A bill amend title VI of the Social Security Act to allow States and local governments to use coronavirus relief funds provided under the American Rescue Plan Act for infrastructure projects, improve the Local Assistance and Tribal Consistency Fund, provide Tribal governments with more time to use Coronavirus Relief Fund payments, and for other purposes.
Bill: S.5323 | Sponsor: Sen. Cornyn, John (R-TX)
Policy area: Social Welfare

Summary:
State, Local, Tribal, and Territorial Fiscal Recovery, Infrastructure, and Disaster Relief Flexibility Act
This bill allows states, tribes, territories, and localities to use certain COVID-19 relief funds for new categories of spending, including for natural disasters and infrastructure projects. It also makes changes to expenditure deadlines and other aspects of this funding.
Specifically, recipients may use funds for emergency relief from natural disasters and associated negative economic impacts of natural disasters. In addition, recipients may use a portion of their COVID-19 relief funds for designated infrastructure projects, such as nationally significant freight and highway projects. Furthermore, the bill allows recipients to expend COVID-19 relief funds on these types of infrastructure projects until September 30, 2026. Under current law, recipients must expend the funds by December 31, 2024.
Other changes in the bill include (1) modifying eligibility and allocation requirements for funding set aside for counties and Indian tribes that are near public lands, (2) allowing Indian tribes an additional year to expend their COVID-19 relief funds, and (3) establishing a process for government entities to decline COVID-19 relief funds and requiring any declined funds to be used to reduce the federal deficit.

To amend title VI of the Social Security Act to allow States and local 
governments to use coronavirus relief funds provided under the American 
    Rescue Plan Act for infrastructure projects, improve the Local 
Assistance and Tribal Consistency Fund, provide Tribal governments with 
   more time to use Coronavirus Relief Fund payments, and for other 
                               purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``State, Local, Tribal, and 
Territorial Fiscal Recovery, Infrastructure, and Disaster Relief 
Flexibility Act''.

SEC. 2. AUTHORITY TO USE CORONAVIRUS RELIEF FUNDS FOR INFRASTRUCTURE 
              PROJECTS.

    (a) In General.--Title VI of the Social Security Act (42 U.S.C. 801 
et seq.), as amended by section 40909 of the Infrastructure Investment 
and Jobs Act, is amended--
            (1) in section 602--
                    (A) in subsection (a)(1), by inserting ``(except as 
                provided in subsection (c)(5))'' after ``December 31, 
                2024''; and
                    (B) in subsection (c)--
                            (i) in paragraph (1)--
                                    (I) in the matter preceding 
                                subparagraph (A), by striking 
                                ``paragraph (3)'' and inserting 
                                ``paragraphs (3), (4), and (5)'';
                                    (II) by amending subparagraph (C) 
                                to read as follows:
                    ``(C) for the provision of government services up 
                to an amount equal to the greater of--
                            ``(i) the amount of the reduction in 
                        revenue of such State, territory, or Tribal 
                        government due to the COVID-19 public health 
                        emergency relative to revenues collected in the 
                        most recent full fiscal year of the State, 
                        territory, or Tribal government prior to the 
                        emergency; or
                            ``(ii) $10,000,000;'';
                                    (III) in subparagraph (D), by 
                                striking the period at the end and 
                                inserting ``; or''; and
                                    (IV) by adding at the end the 
                                following new subparagraph:
                    ``(E) to provide emergency relief from natural 
                disasters or the negative economic impacts of natural 
                disasters, including temporary emergency housing, food 
                assistance, financial assistance for lost wages, or 
                other immediate needs.''; and
                            (ii) by adding at the end the following new 
                        paragraph:
            ``(5) Authority to use funds for certain infrastructure 
        projects.--
                    ``(A) In general.--Subject to subparagraph (C), 
                notwithstanding any other provision of law, a State, 
                territory, or Tribal government receiving a payment 
                under this section may use funds provided under such 
                payment for projects described in subparagraph (B), 
                including, to the extent consistent with guidance or 
                rules issued by the Secretary or the head of a Federal 
                agency to which the Secretary has delegated authority 
                pursuant to subparagraph (C)(iv)--
                            ``(i) in the case of a project eligible 
                        under section 117 of title 23, United States 
                        Code, or section 5309 or 6701 of title 49, 
                        United States Code, to satisfy a non-Federal 
                        share requirement applicable to such a project; 
                        and
                            ``(ii) in the case of a project eligible 
                        for credit assistance under the TIFIA program 
                        under chapter 6 of title 23, United States 
                        Code--
                                    ``(I) to satisfy a non-Federal 
                                share requirement applicable to such a 
                                project; and
                                    ``(II) to repay a loan provided 
                                under such program.
