estimate the extent of underinvestment 

in the public sector since the onset of 

the Great Recession. While Treasury 

considered a range of methodologies 

and point estimates to set the 

adjustment factor, a 7.5 percent factor 

errs on the side of recipient flexibility. 

Treasury believes this adjustment 

enhances recipients’ ability to identify 

and meet the particularized needs of 

their communities. Treasury also 

believes that the additional enumerated 

eligible uses for supporting the 

workforce provide recipients several 

means to help retain current workers, 

decreasing turnover costs. 

Identifying Eligible Populations 

Treasury has provided several 

methods for recipients to identify 

households, populations, and 

communities eligible for services that 

respond to the public health and 

negative economic impacts of the 

pandemic. In general, these methods 

seek to provide recipients options to 

identify eligible populations with 

minimal administrative burden, while 

also maintaining targeting of the funds 


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392See U.S. Bureau of Labor Statistics, 

Occupational Employment and Wage Estimates, 

https://www.bls.gov/oes/current/oes_nat.htm (last 

visited November 9, 2021). 

to entities impacted by the pandemic. 

Recipients also retain flexibility to 

identify and serve other populations 

and entities that experienced pandemic 

impacts, ensuring that recipients can 

meet the particularized needs of their 

local communities. 

Defining Low and Moderate Income: 

To streamline the provision of funds 

relating to negative economic impacts 

resulting from the pandemic, Treasury 

has created an eligibility standard 

making it easier for recipients to provide 

assistance to low- and moderate-income 

populations without needing to identify 

and document a specific negative 

economic impact. Populations falling 

under the definition of low income are 

presumed to have been 

disproportionately impacted by the 

pandemic, while those falling under the 

definition of moderate income are 

presumed to have been impacted by the 

pandemic. In addition, the final rule 

recognizes categorical eligibility for 

certain enumerated programs and 

populations if a recipient chooses to 

implement categorical eligibility when 

identifying impacted and 

disproportionately impacted 

populations. Treasury considered 

several options for eligibility standards 

that would reduce administrative 

burdens for recipients when 

determining who qualifies as low and 

moderate income. 

One option involved defining a 

household as low income or moderate 

income based only on FPG thresholds 

and could use levels lower than those 

selected. This option involved setting 

uniform thresholds throughout the 

country. 

A second option took a broader 

approach, defining a household as low 

income if it has (i) income at or below 

185 percent of the FPG for the size of 

its household or (ii) income at or below 

40 percent of the AMI for its county and 

size of household. The option defined a 

household as moderate income if it has 

(i) income at or below 300 percent of the 

FPG for the size of its household or (ii) 

income at or below 65 percent of the 

AMI for its county and size of 

household. The combination of an FPG 

floor with AMI allows for a regional 

adjustment in areas with substantially 

higher costs and incomes. Finally, 

Treasury also considered a range of FPG 

and AMI thresholds above and below 

these levels. 

Treasury chose the second option. 

Treasury believes that the higher FPG 

floor will ease administrative burdens 

by making more households 

presumptively eligible for funds meant 

to address negative economic impacts in 

a targeted manner. With respect to the 

low-income cutoff, 185 percent of the 

FPG for a family of four is $49,025, 

which is approximately the wage 

earnings for a two-earner household 

where both earners receive the median 

wage in occupations, such as waiters 

and waitresses and hotel clerks, that 

were heavily impacted by COVID–19. 

As such, this cutoff is likely to include 

more workers in industries heavily 

impacted by COVID–19, who may be 

most likely to face disproportionate 

impacts of the pandemic, than a lower 

threshold.392 With respect to the 

moderate-income cutoff, many 

households with incomes between 200 

percent and 300 percent of the FPG 

struggle with a lack of economic 

security, suggesting that 300 percent of 

the FPG was an appropriate cutoff for 

moderate income. 

Treasury also considered relatively 

higher thresholds for both an FPG and 

AMI approach; however, increasing 

income thresholds for presumed 

eligibility increases the likelihood that 

higher-income workers, who generally 

experienced fewer economic impacts 

from the pandemic, would become 

presumed eligible for responsive 

services. Providing services to 

households that did not experience a 

negative economic impact, or 

experienced a relatively minimal 

impact, would provide much less 

benefit than serving households that 

experienced more severe impacts, 

diluting the benefits of the SLFRF 

funds. 

In all, Treasury anticipates that these 

selected thresholds, combined with the 

regional adjustment, will allow 

resources to be targeted toward 

individuals and households with the 

greatest need while also reducing 

administrative burdens on recipients. 

Disproportionately Impacted 

Populations: In the interim final rule, 

Treasury enumerated a broader set of 

eligible uses for disproportionately 

impacted communities, in recognition 

of the pre-existing health, economic, 

and social disparities that contributed to 

disproportionate pandemic impacts in 

certain communities and that 

addressing root causes of those 

disparities constitutes responding to the 

public health and negative economic 

impacts of the pandemic. To identify 

these communities and reduce 

administrative burden, Treasury 

allowed recipients to presume that 

certain populations—those in QCTs and 

those being served by Tribal 

governments—were disproportionately 

impacted. In the final rule, to further 

decrease administrative burden and 

enhance recipient flexibility, Treasury is 

allowing recipients to also presume that 

low-income households were 

disproportionately impacted. Treasury 

anticipates that adding low-income 

households as a presumed eligible 

population will maintain targeting of 

funds to populations and communities 

most likely to have experienced severe 

pandemic impacts, while providing a 

more flexible approach for recipients. 

Identifying Impacted Classes: In the 

final rule, Treasury reiterated its stance 

in the interim final rule allowing 

recipients to designate a class of 

households or other entities as impacted 

or disproportionately impacted and 

provide responsive services. After 

designating a class, recipients can serve 

a household or entity by simply 

identifying that the household or entity 

is a member of the class. Relative to 

restricting services to only presumed 

eligible populations identified by 

Treasury, this decision provides vital 

administrative flexibility for recipients 

that may identify particular impacted 

classes in the context of their 

jurisdiction. Treasury anticipates that 

SLFRF funds will be targeted to 

impacted or disproportionately 

impacted communities, as recipients 

must demonstrate that the designated 

class experienced negative economic 

impacts or meaningfully more severe 

negative economic impacts. This 

approach maintains the requirement 

that entities served have to have 

experienced a negative economic 

impact, while simultaneously 

minimizing any administrative costs 

associated with meeting this 

requirement. 

Additional Enumerated Uses 

The interim final rule enumerated 

eligible uses of SLFRF funds to serve 

both impacted and disproportionately 

impacted communities. For example, 

enumerated eligible uses to serve 

impacted communities included food 

assistance; rent, mortgage, or utility 

assistance; and counselling and legal aid 

to prevent eviction or homelessness. 

Examples of enumerated eligible uses to 

serve disproportionately impacted 

communities included remediation of 

lead paint or other lead hazards and 

housing vouchers and assistance 

relocating to neighborhoods with higher 

levels of economic opportunity. In the 

final rule, Treasury had the option to 

retain, expand, or reduce enumerated 

eligible uses, or shift use eligibility 

between disproportionately impacted 

and impacted communities. Many 


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public comments suggested potential 

expansions of uses, including shifting 

enumerated eligible uses for 

disproportionately impacted 

communities to serve a broader 

population of impacted communities. 

Taking these comments into account, 

Treasury generally took this approach, 

in anticipation that the benefits of the 

program will increase while recipient 

administrative costs in identifying and 

justifying non-enumerated uses of funds 

will decrease. 

Specifically, Treasury added 

enumerated eligible uses for impacted 

populations including paid sick, 

medical, or family leave; health 

insurance subsidies; and services for the 

unbanked and underbanked, on the 

basis that impacts of the pandemic that 

were broadly experienced by many 

communities would be addressed by 

these uses. Treasury also shifted some 

eligible uses, formerly restricted only to 

disproportionately impacted 

communities, to impacted communities. 

These uses included community 

violence intervention, assistance 

accessing or applying to public benefits 

and services, affordable housing 

development, and services to promote 

healthy childhood environments like 

childcare and early learning. These uses 

were shifted on the basis that the 

associated impacts of the pandemic 

were experienced by a broader 

population, and responses are, 

accordingly, eligible to benefit a broader 

population. 

Additionally, the final rule clarified 

that investments in parks and other 

public outdoor recreation spaces are 

enumerated eligible uses for 

disproportionately impacted 

communities. In including these uses, 

Treasury took into account evidence on 

the social determinants of health, or the 

ways that social context, like the 

neighborhood built environment, 

impacts health outcomes. By taking a 

more holistic approach to public health, 

the final rule allows recipients to 

respond more broadly to factors that 

contributed to the pandemic’s health 

impacts and more fully mitigate those 

health impacts. 

To balance administrative flexibility 

with a maintenance of focus on impacts 

of the pandemic, Treasury considered, 

but did not include, other proposed 

enumerated uses that did not respond to 

the impacts of the pandemic or 

responded to impacts that were not 

experienced generally across the 

country by many jurisdictions and 

populations. For example, Treasury did 

not include pollution remediation 

broadly, a proposed enumerated eligible 

use for disproportionately impacted 

communities, on the basis that 

associated projects would only respond 

to disproportionate impacts of the 

pandemic depending on the specific 

issue addressed. In sum, Treasury 

expanded enumerated eligible uses 

while retaining a focus on broadly 

experienced impacts of the pandemic. 

Treasury anticipates that this will give 

recipients further flexibility to presume 

eligibility and respond to pandemic 

impacts without increasing 

administrative burden. 

Capital Expenditures: In the interim 

final rule, Treasury permitted funds to 

be used for a limited number of capital 

expenditures mostly related to the 

COVID–19 public health response. This 

decision granted recipients some 

discretion to use SLFRF funds to 

address COVID–19 prevention and 

mitigation through certain investments 

in equipment, real property, and 

facilities, which Treasury recognized as 

critical components of the public health 

response. In the final rule, Treasury 

considered maintaining the provisions 

in the interim final rule or expanding 

allowable capital expenditures to 

provide recipients greater flexibility to 

pursue other capital investments that 

are responsive to the public health 

emergency and its negative economic 

impacts. While expanding allowable 

capital expenditures may increase the 

risk that recipients will undertake large 

expenditures that do not sufficiently 

address intended harms, or address 

harms in a less cost-efficient manner 

than an alternative investment (e.g., a 

program or service), expanding 

allowable capital expenditures would 

likely help fill critical gaps in 

recipients’ response to the pandemic 

and provide equipment and facilities 

that generate benefits beyond SLFRF’s 

period of performance. To preserve 

flexibility while mitigating risks, the 

final rule allows recipients to undertake 

an expanded set of capital expenditures 

while requiring additional written 

justifications for projects with an 

expected total cost at or over $1 million. 

Treasury believes this approach 

balances the implementation of 

appropriate risk-based compliance 

requirements and the provision of 

administrative convenience for smaller 

capital expenditures, while generally 

allowing recipients the flexibility to 

undertake a greater variety of responsive 

capital expenditures. 

Revenue Loss 

Revenue Loss Formula: In this final 

rule, Treasury’s approach to revenue 

loss allows recipients to compute the 

extent of reduction in revenue by 

comparing actual revenue to a 

counterfactual trend representing what 

could have plausibly been expected to 

occur in the absence of the pandemic. 

The counterfactual trend begins with 

the last full fiscal year prior to the 

public health emergency (as required by 

statute) and projects forward with an 

annualized growth adjustment. Treasury 

has made several adjustments in the 

final rule to decrease administrative 

burden, reducing costs for recipients, 

while still accurately capturing 

reductions in revenue due to the 

pandemic. 

Under the interim final rule, Treasury 

specified that recipients calculate 

revenue loss on a calendar year basis. In 

this final rule, Treasury is providing 

recipients the option to calculate 

revenue loss on a calendar year or fiscal 

year basis, which will allow recipients 

the administrative flexibility to 

minimize administrative burdens based 

on the data available to them. 

Treasury’s decision to incorporate a 

growth adjustment into the calculation 

of revenue loss ensures that the formula 

more fully captures revenue shortfalls 

relative to recipients’ pre-pandemic 

expectations. Recipients will have the 

opportunity to calculate revenue loss at 

several points throughout the program, 

recognizing that some recipients may 

experience revenue effects with a lag. 

This option to re-calculate revenue loss 

on an ongoing basis is intended to result 

in more support for recipients to avoid 

harmful cutbacks in future years. In 

calculating revenue loss, recipients will 

look at general revenue in the aggregate, 

rather than on a source-by-source basis, 

given that recipients may have 

experienced offsetting changes in 

revenues across sources. The final rule 

also provides for removing the impact of 

tax increasing or decreasing changes, 

which affect the amount of revenue 

collected but are not ‘‘due to’’ the 

pandemic, from the calculation of 

revenue loss due to the public health 

emergency. Both of these components of 

Treasury’s approach provide a more 

accurate representation of the effect of 

the pandemic on overall revenues. 

Revenue Loss Standard Allowance: In 

addition to largely preserving the 

formula to calculate revenue loss from 

the interim final rule, Treasury also 

added an alternative ‘‘standard 

allowance’’ option for the revenue loss 

calculation to this final rule. Treasury’s 

decision to elect to allow a fixed amount 

of loss that can be used to fund 

‘‘government services’’ allows recipients 

the flexibility to use minimal 

administrative capacity on the 

calculation if desired. The decision also 

benefits recipients by allowing them to 

avoid expending administrative 


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393Further, the final rule encourages, but does not 

require, that recipients pursue broadband 

infrastructure projects in locations not currently 

served by a wireline connection that reliably 

delivers at least 100 Mbps of download speed and 

20 Mbps of upload speed. 

394 Data from the Federal Communications 

Commission shows that as of June 2020, 9.07 

percent of the U.S. population had no available 

cable or fiber broadband providers providing greater 

than 25 Mbps download speeds and 3 Mbps upload 

speeds. Federal Communications Commission, 

Fixed Broadband Deployment, https://

broadbandmap.fcc.gov/#/ (last visited May 9, 2021). 

395See Federal Communications Commission, 

Broadband Speed Guide, available at https://

www.fcc.gov/consumers/guides/broadband-speedguide (last visited October 28, 2021). 

resources to determine how unique 

variations in revenue interact with the 

revenue loss formula. 

Premium Pay 

Per the ARPA statute, recipients have 

broad latitude to designate critical 

infrastructure sectors and make grants to 

third-party employers for the purpose of 

providing premium pay. While the final 

rule provides significant flexibility to 

implement the statutory requirement 

that premium pay respond to essential 

workers, it requires recipients give 

written justification in the case that 

premium pay would increase a worker’s 

annual pay above a certain threshold or 

is awarded to an individual whose 

annual pay is already above that 

threshold. To set this threshold, 

Treasury analyzed data from the Bureau 

of Labor Statistics to determine a level 

that would not require further 

justification for premium pay to the vast 

majority of essential workers, while 

requiring higher scrutiny for provision 

of premium pay to higher earners who, 

even without premium pay, would 

likely have greater personal financial 

resources to cope with the effects of the 

pandemic. Alternatively, a recipient 

need not submit written justification to 

Treasury if the worker receiving 

premium pay is eligible for overtime 

under the FLSA. Treasury believes this 

alternative, which is an addition to the 

final rule, will give recipients more 

flexibility and will simplify application 

of the final rule as employers, public 

and private, are already legally required 

to determine whether an employee is 

eligible for overtime pay under the 

FLSA. Treasury believes the threshold 

and overtime eligibility provision in the 

final rule strike the appropriate balance 

between preserving flexibility and 

helping encourage use of these 

resources to help those in greatest need. 

The final rule also requires that workers 

eligible for premium pay have regular 

in-person interactions or regular 

physical handling of items that were 

also handled by others. This 

requirement will help encourage use of 

financial resources for those who have 

endured the heightened risk of 

performing essential work. 

Water and Sewer Infrastructure 

In the interim final rule, Treasury 

aligned eligible uses of funds for water 

and sewer infrastructure to those 

projects eligible to receive financial 

assistance through the DWSRF and 

CWSRF administered by the EPA. 

The benefits of this approach 

included giving recipients an existing 

list that would provide them clarity as 

well as flexibility in identifying eligible 

projects, particularly given the broad 

range of projects eligible under the 

CWSRF and DWSRF. The approach also 

ensured that projects would conform to 

vetted project types from a widely used 

program. Treasury received comments 

from recipients requesting additional 

project categories to be considered 

eligible, indicating a potential cost to 

maintaining alignment with the CWSRF 

and DWSRF. 

For the final rule, Treasury has 

expanded eligibility to include several 

additional project types beyond those 

covered by the CWSRF and DWSRF. 

Treasury believes that expanded 

eligibility will benefit recipients by 

allowing them additional flexibility to 

pursue beneficial projects, including 

project categories that support the 

provision of drinking water and the 

removal, management, and treatment of 

wastewater and stormwater: Additional 

stormwater management projects, 

private well infrastructure, additional 

projects that address lead in water, and 

certain dam and reservoir rehabilitation 

projects undertaken to address the 

provision of drinking water. A potential 

cost of this approach is that uses beyond 

the CSWRF and DWSRF may have less 

public guidance available to understand 

project eligibilities. However, Treasury 

anticipates that this eligibility 

expansion will provide a net benefit to 

recipients by allowing them to pursue 

projects relevant to their goals that were 

ineligible under the interim final rule. 

The expansion to allow private well 

infrastructure may also affect the 

distributional impact of SLFRF. Private 

wells disproportionately serve rural 

Americans, including low-income 

households, and expanding eligibility to 

include this use may allow SLFRF funds 

to benefit such households. While 

distributional impacts are uncertain, 

Treasury believes that the potential for 

benefits to accrue to rural and lowincome households makes it important 

to clarify that these types of projects are 

eligible. 

Broadband Infrastructure 

In the final rule, Treasury expands 

eligible areas for broadband investment 

by requiring that recipients invest in 

projects designed to provide service to 

households and businesses with an 

identified need for additional 

broadband investment, including 

increasing access to high-speed 

broadband, increasing the affordability 

of broadband services, and improving 

the reliability of broadband service.393

Treasury considered multiple 

alternatives when selecting this 

standard. The threshold for the interim 

final rule allowed benefits to accrue in 

a more targeted manner to the 

approximately 9 percent of the country 

with access to speeds under the 25/3 

Mbps threshold.394 However, since 

SLFRF funds are distributed to tens of 

thousands of governments across the 

country with a variety of broadband 

needs, Treasury believes that allowing 

recipients greater flexibility to 

determine locations to serve in their 

jurisdictions—including considering 

affordability and competition barriers— 

will lead to greater long-term public 

benefit. Further, given that many federal 

broadband grant programs are focused 

solely on unserved and underserved 

areas, Treasury believes that the final 

rule’s flexibility enables these funds to 

fill an important role in the overall 

federal broadband landscape. 

In the final rule, Treasury also 

requires that broadband projects must 

meet a standard of reliably delivering at 

least 100 Mbps download speeds and 

upload speeds, or in cases where it is 

not practicable to do so, reliably 

delivering at least 100 Mbps download 

speed and between at least 20 Mbps and 

100 Mbps upload speed while being 

scalable to 100 Mbps upload and 

download speeds. Treasury expects that 

this threshold will yield long-term 

benefits and allow networks to meet 

both pandemic-related and future needs. 

The Federal Communications 

Commission (FCC) estimates that 

currently a household with two to three 

remote learners using the internet 

simultaneously needs a connection 

supporting 100 Mbps download 

speeds.395 While a lower threshold may 

have resulted in lower near-term costs 

to build, it would have potentially 

constrained future utility from the 

infrastructure by producing 

infrastructure that would more 

quickly—potentially in the near-term— 

become obsolete and no longer meet 

household needs, potentially requiring 

sooner replacement and generally 

decreasing the return on investment. As 


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such, projects meeting a lower threshold 

could not be considered ‘‘necessary’’ 

investments in broadband 

infrastructure, so Treasury has retained 

the threshold from the interim final 

rule. 

Further, the final rule adds a 

requirement that recipients address the 

affordability needs of low-income 

consumers in accessing broadband 

networks funded by SLFRF, either by 

requiring service providers that provide 

service to households to either 

participate in the FCC’s Affordable 

Connectivity Program (ACP), or a broadbased affordability program with 

commensurate benefits. Treasury 

believes that this requirement will 

increase the number of customers that 

are able to take advantage of broadband 

infrastructure funded by SLFRF, 

increasing the effectiveness of funds in 

connecting households and businesses 

to high-speed internet that is critical to 

work, health, and education. There is a 

potential that this requirement may 

marginally increase project costs for 

recipients and providers, but this 

impact is uncertain, given the varying 

business models and pricing structures 

of broadband projects and providers. 

Labor Standards 

In this Supplementary Information for 

the final rule, Treasury encourages 

recipients to ensure that capital 

expenditures to respond to the public 

health and negative economic impacts 

of the pandemic and water, sewer, and 

broadband projects use strong labor 

standards, including, for example, 

project labor agreements and 

community benefits agreements that 

offer wages at or above the prevailing 

rate and include local hire provisions. 