                    ``(B) Projects described.--A project referred to in 
                subparagraph (A) is any of the following:
                            ``(i) A project eligible under section 117 
                        of title 23, United States Code.
                            ``(ii) A project eligible under section 119 
                        of title 23, United States Code.
                            ``(iii) A project eligible under section 
                        124 of title 23, United States Code, as added 
                        by the Infrastructure Investment and Jobs Act.
                            ``(iv) A project eligible under section 133 
                        of title 23, United States Code.
                            ``(v) An activity to carry out section 134 
                        of title 23, United States Code.
                            ``(vi) A project eligible under section 148 
                        of title 23, United States Code.
                            ``(vii) A project eligible under section 
                        149 of title 23, United States Code.
                            ``(viii) A project eligible under section 
                        151(f) of title 23, United States Code, as 
                        added by the Infrastructure Investment and Jobs 
                        Act.
                            ``(ix) A project eligible under section 165 
                        of title 23, United States Code.
                            ``(x) A project eligible under section 167 
                        of title 23, United States Code.
                            ``(xi) A project eligible under section 173 
                        of title 23, United States Code, as added by 
                        the Infrastructure Investment and Jobs Act.
                            ``(xii) A project eligible under section 
                        175 of title 23, United States Code, as added 
                        by the Infrastructure Investment and Jobs Act.
                            ``(xiii) A project eligible under section 
                        176 of title 23, United States Code, as added 
                        by the Infrastructure Investment and Jobs Act.
                            ``(xiv) A project eligible under section 
                        202 of title 23, United States Code.
                            ``(xv) A project eligible under section 203 
                        of title 23, United States Code.
                            ``(xvi) A project eligible under section 
                        204 of title 23, United States Code.
                            ``(xvii) A project eligible under the 
                        program for national infrastructure investments 
                        (commonly known as the `Rebuilding American 
                        Infrastructure with Sustainability and Equity 
                        (RAISE) grant program').
                            ``(xviii) A project eligible for credit 
                        assistance under the TIFIA program under 
                        chapter 6 of title 23, United States Code.
                            ``(xix) A project that furthers the 
                        completion of a designated route of the 
                        Appalachian Development Highway System under 
                        section 14501 of title 40, United States Code.
                            ``(xx) A project eligible under section 
                        5307 of title 49, United States Code.
                            ``(xxi) A project eligible under section 
                        5309 of title 49, United States Code.
                            ``(xxii) A project eligible under section 
                        5311 of title 49, United States Code.
                            ``(xxiii) A project eligible under section 
                        5337 of title 49, United States Code.
                            ``(xxiv) A project eligible under section 
                        5339 of title 49, United States Code.
                            ``(xxv) A project eligible under section 
                        6703 of title 49, United States Code, as added 
                        by the Infrastructure Investment and Jobs Act.
                            ``(xxvi) A project eligible under title I 
                        of the Housing and Community Development Act of 
                        1974 (42 U.S.C. 5301 et seq.).
                            ``(xxvii) A project eligible under the 
                        bridge replacement, rehabilitation, 
                        preservation, protection, and construction 
                        program under paragraph (1) under the heading 
                        `highway infrastructure program' under the 
                        heading `Federal Highway Administration' under 
                        the heading `DEPARTMENT OF TRANSPORTATION' 
                        under title VIII of division J of the 
                        Infrastructure Investment and Jobs Act.
                    ``(C) Limitations; application of requirements.--
                            ``(i) Limitation on amounts to be used for 
                        infrastructure projects.--
                                    ``(I) In general.--The total amount 
                                that a State, territory, or Tribal 
                                government may use from a payment made 
                                under this section for uses described 
                                in subparagraph (A) shall not exceed 
                                the greater of--
                                            ``(aa) $10,000,000; and
                                            ``(bb) 30 percent of such 
                                        payment.
                                    ``(II) Rule of application.--The 
                                spending limitation under subclause (I) 
                                shall not apply to any use of funds 
                                permitted under paragraph (1), and any 
                                such use of funds shall be disregarded 
                                for purposes of applying such spending 
                                limitation.
                            ``(ii) Limitation on operating expenses.--
                        Funds provided under a payment made under this 
                        section shall not be used for operating 
                        expenses of a project described in clauses (xx) 
                        through (xxiv) of subparagraph (B).