Treasury believes that its 

encouragement of labor standards 

carries benefits because it will ensure 

that workers have access to strong 

employment opportunities associated 

with infrastructure projects, which will 

in turn aid the economic recovery. 

Treasury believes that infrastructure 

projects may also benefit from stronger 

labor standards due to the potential of 

these standards to ensure a stronger 

skilled labor supply and minimize labor 

disputes and workplace injuries, which 

can result in costly disruptions to 

projects. Treasury assesses that these 

benefits will increase the economy and 

efficiency of infrastructure projects 

undertaken through SLFRF and will 

outweigh the potential for a marginal 

increase in labor costs. 

Splitting Payments to Recipients 

Treasury is required by statute to 

deliver funds to local governments in 

two payments separated by at least 

twelve months, and the interim final 

rule provided for split payments to a 

majority of states as well. As discussed 

above, splitting payments ensures that 

recipients can adapt spending plans to 

evolving economic conditions and that 

at least some of the economic benefits 

will be realized in 2022 or later. 

However, consistent with authorities 

granted to Treasury in the statute, 

Treasury recognizes that a subset of 

states with significant remaining 

elevation in the unemployment rate 

could face heightened additional near 

term needs to aid unemployed workers 

and stimulate the recovery. Therefore, 

for a subset of state governments, 

Treasury has provided funds in one 

payment. Treasury believes that this 

approach strikes an appropriate balance 

between the general reasons to provide 

funds in two payments and the 

heightened additional near-term needs 

in specific states. As discussed above, 

Treasury set a threshold based on 

historical analysis of unemployment 

rates in recessions. 

Reaching Underserved Communities 

Finally, the final rule aims to promote 

and streamline the provision of 

assistance to individuals and 

communities in greatest need, 

particularly communities that have been 

historically underserved and have 

experienced disproportionate impacts of 

the COVID–19 crisis. Targeting relief is 

in line with Executive Order 13985, 

‘‘Advancing Racial Equity and Support 

for Underserved Communities Through 

the Federal Government,’’ which laid 

out an Administration-wide priority to 

support ‘‘equity for all, including people 

of color and others who have been 

historically underserved, marginalized, 

and adversely affected by persistent 

poverty and inequality.’’ To this end, 

the final rule enumerates a list of 

services that may be provided using 

SLFRF funds in disproportionately 

impacted communities, including lowincome areas, to address the more 

severe impacts of the pandemic in these 

communities; establishes the 

characteristics of essential workers 

eligible for premium pay and 

encouragement to serve workers based 

on financial need; provides that 

recipients may use SLFRF funds to 

restore state and local workforces, 

where women and people of color are 

disproportionately represented; and 

requires that broadband infrastructure 

projects participate in programs to 

support affordability of broadband 

service. Collectively, these provisions 

will promote use of resources to 

facilitate the provision of assistance to 

individuals and communities with the 

greatest need. 

Analysis of Costs 

This regulatory action will generate 

administrative costs relative to a prestatutory baseline. This includes, 

chiefly, costs required to administer 

SLFRF funds, oversee subrecipients and 

beneficiaries, and file periodic reports 

with Treasury. It also requires states to 

allocate SLFRF funds to nonentitlement 

units, which are smaller units of local 

government that are statutorily required 

to receive their funds through states. 

Treasury expects that the administrative 

burden associated with this program 

will be moderate for a grant program of 

its size. Treasury expects that many 

recipients receive direct or indirect 

funding from federal government 

programs and that many have 

familiarity with how to administer and 

report on federal funds or grant funding 

provided by other entities. In particular, 

states, territories, and large localities 

will have received funds from the 

Coronavirus Relief Fund (CRF) and 

Treasury expects them to rely heavily 

on established processes developed 

through that program or other prior 

grant funding, mitigating burden on 

these governments. Treasury has 

enhanced the level of recipient 

reporting as compared to the CRF, 

incorporating feedback from the 

Government Accountability Office and 

others that additions would improve the 

oversight of recipients’ use of funds. To 

balance the oversight benefits with the 

costs of added reporting burdens, 

Treasury has incorporated other 

mechanisms to mitigate burden. For 

example, Treasury is ‘‘tiering’’ reporting 

requirements so that recipients that 

receive relatively lesser amounts of 

SLFRF funds are required to submit less 

frequent reports than recipients 

receiving greater amounts of funds. 

Treasury is noting administrative costs 

as a generally allowable use of SLFRF 

funds, which defrays administrative 

expenses to recipients that may be 

needed to comply with reporting 

requirements. Treasury has also 

provided options for recipients to use 

eligibility thresholds they are already 

familiar with during administration of 

SLFRF funds, which will enable 

recipients to avoid the costs of setting 

up new programs and reporting 

mechanisms to meet reporting and 

compliance requirements. For example, 

Treasury has permitted recipients to use 

‘‘categorical eligibility’’ when delivering 

assistance to particular groups, such as 

impacted or disproportionately 

impacted households. 


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396See Coronavirus State and Local Fiscal 

Recovery Funds, Frequently Asked Questions, 10.2, 

as of July 19, 2021; https://home.treasury.gov/ 

system/files/136/SLFRPFAQ.pdf. 

In making implementation choices, 

Treasury has hosted numerous 

consultations with a diverse range of 

direct recipients—states, cities, 

counties, and Tribal governments— 

along with various communities across 

the United States, including those that 

are underserved. Furthermore, Treasury 

has made clear in guidance that SLFRF 

funds may be used to cover certain 

expenses related to administering 

programs established using SLFRF 

funds.396

Executive Order 13132 

Executive Order 13132 (entitled 

Federalism) prohibits an agency from 

publishing any rule that has federalism 

implications if the rule either imposes 

substantial, direct compliance costs on 

state, local, and Tribal governments, and 

is not required by statute, or preempts 

state law, unless the agency meets the 

consultation and funding requirements 

of section 6 of the Executive Order. This 

final rule does not have federalism 

implications within the meaning of the 

Executive Order and does not impose 

substantial, direct compliance costs on 

state, local, and Tribal governments or 

preempt state law within the meaning of 

the Executive Order. The compliance 

costs are imposed on state, local, and 

Tribal governments by sections 602 and 

603 of the Social Security Act, as 

enacted by the ARPA. Notwithstanding 

the above, Treasury has engaged in 

efforts to consult and work 

cooperatively with affected state, local, 

and Tribal government officials and 

associations in the process of 

developing the interim final rule and 

this final rule. Pursuant to the 

requirements set forth in section 8(a) of 

Executive Order 13132, Treasury 

certifies that it has complied with the 

requirements of Executive Order 13132. 

Administrative Procedure Act 

The Administrative Procedure Act 

(APA), 5 U.S.C. 551 et seq., generally 

requires public notice and an 

opportunity for comment before a rule 

becomes effective. However, the APA 

provides that the requirements of 5 

U.S.C. 553 do not apply ‘‘to the extent 

that there is involved . . . a matter 

relating to agency . . . grants.’’ The 

APA also provides an exception to 

ordinary notice-and-comment 

procedures ‘‘when the agency for good 

cause finds (and incorporates the 

finding and a brief statement of reasons 

therefor in the rules issued) that notice 

and public procedure thereon are 

impracticable, unnecessary, or contrary 

to the public interest.’’ 5 U.S.C. 

553(b)(B). The interim final rule was 

issued without prior notice and 

comment procedures because it 

implemented statutory conditions on 

the eligible uses of SLFRF funds, and 

addressed the payment of those funds, 

the reporting on uses of funds, and 

potential consequences of ineligible 

uses to help address the economic and 

public health emergency. See the 

SUPPLEMENTARY INFORMATION section of 

the May 17, 2021 interim final rule for 

the applicability of the requirements of 

5 U.S.C. 553. In addition, under the 

exception discussed in that section for 

matters relating to agency grants, the 

requirements of 5 U.S.C. 553 also do not 

apply to this final rule. After careful 

consideration of the comments received, 

this final rule adopts the May 17, 2021 

interim final rule with the revisions 

discussed in this SUPPLEMENTARY

INFORMATION. 

Congressional Review Act 

The Administrator of OIRA has 

determined that this is a major rule for 

purposes of Subtitle E of the Small 

Business Regulatory Enforcement and 

Fairness Act of 1996 (also known as the 

Congressional Review Act or CRA) (5 

U.S.C. 804(2) et seq.). Under the CRA, 

a major rule generally may take effect no 

earlier than 60 days after the rule is 

published in the Federal Register. 5 

U.S.C. 801(a)(3). 

Paperwork Reduction Act 

The information collections 

associated with the SLFRF program 

have been reviewed and approved by 

OMB pursuant to the Paperwork 

Reduction Act (44 U.S.C. Chapter 35) 

(PRA) and assigned control number 

1505–0271. Under the PRA, an agency 

may not conduct or sponsor, and a 

respondent is not required to respond 

to, an information collection unless it 

displays a valid OMB control number. 

Estimates of hourly burden under this 

program are set forth in the table below. 

Reporting Number 

respondents 

Number 

responses 

per 

respondent 

Total 

responses 

Hours per 

response 

Total 

burden 

in hours 

Cost to 

respondents 

($48.80 per 

hour *) 

Recipient Payment Form ...................................... 5,050 1 5,050 .25 (15 minutes) .... 1,262.5 $61,610 

Acceptance of Award Terms ................................ 5,050 1 5,050 .25 (15 minutes) .... 1,262.5 61,610 

Title VI Assurances .............................................. 5,050 1 5,050 .50 (30 minutes) .... 2,525 123,220 

Tribal Employment Information Form ................... 584 1 584 .75 (45 minutes) .... 438 21,374 

Request for Extension Form ................................ 96 1 96 1 ............................ 96 4,685 

Annual Recovery Plan Performance Report ........ 430 1 430 100 ........................ 43,000 2,098,400 

NEU Distribution Template ................................... 55 2 110 10 .......................... 1,100 53,680 

Non-UGLG Distribution Template ........................ 55 2 110 5 ............................ 550 26,840 

Transfer Forms ..................................................... 1,500 1 1,500 1 ............................ 1,500 73,200 

Project and Expenditure Report ........................... 37,000 1 37,000 5 ............................ 185,000 9,028,000 

Total .............................................................. 54,870 .................... 54,980 ............................... 236,735 11,552,619 

* Bureau of Labor Statistics, U.S. Department of Labor, Occupational Outlook Handbook, Accountants and Auditors, on the internet at https://

www.bls.gov/ooh/business-and-financial/accountants-and-auditors.htm (visited March 28, 2020). Base wage of $33.89/hour increased by 44 percent to account for fully loaded employer cost of employee compensation (benefits, etc.) for a fully loaded wage rate of $48.80. 

Regulatory Flexibility Analysis 

The Regulatory Flexibility Act (RFA) 

generally requires that when an agency 

issues a proposed rule, or a final rule 

pursuant to section 553(b) of the 

Administrative Procedure Act or 

another law, the agency must prepare a 

regulatory flexibility analysis that meets 

the requirements of the RFA and 

publish such analysis in the Federal 

Register. 5 U.S.C. 603, 604. 

Rules that are exempt from notice and 

comment under the APA or any other 

law are also exempt from the RFA 


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4446 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 

requirements, including the requirement 

to conduct a regulatory flexibility 

analysis, when among other things the 

agency for good cause finds that notice 

and public procedure are impracticable, 

unnecessary, or contrary to the public 

interest. Because this rule is exempt 

from the notice and comment 

requirements of the APA, Treasury is 

not required to conduct a regulatory 

flexibility analysis. 

Rule Text 

List of Subjects in 31 CFR Part 35 

Executive compensation, State and 

Local Governments, Tribal 

Governments, Public health emergency. 

For the reasons stated in the 

preamble, the United States Department 

of the Treasury amends 31 CFR part 35 

as follows: 

PART 35—PANDEMIC RELIEF 

PROGRAMS 

■ 1. Revise Subpart A to read as follows: 

Subpart A—Coronavirus State and 

Local Fiscal Recovery Funds 

Sec. 

35.1 Purpose. 

35.2 Applicability. 

35.3 Definitions. 

35.4 Reservation of authority, reporting. 

35.5 Use of funds. 

35.6 Eligible uses. 

35.7 Pensions. 

35.8 Tax. 

35.9. Compliance with applicable laws. 

35.10. Recoupment. 

35.11 Payments to States. 

35.12. Distributions to nonentitlement units 

of local government and units of general 

local government. 

Authority: 42 U.S.C. 802(f); 42 U.S.C. 

803(f). 

§ 35.1 Purpose. 

This part implements section 9901 of 

the American Rescue Plan Act (Subtitle 

M of Title IX of Pub. L. 117–2), which 

amends Title VI of the Social Security 

Act (42 U.S.C. 801 et seq.) by adding 

sections 602 and 603 to establish the 

Coronavirus State Fiscal Recovery Fund 

and Coronavirus Local Fiscal Recovery 

Fund. 

§ 35.2 Applicability. 

This part applies to states, territories, 

Tribal governments, metropolitan cities, 

nonentitlement units of local 

government, counties, and units of 

general local government that accept a 

payment or transfer of funds made 

under section 602 or 603 of the Social 

Security Act. 

§ 35.3 Definitions. 

Baseline means tax revenue of the 

recipient for its fiscal year ending in 

2019, adjusted for inflation in each 

reporting year using the Bureau of 

Economic Analysis’s Implicit Price 

Deflator for the gross domestic product 

of the United States. 

Capital expenditures has the same 

meaning given in 2 CFR 200.1. 

County means a county, parish, or 

other equivalent county division (as 

defined by the Census Bureau). 

Covered benefits include, but are not 

limited to, the costs of all types of leave 

(vacation, family-related, sick, military, 

bereavement, sabbatical, jury duty), 

employee insurance (health, life, dental, 

vision), retirement (pensions, 401(k)), 

unemployment benefit plans (Federal 

and State), workers’ compensation 

insurance, and Federal Insurance 

Contributions Act taxes (which includes 

Social Security and Medicare taxes). 

Covered change means a change in 

law, regulation, or administrative 

interpretation that reduces any tax (by 

providing for a reduction in a rate, a 

rebate, a deduction, a credit, or 

otherwise) or delays the imposition of 

any tax or tax increase. A change in law 

includes any final legislative or 

regulatory action, a new or changed 

administrative interpretation, and the 

phase-in or taking effect of any statute 

or rule if the phase-in or taking effect 

was not prescribed prior to the start of 

the covered period. 

Covered period means, with respect to 

a state or territory, the period that: 

(1) Begins on March 3, 2021; and 

(2) Ends on the last day of the fiscal 

year of such State or territory in which 

all funds received by the State or 

territory from a payment made under 

section 602 or 603 of the Social Security 

Act have been expended or returned to, 

or recovered by, the Secretary. 

COVID–19 means the Coronavirus 

Disease 2019. 

COVID–19 public health emergency 

means the period beginning on January 

27, 2020 and lasting until the 

termination of the national emergency 

concerning the COVID–19 outbreak 

declared pursuant to the National 

Emergencies Act (50 U.S.C. 1601 et 

seq.). 

Deposit means an extraordinary 

payment of an accrued, unfunded 

liability. The term deposit does not refer 

to routine contributions made by an 

employer to pension funds as part of the 

employer’s obligations related to 

payroll, such as either a pension 

contribution consisting of a normal cost 

component related to current employees 

or a component addressing the 

amortization of unfunded liabilities 

calculated by reference to the 

employer’s payroll costs. 

Eligible employer means an employer 

of an eligible worker who performs 

essential work. 

Eligible workers means workers 

needed to maintain continuity of 

operations of essential critical 

infrastructure sectors, including health 

care; emergency response; sanitation, 

disinfection, and cleaning work; 

maintenance work; grocery stores, 

restaurants, food production, and food 

delivery; pharmacy; biomedical 

research; behavioral health work; 

medical testing and diagnostics; homeand community-based health care or 

assistance with activities of daily living; 

family or childcare; social services 

work; public health work; vital services 

to Tribes; any work performed by an 

employee of a State, local, or Tribal 

government; educational work, school 

nutrition work, and other work required 

to operate a school facility; laundry 

work; elections work; solid waste or 

hazardous materials management, 

response, and cleanup work; work 

requiring physical interaction with 

patients; dental care work; 

transportation and warehousing; work at 

hotel and commercial lodging facilities 

that are used for COVID–19 mitigation 

and containment; work in a mortuary; 

and work in critical clinical research, 

development, and testing necessary for 

COVID–19 response. 

(1) With respect to a recipient that is 

a metropolitan city, nonentitlement unit 

of local government, or county, workers 

in any additional non-public sectors as 

each chief executive officer of such 

recipient may designate as critical to 

protect the health and well-being of the 

residents of their metropolitan city, 

nonentitlement unit of local 

government, or county; or 

(2) With respect to a State, territory, 

or Tribal government, workers in any 

additional non-public sectors as each 

Governor of a State or territory, or each 

Tribal government, may designate as 

critical to protect the health and wellbeing of the residents of their State, 

territory, or Tribal government. 

Essential work means work that: 

(1) Is not performed while 

teleworking from a residence; and 

(2) Involves: 

(i) Regular in-person interactions with 

patients, the public, or coworkers of the 

individual that is performing the work; 

or 

(ii) Regular physical handling of items 

that were handled by, or are to be 

handled by patients, the public, or 

coworkers of the individual that is 

performing the work. 


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Funds means, with respect to a 

recipient, amounts provided to the 

recipient pursuant to a payment made 

under section 602(b) or 603(b) of the 

Social Security Act or transferred to the 

recipient pursuant to section 603(c)(4) 

of the Social Security Act. 

General revenue means money that is 

received from tax revenue, current 

charges, and miscellaneous general 

revenue, excluding refunds and other 

correcting transactions and proceeds 

from issuance of debt or the sale of 

investments, agency or private trust 

transactions, and intergovernmental 

transfers from the Federal Government, 

including transfers made pursuant to 

section 9901 of the American Rescue 

Plan Act. General revenue also includes 

revenue from liquor stores that are 

owned and operated by state and local 

governments. General revenue does not 

include revenues from utilities, except 

recipients may choose to include 

revenue from utilities that are part of 

their own government as general 

revenue provided the recipient does so 

consistently over the remainder of the 

period of performance. Revenue from 

Tribal business enterprises must be 

included in general revenue. 

Intergovernmental transfers means 

money received from other 

governments, including grants and 

shared taxes. 

Low-income household means a 

household with: 

(1) Income at or below 185 percent of 

the Federal Poverty Guidelines for the 

size of its household based on the 

poverty guidelines published most 

recently by the Department of Health 

and Human Services; or 

(2) Income at or below 40 percent of 

the Area Median Income for its county 

and size of household based on data 

published most recently by the 

Department of Housing and Urban 

Development. 

Micro-business means a small 

business that has five or fewer 

employees, one or more of whom owns 

the small business. 

Moderate-income household means a 

household with: 

(1) Income at or below 300 percent of 

the Federal Poverty Guidelines for the 

size of its household based on poverty 

guidelines published most recently by 

the Department of Health and Human 

Services; or 

(2) Income at or below 65 percent of 

the Area Median Income for its county 

and size of household based on data 

published most recently by the 

Department of Housing and Urban 

Development. 

Metropolitan city has the meaning 

given that term in section 102(a)(4) of 

the Housing and Community 

Development Act of 1974 (42 U.S.C. 

5302(a)(4)) and includes cities that 

relinquish or defer their status as a 

metropolitan city for purposes of 

receiving allocations under section 106 

of such Act (42 U.S.C. 5306) for fiscal 

year 2021. 

Net reduction in total spending is 

measured as the State or territory’s total 

spending for a given reporting year 

excluding its spending of funds, 

subtracted from its total spending for its 

fiscal year ending in 2019, adjusted for 

inflation using the Bureau of Economic 

Analysis’s Implicit Price Deflator for the 

gross domestic product of the United 

States for that reporting year. 

Nonentitlement unit of local 

government means a ‘‘city,’’ as that term 

is defined in section 102(a)(5) of the 

Housing and Community Development 

Act of 1974 (42 U.S.C. 5302(a)(5)), that 

is not a metropolitan city. 

Nonprofit means a nonprofit 

organization that is exempt from Federal 

income taxation and that is described in 

section 501(c)(3) or 501(c)(19) of the 

Internal Revenue Code. 

Obligation means an order placed for 

property and services and entering into 

contracts, subawards, and similar 

transactions that require payment. 

Pension fund means a defined benefit 

plan and does not include a defined 

contribution plan. 

Period of performance means the time 

period described in § 35.5 during which 

a recipient may obligate and expend 

funds in accordance with sections 

602(c)(1) and 603(c)(1) of the Social 

Security Act and this subpart. 

Premium pay means an amount of up 

to $13 per hour that is paid to an 

eligible worker, in addition to wages or 

remuneration the eligible worker 

otherwise receives, for all work 

performed by the eligible worker during 

the COVID–19 public health emergency. 

Such amount may not exceed $25,000 in 

total over the period of performance 

with respect to any single eligible 

worker. Premium pay may be awarded 

to non-hourly and part-time eligible 

workers performing essential work. 