                            ``(iii) Application of requirements.--
                        Except as otherwise determined by the Secretary 
                        or the head of a Federal agency to which the 
                        Secretary has delegated authority pursuant to 
                        clause (iv) or provided in this section--
                                    ``(I) the requirements of section 
                                60102 of the Infrastructure Investment 
                                and Jobs Act shall apply to funds 
                                provided under a payment made under 
                                this section that are used pursuant to 
                                subparagraph (A) for a project 
                                described in clause (xxvi) of 
                                subparagraph (B) that relates to 
                                broadband infrastructure;
                                    ``(II) the requirements of titles 
                                23, 40, and 49 of the United States 
                                Code, title I of the Housing and 
                                Community Development Act of 1974 (42 
                                U.S.C. 5301 et seq.), and the National 
                                Environmental Policy Act of 1969 (42 
                                U.S.C. 4321 et. seq) shall apply to 
                                funds provided under a payment made 
                                under this section that are used for 
                                projects described in subparagraph (B); 
                                and
                                    ``(III) a State government 
                                receiving a payment under this section 
                                may use funds provided under such 
                                payment for projects described in 
                                clauses (i) through (xxvii) of 
                                subparagraph (B), as applicable, that--
                                            ``(aa) demonstrate progress 
                                        in achieving a state of good 
                                        repair as required by the 
                                        State's asset management plan 
                                        under section 119(e) of title 
                                        23, United States Code; and
                                            ``(bb) support the 
                                        achievement of 1 or more 
                                        performance targets of the 
                                        State established under section 
                                        150 of title 23, United States 
                                        Code.
                            ``(iv) Oversight.--The Secretary may 
                        delegate oversight and administration of the 
                        requirements described in clause (iii) to the 
                        appropriate Federal agency.
                            ``(v) Supplement, not supplant.--Amounts 
                        from a payment made under this section that are 
                        used by a State, territory, or Tribal 
                        government for uses described in subparagraph 
                        (A) shall supplement, and not supplant, other 
                        Federal, State, territorial, Tribal, and local 
                        government funds (as applicable) otherwise 
                        available for such uses.
                    ``(D) Reports.--The Secretary, in consultation with 
                the Secretary of Transportation, shall provide periodic 
                reports on the use of funds by States, territories, and 
                Tribal governments under subparagraph (A).
                    ``(E) Availability.--Funds provided under a payment 
                made under this section to a State, territory, or 
                Tribal government shall remain available for obligation 
                for a use described in subparagraph (A) through 
                December 31, 2024, except that no amount of such funds 
                may be expended after September 30, 2026.''; and
            (2) in subsection 603--
                    (A) in subsection (a), by inserting ``(except as 
                provided in subsection (c)(6))'' after ``December 31, 
                2024''; and
                    (B) in subsection (c)--
                            (i) in paragraph (1)--
                                    (I) in the matter preceding 
                                subparagraph (A), by striking 
                                ``paragraphs (3) and (4)'' and 
                                inserting ``paragraphs (3), (4), (5), 
                                and (6)'';
                                    (II) by amending subparagraph (C) 
                                to read as follows:
                    ``(C) for the provision of government services up 
                to an amount equal to the greater of--
                            ``(i) the amount of the reduction in 
                        revenue of such metropolitan city, 
                        nonentitlement unit of local government, or 
                        county due to the COVID-19 public health 
                        emergency relative to revenues collected in the 
                        most recent full fiscal year of the 
                        metropolitan city, nonentitlement unit of local 
                        government, or county to the emergency; or
                            ``(ii) $10,000,000;'';
                                    (III) in subparagraph (D), by 
                                striking the period at the end and 
                                inserting ``; or''; and
                                    (IV) by adding at the end the 
                                following new subparagraph:
                    ``(E) to provide emergency relief from natural 
                disasters or the negative economic impacts of natural 
                disasters, including temporary emergency housing, food 
                assistance, financial assistance for lost wages, or 
                other immediate needs.''; and
                            (ii) by adding at the end the following new 
                        paragraph:
            ``(6) Authority to use funds for certain infrastructure 
        projects.--
                    ``(A) In general.--Subject to subparagraph (B), 
                notwithstanding any other provision of law, a 
                metropolitan city, nonentitlement unit of local 
                government, or county receiving a payment under this 
                section may use funds provided under such payment for 
                projects described in subparagraph (B) of section 
                602(c)(5), including, to the extent consistent with 
                guidance or rules issued by the Secretary or the head 
                of a Federal agency to which the Secretary has 
                delegated authority pursuant to subparagraph (B)(iv)--
                            ``(i) in the case of a project eligible 
                        under section 117 of title 23, United States 
                        Code, or section 5309 or 6701 of title 49, 
                        United States Code, to satisfy a non-Federal 
                        share requirement applicable to such a project; 
                        and
                            ``(ii) in the case of a project eligible 
                        for credit assistance under the TIFIA program 
                        under chapter 6 of title 23, United States 
                        Code--
                                    ``(I) to satisfy a non-Federal 
                                share requirement applicable to such a 
                                project; and
                                    ``(II) to repay a loan provided 
                                under such program.
                    ``(B) Limitations; application of requirements.--
                            ``(i) Limitation on amounts to be used for 
                        infrastructure projects.--
                                    ``(I) In general.--The total amount 
                                that a metropolitan city, 
                                nonentitlement unit of local 
                                government, or county may use from a 
                                payment made under this section for 
                                uses described in subparagraph (A) 
                                shall not exceed the greater of--
                                            ``(aa) $10,000,000; and
                                            ``(bb) 30 percent of such 
                                        payment.
                                    ``(II) Rule of application.--The 
                                spending limitation under subclause (I) 
                                shall not apply to any use of funds 
                                permitted under paragraph (1), and any 
                                such use of funds shall be disregarded 
                                for purposes of applying such spending 
                                limitation.
                            ``(ii) Limitation on operating expenses.--
                        Funds provided under a payment made under this 
                        section shall not be used for operating 
                        expenses of a project described in clauses (xx) 
                        through (xxiv) of section 602(c)(5)(B).
                            ``(iii) Application of requirements.--
                        Except as otherwise determined by the Secretary 
                        or the head of a Federal agency to which the 
                        Secretary has delegated authority pursuant to 
                        clause (iv) or provided in this section--
                                    ``(I) the requirements of section 
                                60102 of the Infrastructure Investment 
                                and Jobs Act shall apply to funds 
                                provided under a payment made under 
                                this section that are used pursuant to 
                                subparagraph (A) for a project 
                                described in clause (xxvi) of section 
                                602(c)(5)(B) that relates to broadband 
                                infrastructure; and
                                    ``(II) the requirements of titles 
                                23, 40, and 49 of the United States 
                                Code, title I of the Housing and 
                                Community Development Act of 1974 (42 
                                U.S.C. 5301 et seq.), and the National 
                                Environmental Policy Act of 1969 (42 
                                U.S.C. 4321 et. seq) shall apply to 
                                funds provided under a payment made 
                                under this section that are used for 
                                projects described in section 
                                602(c)(5)(B).
                            ``(iv) Oversight.--The Secretary may 
                        delegate oversight and administration of the 
                        requirements described in clause (iii) to the 
                        appropriate Federal agency.
                            ``(v) Supplement, not supplant.--Amounts 
                        from a payment made under this section that are 
                        used by a metropolitan city, nonentitlement 
                        unit of local government, or county for uses 
                        described in subparagraph (A) shall supplement, 
                        and not supplant, other Federal, State, 
                        territorial, Tribal, and local government funds 
                        (as applicable) otherwise available for such 
                        uses.
                    ``(C) Reports.--The Secretary, in consultation with 
                the Secretary of Transportation, shall provide periodic 
                reports on the use of funds by metropolitan cities, 
                nonentitlement units of local government, or counties 
                under subparagraph (A).
                    ``(D) Availability.--Funds provided under a payment 
                made under this section to a metropolitan city, 
                nonentitlement unit of local government, or county 
                shall remain available for obligation for a use 
                described in subparagraph (A) through December 31, 
                2024, except that no amount of such funds may be 
                expended after September 30, 2026.''.
    (b) Technical Amendments.--Sections 602(c)(3) and 603(c)(3) of 
title VI of the Social Security Act (42 U.S.C. 802(c)(3), 803(c)(3)) 
are each amended by striking ``paragraph (17) of''.
    (c) Guidance and Effective Date.--
            (1) Guidance or rule.--Within 60 days of the date of 
        enactment of this Act, the Secretary of the Treasury, in 
        consultation with the Secretary of Transportation, shall issue 
        guidance or promulgate a rule to carry out the amendments made 
        by this section, including updating reporting requirements on 
        the use of funds under this section.
            (2) Effective date.--The amendments made by this section 
        shall take effect upon the issuance of guidance or the 
        promulgation of a rule described in paragraph (1).
    (d) Department of the Treasury Administrative Expenses.--
            (1) Reduction of funds available for administrative 
        expenses.--Title IV of division A of the Coronavirus Aid, 
        Relief, and Economic Security Act (Public Law 116-136) is 
        amended--
                    (A) in section 4003(f), by striking 
                ``$100,000,000'' and inserting ``61,000,000''; and
                    (B) in section 4112(b), by striking 
                ``$100,000,000'' and inserting ``$67,000,000''.