Premium pay will be considered to be 

in addition to wages or remuneration 

the eligible worker otherwise receives if, 

as measured on an hourly rate, the 

premium pay is: 

(1) With regard to work that the 

eligible worker previously performed, 

pay and remuneration equal to the sum 

of all wages and remuneration 

previously received plus up to $13 per 

hour with no reduction, substitution, 

offset, or other diminishment of the 

eligible worker’s previous, current, or 

prospective wages or remuneration; or 

(2) With regard to work that the 

eligible worker continues to perform, 

pay of up to $13 per hour that is in 

addition to the eligible worker’s regular 

rate of wages or remuneration, with no 

reduction, substitution, offset, or other 

diminishment of the worker’s current 

and prospective wages or remuneration. 

Qualified census tract has the same 

meaning given in 26 U.S.C. 

42(d)(5)(B)(ii)(I). 

Recipient means a State, territory, 

Tribal government, metropolitan city, 

nonentitlement unit of local 

government, county, or unit of general 

local government that receives a 

payment made under section 602(b) or 

603(b) of the Social Security Act or 

transfer pursuant to section 603(c)(4) of 

the Social Security Act. 

Reporting year means a single year or 

partial year within the covered period, 

aligned to the current fiscal year of the 

State or territory during the covered 

period. 

Secretary means the Secretary of the 

Treasury. 

State means each of the 50 States and 

the District of Columbia. 

Small business means a business 

concern or other organization that: 

(1) Has no more than 500 employees 

or, if applicable, the size standard in 

number of employees established by the 

Administrator of the Small Business 

Administration for the industry in 

which the business concern or 

organization operates, and 

(2) Is a small business concern as 

defined in section 3 of the Small 

Business Act (15 U.S.C. 632). 

Tax revenue means revenue received 

from a compulsory contribution that is 

exacted by a government for public 

purposes excluding refunds and 

corrections and, for purposes of § 35.8, 

intergovernmental transfers. Tax 

revenue does not include payments for 

a special privilege granted or service 

rendered, employee or employer 

assessments and contributions to 

finance retirement and social insurance 

trust systems, or special assessments to 

pay for capital improvements. 

Territory means the Commonwealth 

of Puerto Rico, the United States Virgin 

Islands, Guam, the Commonwealth of 

the Northern Mariana Islands, or 

American Samoa. 

Title I eligible schools means schools 

eligible to receive services under section 

1113 of Title I, Part A of the Elementary 

and Secondary Education Act of 1965, 

as amended (20 U.S.C. 6313), including 

schools served under section 

1113(b)(1)(C) of that Act. 

Tribal enterprise means a business 

concern: 


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(1) That is wholly owned by one or 

more Tribal governments, or by a 

corporation that is wholly owned by one 

or more Tribal governments; or 

(2) That is owned in part by one or 

more Tribal governments, or by a 

corporation that is wholly owned by one 

or more Tribal governments, if all other 

owners are either United States citizens 

or small business concerns, as these 

terms are used and consistent with the 

definitions in 15 U.S.C. 657a(b)(2)(D). 

Tribal government means the 

recognized governing body of any 

Indian or Alaska Native Tribe, band, 

nation, pueblo, village, community, 

component band, or component 

reservation, individually identified 

(including parenthetically) in the list 

published on January 29, 2021, pursuant 

to section 104 of the Federally 

Recognized Indian Tribe List Act of 

1994 (25 U.S.C. 5131). 

Unemployment rate means the U–3 

unemployment rate provided by the 

Bureau of Labor Statistics as part of the 

Local Area Unemployment Statistics 

program, measured as total 

unemployment as a percentage of the 

civilian labor force. 

Unemployment trust fund means an 

unemployment trust fund established 

under section 904 of the Social Security 

Act (42 U.S.C. 1104). 

Unit of general local government has 

the meaning given to that term in 

section 102(a)(1) of the Housing and 

Community Development Act of 1974 

(42 U.S.C. 5302(a)(1)). 

§ 35.4 Reservation of authority, reporting. 

(a) Reservation of authority. Nothing 

in this part shall limit the authority of 

the Secretary to take action to enforce 

conditions or violations of law, 

including actions necessary to prevent 

evasions of this subpart. 

(b) Extensions or accelerations of 

timing. The Secretary may extend or 

accelerate any deadline or compliance 

date of this part, including reporting 

requirements that implement this 

subpart, if the Secretary determines that 

such extension or acceleration is 

appropriate. In determining whether an 

extension or acceleration is appropriate, 

the Secretary will consider the period of 

time that would be extended or 

accelerated and how the modified 

timeline would facilitate compliance 

with this subpart. 

(c) Reporting and requests for other 

information. During the period of 

performance, recipients shall provide to 

the Secretary periodic reports providing 

detailed accounting of the uses of funds, 

modifications to a State or Territory’s 

tax revenue sources, and such other 

information as the Secretary may 

require for the administration of this 

section. In addition to regular reporting 

requirements, the Secretary may request 

other additional information as may be 

necessary or appropriate, including as 

may be necessary to prevent evasions of 

the requirements of this subpart. False 

statements or claims made to the 

Secretary may result in criminal, civil, 

or administrative sanctions, including 

fines, imprisonment, civil damages and 

penalties, debarment from participating 

in Federal awards or contracts, and/or 

any other remedy available by law. 

§ 35.5 Use of funds. 

(a) In general. A recipient may only 

use funds to cover costs incurred during 

the period beginning March 3, 2021, and 

ending December 31, 2024, for one or 

more of the purposes enumerated in 

sections 602(c)(1) and 603(c)(1) of the 

Social Security Act, as applicable, 

including those enumerated in § 35.6, 

subject to the restrictions set forth in 

sections 602(c)(2) and 603(c)(2) of the 

Social Security Act, as applicable. 

(b) Costs incurred. A cost shall be 

considered to have been incurred for 

purposes of paragraph (a) of this section 

if the recipient has incurred an 

obligation with respect to such cost by 

December 31, 2024. 

(c) Return of funds. A recipient must 

return any funds not obligated by 

December 31, 2024. A recipient must 

also return funds obligated by December 

31, 2024 but not expended by December 

31, 2026. 

§ 35.6 Eligible uses. 

(a) In general. Subject to §§ 35.7 and 

35.8, a recipient may use funds for one 

or more of the purposes described in 

paragraphs (b) through (f) of this 

section. 

(b) Responding to the public health 

emergency or its negative economic 

impacts. A recipient may use funds to 

respond to the public health emergency 

or its negative economic impacts if the 

use meets the criteria provided in 

paragraph (b)(1) of this section or is 

enumerated in paragraph (b)(3) of this 

section; provided that, in the case of a 

use of funds for a capital expenditure 

under paragraphs (b)(1) or (b)(3) of this 

section, the use of funds must also meet 

the criteria provided in paragraph (b)(4) 

of this section. Treasury may also 

articulate additional eligible programs, 

services, or capital expenditures from 

time to time that satisfy the eligibility 

criteria of this paragraph (b), which 

shall be eligible under this paragraph 

(b). 

(1) Identifying eligible responses to 

the public health emergency or its 

negative economic impacts. (i) A 

program, service, or capital expenditure 

is eligible under this paragraph (b)(1) if 

a recipient identifies a harm or impact 

to a beneficiary or class of beneficiaries 

caused or exacerbated by the public 

health emergency or its negative 

economic impacts and the program, 

service, or capital expenditure responds 

to such harm. 

(ii) A program, service, or capital 

expenditure responds to a harm or 

impact experienced by an identified 

beneficiary or class of beneficiaries if it 

is reasonably designed to benefit the 

beneficiary or class of beneficiaries that 

experienced the harm or impact and is 

related and reasonably proportional to 

the extent and type of harm or impact 

experienced. 

(2) Identified harms: Presumptions of 

impacted and disproportionately 

impacted beneficiaries. A recipient may 

rely on the following presumptions to 

identify beneficiaries presumptively 

impacted or disproportionately 

impacted by the public health 

emergency or its negative economic 

impacts for the purpose of providing a 

response under paragraph (b)(1) or (b)(3) 

of this section: 

(i) Households or populations that 

experienced unemployment; 

experienced increased food or housing 

insecurity; qualify for the Children’s 

Health Insurance Program (42 U.S.C. 

1397aa et seq.), Childcare Subsidies 

through the Child Care and 

Development Fund Program (42 U.S.C. 

9857 et seq. and 42 U.S.C. 618), or 

Medicaid (42 U.S.C. 1396 et seq.); if 

funds are to be used for affordable 

housing programs, qualify for the 

National Housing Trust Fund (12 U.S.C. 

4568) or the Home Investment 

Partnerships Program (42 U.S.C. 12721 

et seq.); if funds are to be used to 

address impacts of lost instructional 

time for students in kindergarten 

through twelfth grade, any student who 

did not have access to in-person 

instruction for a significant period of 

time; and low- and moderate-income 

households and populations are 

presumed to be impacted by the public 

health emergency or its negative 

economic impacts; 

(ii) The general public is presumed to 

be impacted by the public health 

emergency for the purposes of providing 

the uses set forth in subparagraphs 

(b)(3)(i)(A) and (b)(3)(i)(C); and 

(iii) The following households, 

communities, small businesses, and 

nonprofit organizations are presumed to 

be disproportionately impacted by the 

public health emergency or its negative 

economic impacts: 

(A) Households and populations 

residing in a qualified census tract; 


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households and populations receiving 

services provided by Tribal 

governments; households and 

populations residing in the territories; 

households and populations receiving 

services provided by territorial 

governments; low-income households 

and populations; households that 

qualify for Temporary Assistance for 

Needy Families (42 U.S.C. 601 et seq.), 

the Supplemental Nutrition Assistance 

Program (7 U.S.C. 2011 et seq.), Free 

and Reduced Price School Lunch and/ 

or Breakfast programs (42 U.S.C. 1751 et 

seq. and 42 U.S.C. 1773), Medicare Part 

D Low-income Subsidies (42 U.S.C. 

1395w–114), Supplemental Security 

Income (42 U.S.C. 1381 et seq.), Head 

Start (42 U.S.C. 9831 et seq.), Early Head 

Start (42 U.S.C. 9831 et seq.), the 

Special Supplemental Nutrition 

Program for Women, Infants, and 

Children (42 U.S.C. 1786), Section 8 

Vouchers (42 U.S.C. 1437f), the LowIncome Home Energy Assistance 

Program (42 U.S.C. 8621 et seq.), Pell 

Grants (20 U.S.C. 1070a), and, if SLFRF 

funds are to be used for services to 

address educational disparities, Title I 

eligible schools; 

(B) Small businesses operating in a 

qualified census tract, operated by 

Tribal governments or on Tribal lands, 

or operating in the territories; and 

(C) Nonprofit organizations operating 

in a qualified census tract, operated by 

Tribal governments or on Tribal lands, 

or operating in the territories. 

(3) Enumerated eligible uses: 

Responses presumed reasonably 

proportional. A recipient may use funds 

to respond to the public health 

emergency or its negative economic 

impacts on a beneficiary or class of 

beneficiaries for one or more of the 

following purposes unless such use is 

grossly disproportionate to the harm 

caused or exacerbated by the public 

health emergency or its negative 

economic impacts: 

(i) Responding to the public health 

impacts of the public health emergency 

for purposes including: 

(A) COVID–19 mitigation and 

prevention in a manner that is 

consistent with recommendations and 

guidance from the Centers for Disease 

Control and Prevention, including 

vaccination programs and incentives; 

testing programs; contact tracing; 

isolation and quarantine; mitigation and 

prevention practices in congregate 

settings; acquisition and distribution of 

medical equipment for prevention and 

treatment of COVID–19, including 

personal protective equipment; COVID– 

19 prevention and treatment expenses 

for public hospitals or health care 

facilities, including temporary medical 

facilities; establishing or enhancing 

public health data systems; installation 

and improvement of ventilation systems 

in congregate settings, health facilities, 

or other public facilities; and assistance 

to small businesses, nonprofits, or 

impacted industries to implement 

mitigation measures; 

(B) Medical expenses related to 

testing and treating COVID–19 that are 

provided in a manner consistent with 

recommendations and guidance from 

the Centers for Disease Control and 

Prevention, including emergency 

medical response expenses, treatment of 

long-term symptoms or effects of 

COVID–19, and costs to medical 

providers or to individuals for testing or 

treating COVID–19; 

(C) Behavioral health care, including 

prevention, treatment, emergency or 

first-responder programs, harm 

reduction, supports for long-term 

recovery, and behavioral health 

facilities and equipment; and 

(D) Preventing and responding to 

increased violence resulting from the 

public health emergency, including 

community violence intervention 

programs, or responding to increased 

gun violence resulting from the public 

health emergency, including payroll and 

covered benefits associated with 

community policing strategies; 

enforcement efforts to reduce gun 

violence; and investing in technology 

and equipment; 

(ii) Responding to the negative 

economic impacts of the public health 

emergency for purposes including: 

(A) Assistance to households and 

individuals, including: 

(1) Assistance for food; emergency 

housing needs; burials, home repairs, or 

weatherization; internet access or digital 

literacy; cash assistance; and assistance 

accessing public benefits; 

(2) Paid sick, medical, or family leave 

programs, or assistance to expand access 

to health insurance; 

(3) Childcare, early learning services, 

home visiting, or assistance for child 

welfare-involved families or foster 

youth; 

(4) Programs to address the impacts of 

lost instructional time for students in 

kindergarten through twelfth grade; 

(5) Development, repair, and 

operation of affordable housing and 

services or programs to increase longterm housing security; 

(6) Financial services that facilitate 

the delivery of Federal, State, or local 

benefits for unbanked and underbanked 

individuals; 

(7) Benefits for the surviving family 

members of individuals who have died 

from COVID–19, including cash 

assistance to surviving spouses or 

dependents of individuals who died of 

COVID–19; 

(8) Assistance for individuals who 

want and are available for work, 

including those who are unemployed, 

have looked for work sometime in the 

past 12 months, who are employed part 

time but who want and are available for 

full-time work, or who are employed but 

seeking a position with greater 

opportunities for economic 

advancement; 

(9) Facilities and equipment related to 

the provision of services to households 

provided in subparagraphs 

(b)(3)(ii)(A)(1)–(8); 

(10) The following expenses related to 

Unemployment Trust Funds: 

(i) Contributions to a recipient 

Unemployment Trust Fund and 

repayment of principal amounts due on 

advances received under Title XII of the 

Social Security Act (42 U.S.C. 1321) up 

to an amount equal to the difference 

between the balance in the recipient’s 

Unemployment Trust Fund as of 

January 27, 2020 and the balance of 

such account as of May 17, 2021 plus 

the principal amount outstanding as of 

May 17, 2021 on any advances received 

under Title XII of the Social Security 

Act between January 27, 2020 and May 

17, 2021; provided that if a recipient 

repays principal on Title XII advances 

or makes a contribution to an 

Unemployment Trust Fund after April 

1, 2022, such recipient shall not reduce 

average weekly benefit amounts or 

maximum benefit entitlements prior to 

December 31, 2024; and 

(ii) Any interest due on such advances 

received under Title XII of the Social 

Security Act (42 U.S.C. 1321); and 

(11) A program, service, capital 

expenditure, or other assistance that is 

provided to a disproportionately 

impacted household, population, or 

community, including: 

(i) Services to address health 

disparities of the disproportionately 

impacted household, population, or 

community; 

(ii) Housing vouchers and relocation 

assistance; 

(iii) Investments in communities to 

promote improved health outcomes and 

public safety such as parks, recreation 

facilities, and programs that increase 

access to healthy foods; 

(iv) Capital expenditures and other 

services to address vacant or abandoned 

properties; 

(v) Services to address educational 

disparities; and 

(vi) Facilities and equipment related 

to the provision of these services to the 

disproportionately impacted household, 

population, or community. 


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(B) Assistance to small businesses, 

including: 

(1) Programs, services, or capital 

expenditures that respond to the 

negative economic impacts of the 

COVID–19 public health emergency, 

including loans or grants to mitigate 

financial hardship such as declines in 

revenues or impacts of periods of 

business closure, or providing technical 

assistance; and 

(2) A program, service, capital 

expenditure, or other assistance that 

responds to disproportionately 

impacted small businesses, including 

rehabilitation of commercial properties; 

storefront and fac ̧ade improvements; 

technical assistance, business 

incubators, and grants for start-ups or 

expansion costs for small businesses; 

and programs or services to support 

micro-businesses; 

(C) Assistance to nonprofit 

organizations including programs, 

services, or capital expenditures, 

including loans or grants to mitigate 

financial hardship such as declines in 

revenues or increased costs, or technical 

assistance; 

(D) Assistance to tourism, travel, 

hospitality, and other impacted 

industries for programs, services, or 

capital expenditures, including support 

for payroll costs and covered benefits 

for employees, compensating returning 

employees, support for operations and 

maintenance of existing equipment and 

facilities, and technical assistance; and 

(E) Expenses to support public sector 

capacity and workforce, including: 

(1) Payroll and covered benefit 

expenses for public safety, public 

health, health care, human services, and 

similar employees to the extent that the 

employee’s time is spent mitigating or 

responding to the COVID–19 public 

health emergency; 

(2) Payroll, covered benefit, and other 

costs associated with programs or 

services to support the public sector 

workforce and with the recipient: 

(i) Hiring or rehiring staff to fill 

budgeted full-time equivalent positions 

that existed on January 27, 2020 but that 

were unfilled or eliminated as of March 

3, 2021; or 

(ii) Increasing the number of its 

budgeted full-time equivalent 

employees by up to the difference 

between the number of its budgeted fulltime equivalent employees on January 

27, 2020, multiplied by 1.075, and the 

number of its budgeted full-time 

equivalent employees on March 3, 2021, 

provided that funds shall only be used 

for additional budgeted full-time 

equivalent employees above the 

recipient’s number of budgeted full-time 

equivalent employees as of March 3, 

2021; 

(3) Costs to improve the design and 

execution of programs responding to the 

COVID–19 pandemic and to administer 

or improve the efficacy of programs 

addressing the public health emergency 

or its negative economic impacts; and 

(4) Costs associated with addressing 

administrative needs of recipient 

governments that were caused or 

exacerbated by the pandemic. 

(4) Capital expenditures. A recipient, 

other than a Tribal government, must 

prepare a written justification for certain 

capital expenditures according to Table 

1 to paragraph (b)(4) of this section. 

Such written justification must include 

the following elements: 

(i) Describe the harm or need to be 

addressed; 

(ii) Explain why a capital expenditure 

is appropriate; and 

(iii) Compare the proposed capital 

expenditure to at least two alternative 

capital expenditures and demonstrate 

why the proposed capital expenditure is 

superior. 

TABLE 1 TO PARAGRAPH (b)(4) 

If a project has total expected 

capital expenditures of and the use is enumerated in (b)(3), then and the use is not enumerated in (b)(3), then 

Less than $1 million ........................ No Written Justification required ............................... No Written Justification required. 

Greater than or equal to $1 million, 

but less than $10 million.

Written Justification required but recipients are not 

required to submit as part of regular reporting to 

Treasury.

Written Justification required and recipients must 

submit as part of regular reporting to Treasury. 

$10 million or more ......................... Written Justification required and recipients must 

submit as part of regular reporting to Treasury.

(c) Providing premium pay to eligible 

workers. A recipient may use funds to 

provide premium pay to eligible 

workers of the recipient who perform 

essential work or to provide grants to 

eligible employers that have eligible 

workers who perform essential work, 

provided that any premium pay or 

grants provided under this paragraph (c) 

must respond to eligible workers 

performing essential work during the 

COVID–19 public health emergency. A 

recipient uses premium pay or grants 

provided under this paragraph (c) to 

respond to eligible workers performing 

essential work during the COVID–19 

public health emergency if: 

(1) The eligible worker’s total wages 

and remuneration, including the 

premium pay, is less than or equal to 

150 percent of the greater of such 

eligible worker’s residing State’s or 

county’s average annual wage for all 

occupations as defined by the Bureau of 

Labor Statistics’ Occupational 

Employment and Wage Statistics; 

(2) The eligible worker is not exempt 

from the Fair Labor Standards Act 

overtime provisions (29 U.S.C. 207); or 

(3) The recipient has submitted to the 

Secretary a written justification that 

explains how providing premium pay to 

the eligible worker is responsive to the 

eligible worker performing essential 

work during the COVID–19 public 

health emergency (such as a description 

of the eligible workers’ duties, health, or 

financial risks faced due to COVID–19, 

and why the recipient determined that 

the premium pay was responsive 

despite the worker’s higher income). 

(d) Providing government services. A 

recipient may use funds for the 

provision of government services to the 

extent of the reduction in the recipient’s 

general revenue due to the public health 

emergency, calculated according to this 

paragraph (d). A recipient must make a 

one-time election to calculate the 

amount of the reduction in the 

recipient’s general revenue due to the 

public health emergency according to 

either paragraph (d)(1) or (d)(2) of this 

section: 

(1) Standard allowance. The 

reduction in the recipient’s general 

revenue due to the public health 

emergency over the period of 

performance will be deemed to be ten 

million dollars; or 

(2) Formula. The reduction in the 

recipient’s general revenue due to the 

public health emergency over the period 

of performance equals the sum of the 

reduction in revenue, calculated as of 

each date identified in paragraph 

(d)(2)(i) of this section and according to 

the formula in paragraph (d)(2)(ii) of 

this section: 


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(i) A recipient must make a one-time 

election to calculate the reduction in its 

general revenue using information as of 

either: 

(A) December 31, 2020, December 31, 

2021, December 31, 2022, and December 

31, 2023; or 

(B) The last day of each of the 

recipient’s fiscal years ending in 2020, 

2021, 2022, and 2023. 

(ii) A reduction in a recipient’s 

general revenue for each date identified 

in paragraph (d)(2)(i) of this section 

equals: 

Max {[Base Year Revenue * (1 + Growth 

Adjustment)∧(nt/12)]¥Actual 

General Revenue; 0} 

Where: 

(A) Base Year Revenue is the 

recipient’s general revenue for the most 

recent full fiscal year prior to the 

COVID–19 public health emergency; 

(B) Growth Adjustment is equal to the 

greater of 5.2 percent (or 0.052) and the 

recipient’s average annual revenue 

growth over the three full fiscal years 

prior to the COVID–19 public health 

emergency; 

(C) n equals the number of months 

elapsed from the end of the base year to 

the calculation date; 

(D) Subscript t denotes the specific 

calculation date; and 

(E) Actual General Revenue is a 

recipient’s actual general revenue 

collected during the 12-month period 

ending on each calculation date 

identified in paragraph (d)(2)(i) of this 

section, except: 

(1) For purposes of all calculation 

dates on or after April 1, 2022, in the 

case of any change made after January 

6, 2022 to any law, regulation, or 

administrative interpretation that 

reduces any tax (by providing for a 

reduction in a rate, a rebate, a 

deduction, a credit, or otherwise) or 

delays the imposition of any tax or tax 

increase and that the recipient assesses 

has had the effect of decreasing the 

amount of tax revenue collected during 

the 12-month period ending on the 

calculation date relative to the amount 

of tax revenue that would have been 

collected in the absence of such change, 

the recipient must add to actual general 

revenue the amount of such decrease in 

tax revenue; 

(2) For purposes of any calculation 

date on or after April 1, 2022, in the 

case of any change made after January 

6, 2022 to any law, regulation, or 

administrative interpretation that 

increases any tax (by providing for an 

increase in a rate, the reduction of a 

rebate, a deduction, or a credit, or 

otherwise) or accelerates the imposition 

of any tax or tax increase and that the 

recipient assesses has had the effect of 

increasing the amount of tax revenue 

collected during the 12-month period 

ending on the calculation date relative 

to the amount of tax revenue that would 

have been collected in the absence of 

such change, the recipient must subtract 

from actual general revenue the amount 

of such increase in tax revenue; 

(3) If the recipient makes a one-time 

election to adjust general revenue to 

reflect tax changes made during the 

period beginning on January 27, 2020 

and ending on January 6, 2022, for 

purposes of each calculation date 

identified in paragraph (d)(2)(i) of this 

section: 

(i) In the case of any change made 

during such prior period to any law, 

regulation, or administrative 

interpretation that reduces any tax (by 

providing for a reduction in a rate, a 

rebate, a deduction, a credit, or 

otherwise) or delays the imposition of 

any tax or tax increase and that the 

recipient assesses has had the effect of 

decreasing the amount of tax revenue 

collected during the 12-month period 

ending on the calculation date relative 

to the amount of tax revenue that would 

have been collected in the absence of 

such change, the recipient must add to 

actual general revenue the amount of 

such decrease in tax revenue; and 

(ii) In the case of any change made 

during such prior period to any law, 

regulation, or administrative 

interpretation that increases any tax (by 

providing for an increase in a rate, the 

reduction of a rebate, a deduction, or a 

credit, or otherwise) or accelerates the 

imposition of any tax or tax increase 

and that the recipient assesses has had 

the effect of increasing the amount of 

tax revenue collected during the 12- 

month period ending on the calculation 

date relative to the amount of tax 

revenue that would have been collected 

in the absence of such change, the 

recipient must subtract from actual 

general revenue the amount of such 

increase in tax revenue; and 

(4) With respect to any calculation 

date during the period beginning on 

January 6, 2022 and ending on March 

31, 2022, if the recipient makes the 

election in paragraph (d)(3) of this 

section, the recipient must also make 

the adjustments referenced in paragraph 

(d)(3) of this section with respect to any 

such changes in law, regulation, or 

administrative interpretation during the 

period beginning on January 6, 2022 and 

ending on such calculation date. 

(e) Making necessary investments in 

water, sewer, and broadband 

infrastructure. A recipient may use 

funds to make the following 

investments in water, sewer, and 

broadband infrastructure. 

(1) Water and sewer investments—(i) 

Clean Water State Revolving Fund 

projects. Projects or activities of the type 

that meet the eligibility requirements of 

section 603(c) of the Federal Water 

Pollution Control Act (33 U.S.C. 

1383(c)); 

(ii) Additional stormwater projects. 

Projects to manage, reduce, treat, or 

recapture stormwater or subsurface 

drainage water regardless of whether 

such projects would improve water 

quality if such projects would otherwise 

meet the eligibility requirements of 

section 603(c)(5) of the Federal Water 

Pollution Control Act (33 U.S.C. 

1383(c)(5)); 

(iii) Drinking Water State Revolving 

Fund projects. Projects or activities of 

the type that meet the eligibility 

requirements of section 1452 of the Safe 

Drinking Water Act (42 U.S.C. 300j–12) 

as implemented by the regulations 

adopted by the Environmental 

Protection Agency (EPA) under 40 CFR 

35.3520, provided that: 

(A) The recipient is not required to 

comply with the limitation under 40 

CFR 35.3520(c)(2) to acquisitions of 

land from willing sellers or the 

prohibition under 40 CFR 35.3520(e)(6) 

on uses of funds for certain Tribal 

projects; and 

(B) In the case of lead service line 

replacement projects, the recipient must 

replace the full length of the service line 

and may not replace only a partial 

portion of the service line. 

(iv) Additional lead remediation and 

household water quality testing. Projects 

or activities to address lead in drinking 

water or provide household water 

quality testing that are within the scope 

of the programs the EPA is authorized 

to establish under sections 1459A(b)(2), 

1459B(b)(1), 1464(d)(2), and 1465 of the 

Safe Drinking Water Act (42 U.S.C. 

300j–19a(b)(2), 300j–19b(b)(1), 300j– 

24(d)(2), and 300j–25), provided that: 

(A) In the case of lead service line 

replacement projects, the recipient must 

replace the full length of the service line 

and may not replace only a partial 

portion of the service line; and 

(B) In the case of projects within the 

scope of the program the EPA is 

authorized to establish under section 

1459B(b)(1) of the Safe Drinking Water 

Act, the recipient may determine the 

income eligibility of homeowners 

served by lead service line replacement 

projects in its discretion. 

(v) Drinking water projects to support 

increased population. Projects of the 

type that meet the eligibility 

requirements of 40 CFR 35.3520 other 

than the requirement of subparagraph 


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(b)(1) of such regulation to address 

present or prevent future violations of 

health-based drinking water standards, 

if the following conditions are met: 

(A) The project is needed to support 

increased population, with need 

assessed as of the time the project is 

undertaken; 

(B) The project is designed to support 

no more than a reasonable level of 

projected increased need, whether due 

to population growth or otherwise; 

(C) The project is a cost-effective 

means for achieving the desired level of 

service; and 

(D) The project is projected to 

continue to provide an adequate level of 

drinking water over its estimated useful 

life. 

(vi) Dams and reservoirs. 

Rehabilitation of dams and reservoirs if 

the following conditions are met: 

(A) The project meets the 

requirements of 40 CFR 35.3520 other 

than the following requirements: 

(1) The prohibition on the 

rehabilitation of dams and reservoirs in 

40 CFR 35.3520(e)(1) and (3); and 

(2) The requirement in 40 CFR 

35.3520(b)(1) that the project is needed 

to address present or prevent future 

violations of health-based drinking 

water standards, provided that if the 

dam or reservoir project does not meet 

this requirement, the project must be 

needed to support increased population, 

with need assessed as of the time the 

project is undertaken, and the project 

must be projected to continue to provide 

an adequate level of drinking water over 

its estimated useful life; 

(B) The primary purpose of the dam 

or reservoir is for drinking water supply; 

(C) The project is needed for the 

provision of drinking water supply, 

with need assessed as of the time the 

project is initiated; 

(D) The project is designed to support 

no more than a reasonable level of 

projected increased need, whether due 

to population growth or otherwise; and 

(E) The project is a cost-effective 

means for achieving the desired level of 

service. 

(vii) Private wells. Rehabilitation of 

private wells, testing initiatives to 

identify contaminants in private wells, 

and treatment activities and remediation 

projects that address contamination in 

private wells, if the project meets the 

requirements of 40 CFR 35.3520 other 

than the limitation to certain eligible 

systems under 40 CFR 35.3520(a). 

(2) Broadband investments—(i) 

General. Broadband infrastructure if the 

following conditions are met: 

(A) The broadband infrastructure is 

designed to provide service to 

households and businesses with an 

identified need, as determined by the 

recipient, for such infrastructure; 

(B) The broadband infrastructure is 

designed to, upon completion: 

(1) Reliably meet or exceed 

symmetrical 100 Mbps download speed 

and upload speeds; or 

(2) In cases where it is not practicable, 

because of the excessive cost of the 

project or geography or topography of 

the area to be served by the project, to 

provide service reliably meeting or 

exceeding symmetrical 100 Mbps 

download speed and upload speeds: 

(i) Reliably meet or exceed 100 Mbps 

download speed and between at least 20 

Mbps and 100 Mbps upload speed; and 

(ii) Be scalable to a minimum of 100 

Mbps download speed and 100 Mbps 

upload speed; and 

(C) The service provider for a 

completed broadband infrastructure 

investment project that provides service 

to households is required, for as long as 

the SLFRF-funded broadband 

infrastructure is in use, by the recipient 

to: 

(1) Participate in the Federal 

Communications Commission’s 

Affordable Connectivity Program (ACP) 

through the lifetime of the ACP; or 

(2) Otherwise provide access to a 

broad-based affordability program to 

low-income consumers in the proposed 

service area of the broadband 

infrastructure that provides benefits to 

households commensurate with those 

provided under the ACP through the 

lifetime of the ACP. 

(ii) Cybersecurity infrastructure 

investments. Cybersecurity 

infrastructure investments that are 

designed to improve the reliability and 

resiliency of new and existing 

broadband infrastructure. Such 

investments may include the addition or 

modernization of network security 

hardware and software tools designed to 

strengthen cybersecurity for the endusers of these networks. 

(f) Meeting the non-federal matching 

requirements for Bureau of Reclamation 

projects. A recipient may use funds to 

meet the non-federal matching 

requirements of any authorized Bureau 

of Reclamation project. 

§ 35.7 Pensions. 

A recipient (other than a Tribal 

government) may not use funds for 

deposit into any pension fund. 

§ 35.8 Tax. 

(a) Restriction. A State or Territory 

shall not use funds to either directly or 

indirectly offset a reduction in the net 

tax revenue of the State or Territory 

resulting from a covered change during 

the covered period. 

(b) Violation. Treasury will consider a 

State or Territory to have used funds to 

offset a reduction in net tax revenue if, 

during a reporting year: 

(1) Covered change. The State or 

Territory has made a covered change 

that, either based on a reasonable 

statistical methodology to isolate the 

impact of the covered change in actual 

revenue or based on projections that use 

reasonable assumptions and do not 

incorporate the effects of 

macroeconomic growth to reduce or 

increase the projected impact of the 

covered change, the State or Territory 

assesses has had or predicts to have the 

effect of reducing tax revenue relative to 

current law; 

(2) Exceeds the de minimis threshold. 

The aggregate amount of the measured 

or predicted reductions in tax revenue 

caused by covered changes identified 

under paragraph (b)(1) of this section, in 

the aggregate, exceeds 1 percent of the 

State’s or Territory’s baseline; 

(3) Reduction in net tax revenue. The 

State or Territory reports a reduction in 

net tax revenue, measured as the 

difference between actual tax revenue 

and the State’s or Territory’s baseline, 

each measured as of the end of the 

reporting year; and 

(4) Consideration of other changes. 

The aggregate amount of measured or 

predicted reductions in tax revenue 

caused by covered changes is greater 

than the sum of the following, in each 

case, as calculated for the reporting 

year: 

(i) The aggregate amount of the 

expected increases in tax revenue 

caused by one or more covered changes 

that, either based on a reasonable 

statistical methodology to isolate the 

impact of the covered change in actual 

revenue or based on projections that use 

reasonable assumptions and do not 

incorporate the effects of 

macroeconomic growth to reduce or 

increase the projected impact of the 

covered change, the State or Territory 

assesses has had or predicts to have the 

effect of increasing tax revenue; and 

(ii) Reductions in spending, up to the 

amount of the State’s or Territory’s net 

reduction in total spending, that are in: 

(A) Departments, agencies, or 

authorities in which the State or 

Territory is not using funds; and 

(B) Departments, agencies, or 

authorities in which the State or 

Territory is using funds, in an amount 

equal to the value of the spending cuts 

in those departments, agencies, or 

authorities, minus funds used. 

(c) Amount and revenue reduction 

cap. If a State or Territory is considered 

to be in violation pursuant to paragraph 

(b) of this section, the amount used in 


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violation of paragraph (a) of this section 

is equal to the lesser of: 

(1) The reduction in net tax revenue 

of the State or Territory for the reporting 

year, measured as the difference 

between the State’s or Territory’s 

baseline and its actual tax revenue, each 

measured as of the end of the reporting 

year; and, 

(2) The aggregate amount of the 

reductions in tax revenues caused by 

covered changes identified in paragraph 

(b)(1) of this section, minus the sum of 

the amounts in identified in paragraphs 

(b)(4)(i) and (ii) of this section. 

§ 35.9 Compliance with applicable laws. 

A recipient must comply with all 

other applicable Federal statutes, 

regulations, and executive orders, and a 

recipient shall provide for compliance 

with the American Rescue Plan Act, this 

subpart, and any interpretive guidance 

by other parties in any agreements it 

enters into with other parties relating to 

these funds. 

§ 35.10 Recoupment. 

(a) Identification of violations—(1) In 

general. Any amount used in violation 

of § 35.5, 35.6, or 35.7 may be identified 

at any time prior to December 31, 2026. 

(2) Annual reporting of amounts of 

violations. On an annual basis, a 

recipient that is a State or territory must 

calculate and report any amounts used 

in violation of § 35.8. 

(b) Calculation of amounts subject to 

recoupment—(1) In general. Except as 

provided in paragraph (b)(2) of this 

section, the Secretary will calculate any 

amounts subject to recoupment 

resulting from a violation of § 35.5, 35.6 

or 35.7 as the amounts used in violation 

of such restrictions. 

(2) Violations of § 35.8. The Secretary 

will calculate any amounts subject to 

recoupment resulting from a violation of 

§ 35.8, equal to the lesser of: 

(i) The amount set forth in § 35.8(c); 

and, 

(ii) The amount of funds received by 

such recipient. 

(c) Initial notice. If the Secretary 

calculates an amount subject to 

recoupment under paragraph (b) of this 

section, Treasury will provide the 

recipient an initial written notice of the 

amount subject to recoupment along 

with an explanation of such amounts. 

(d) Request for reconsideration. 

Unless the Secretary extends or 

accelerates the time period, within 60 

calendar days of receipt of an initial 

notice of recoupment provided under 

paragraph (c) of this section, a recipient 

may submit a written request to the 

Secretary requesting reconsideration of 

any amounts subject to recoupment 

under paragraph (b) of this section. To 

request reconsideration of any amounts 

subject to recoupment, a recipient must 

submit to the Secretary a written request 

that includes: 

(1) An explanation of why the 

recipient believes all or some of the 

amount should not be subject to 

recoupment; and 

(2) A discussion of supporting 

reasons, along with any additional 

information. 

(e) Final amount subject to 

recoupment. Unless the Secretary 

extends or accelerates the time period, 

within 60 calendar days of receipt of the 

recipient’s request for reconsideration 

provided pursuant to paragraph (d) of 

this section or the expiration of the 

period for requesting reconsideration 

provided under paragraph (d), the 

recipient will be notified of the 

Secretary’s decision to affirm, withdraw, 

or modify the notice of recoupment. 

Such notification will include an 

explanation of the decision, including 

responses to the recipient’s supporting 

reasons and consideration of additional 

information provided. A recipient must 

invoke and exhaust the procedures 

available under this subpart prior to 

seeking judicial review of a decision 

under § 35.10. 

(f) Repayment of funds. Unless the 

Secretary extends or accelerates the time 

period, a recipient shall repay to the 

Secretary any amounts subject to 

recoupment in accordance with 

instructions provided by the Secretary: 

(1) Within 120 calendar days of 

receipt of the notice of recoupment 

provided under paragraph (c) of this 

section, in the case of a recipient that 

does not submit a request for 

reconsideration in accordance with the 

requirements of paragraph (d) of this 

section; or 

(2) Within 120 calendar days of 

receipt of the Secretary’s decision under 

paragraph (e) of this section, in the case 

of a recipient that submits a request for 

reconsideration in accordance with the 

requirements of paragraph (d) of this 

section. 

(g) Other remedial actions. Prior to 

seeking recoupment or taking other 

appropriate action pursuant to 

paragraph (c), (d), (e), or (f) of this 

section, the Secretary may notify the 

recipient of potential violations and 

provide the recipient an opportunity for 

informal consultation and remediation. 

§ 35.11 Payments to States. 

(a) In general. With respect to any 

State or Territory that has an 

unemployment rate as of the date that 

it submits an initial certification for 

payment of funds pursuant to section 

602(d)(1) of the Social Security Act that 

is less than two percentage points above 

its unemployment rate in February 

2020, the Secretary will withhold 50 

percent of the amount of funds allocated 

under section 602(b) of the Social 

Security Act to such State or territory 

until at least May 10, 2022 and not more 

than twelve months from the date such 

initial certification is provided to the 

Secretary. 

(b) Payment of withheld amount. In 

order to receive the amount withheld 

under paragraph (a) of this section, the 

State or Territory must submit to the 

Secretary the following information: 

(1) A certification, in the form 

provided by the Secretary, that such 

State or Territory requires the payment 

to carry out the activities specified in 

section 602(c) of the Social Security Act 

and will use the payment in compliance 

with section 602(c) of the Social 

Security Act; and 

(2) Any reports required to be filed by 

that date pursuant to this part that have 

not yet been filed. 

§ 35.12 Distributions to nonentitlement 

units of local government and units of 

general local government. 

(a) Nonentitlement units of local 

government. Each State or Territory that 

receives a payment from the Secretary 

pursuant to section 603(b)(2)(B) of the 

Social Security Act shall distribute the 

amount of the payment to 

nonentitlement units of local 

government in such State or Territory in 

accordance with the requirements set 

forth in section 603(b)(2)(C) of the 

Social Security Act and without 

offsetting any debt owed by such 

nonentitlement units of local 

governments against such payments. 

(b) Budget cap. A State or Territory 

may not make a payment to a 

nonentitlement unit of local government 

pursuant to section 603(b)(2)(C) of the 

Social Security Act and paragraph (a) of 

this section in excess of the amount 

equal to 75 percent of the most recent 

budget for the nonentitlement unit of 

local government as of January 27, 2020. 

For purposes of this section 35.12, a 

nonentitlement unit of local 

government’s most recent budget shall 

mean the nonentitlement unit of local 

government’s total annual budget, 

including both operating and capital 

expenditure budgets, in effect as of 

January 27, 2020. A State or Territory 

shall permit a nonentitlement unit of 

local government without a formal 

budget as of January 27, 2020, to 

provide a certification from an 

authorized officer of the nonentitlement 

unit of local government of its most 

recent annual expenditures as of 


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4454 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 

January 27, 2020, and a State or 

Territory may rely on such certification 

for purposes of complying with this 

section 35.12. 

(c) Units of general local government. 

Each State or Territory that receives a 

payment from the Secretary pursuant to 

section 603(b)(3)(B)(ii) of the Social 

Security Act, in the case of an amount 

to be paid to a county that is not a unit 

of general local government, shall 

distribute the amount of the payment to 

units of general local government within 

such county in accordance with the 

requirements set forth in section 

603(b)(3)(B)(ii) of the Social Security 

Act and without offsetting any debt 

owed by such units of general local 

government against such payments. 

(d) Additional conditions. A State or 

Territory may not place additional 

conditions or requirements on 

distributions to nonentitlement units of 

local government or units of general 

local government beyond those required 

by section 603 of the Social Security Act 

or this subpart. 

Jacob Leibenluft, 

Chief Recovery Officer. 

[FR Doc. 2022–00292 Filed 1–26–22; 8:45 am] 

BILLING CODE P 


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