            (2) Authority.--Notwithstanding any other provision of law, 
        the unobligated balances from amounts made available to the 
        Secretary of the Treasury (referred to in this subsection as 
        the ``Secretary'') for administrative expenses pursuant to the 
        provisions specified in paragraph (3) shall be available to the 
        Secretary (in addition to any other appropriations provided for 
        such purpose) for the purpose described in paragraph (4) 
        (subject to the limitation in such paragraph) and for 
        administrative expenses of the Department of the Treasury, 
        except for the Internal Revenue Service, determined by the 
        Secretary to be necessary to respond to the coronavirus 
        emergency, including any expenses necessary to implement any 
        provision of--
                    (A) the Coronavirus Aid, Relief, and Economic 
                Security Act (Public Law 116-136);
                    (B) division N of the Consolidated Appropriations 
                Act, 2021 (Public Law 116-260);
                    (C) the American Rescue Plan Act (Public Law 117-
                2); or
                    (D) title VI of the Social Security Act (42 U.S.C. 
                801 et seq.).
            (3) Provisions specified.--The provisions specified in this 
        paragraph are the following:
                    (A) Amounts made available under section 4027(a) of 
                the Coronavirus Aid, Relief, and Economic Security Act 
                (15 U.S.C. 9061(a)) to pay costs and administrative 
                expenses under section 4003(f) of such Act (15 U.S.C. 
                9042(f))) and amounts made available by section 4120(a) 
                of the Coronavirus Aid, Relief, and Economic Security 
                Act (15 U.S.C. 9080) to pay costs and administrative 
                expenses under section 4112(b) of such Act (15 U.S.C. 
                9072(b)) (after application of the amendments made by 
                paragraph (1) of this subsection).
                    (B) Section 421(f)(2) of division N of the 
                Consolidated Appropriations Act, 2021 (Public Law 116-
                260).
                    (C) Sections 3201(a)(2)(B), 3206(d)(1)(A), and 
                7301(b)(5) of the American Rescue Plan Act of 2021 
                (Public Law 117-2).
                    (D) Section 602(a)(2) of the Social Security Act 
                (42 U.S.C. 802(a)(2)).
            (4) Payments to eligible revenue sharing consolidated 
        governments.--Of amounts made available under paragraph (2), up 
        to $10,600,000 shall be available to the Secretary (in addition 
        to any other appropriations provided for such purpose) for 
        making payments to eligible revenue sharing consolidated 
        governments under subsection (g) of section 605 of the Social 
        Security Act (42 U.S.C. 805), as added by section 3 of this 
        Act.

SEC. 3. ALLOWING PAYMENTS TO ELIGIBLE REVENUE SHARING CONSOLIDATED 
              GOVERNMENTS FROM LOCAL ASSISTANCE AND TRIBAL CONSISTENCY 
              FUND.

    (a) In General.--Section 605 of the Social Security Act (42 U.S.C. 
805) is amended by adding at the end the following new subsection:
    ``(g) Payments to Eligible Revenue Sharing Consolidated 
Governments.--
            ``(1) Payments to eligible revenue sharing consolidated 
        governments for fiscal years 2023 and 2024.--The Secretary 
        shall allocate and pay to each eligible revenue sharing 
        consolidated government for each of fiscal years 2023 and 2024 
        an amount equal to the amount that the Secretary would have 
        allocated to such eligible revenue sharing consolidated 
        government for fiscal year 2022 if all eligible revenue sharing 
        consolidated governments had been treated as eligible revenue 
        sharing counties for purposes of being eligible for payments 
        under subsection (b)(1) for such fiscal year using the 
        allocation methodology adopted by the Department of the 
        Treasury for such eligible revenue sharing counties as of the 
        date of enactment of this subsection.
            ``(2) Funding for payments.--
                    ``(A) In general.--The Secretary shall make the 
                allocations and payments described in paragraph (1) 
                from the amounts described in subparagraph (B), which 
                shall be available to the Secretary for such purpose 
                notwithstanding any other provision of law.
                    ``(B) Amounts described.--The amounts described in 
                this subparagraph are the following:
                            ``(i) Any amount allocated to an eligible 
                        revenue sharing county under subsection (b)(1) 
                        for fiscal year 2022 or 2023 that, as of 
                        January 31, 2023, has not been requested by 
                        such county.
                            ``(ii) Amounts made available to the 
                        Secretary under section 2(d)(4) of the State, 
                        Local, Tribal, and Territorial Fiscal Recovery, 
                        Infrastructure, and Disaster Relief Flexibility 
                        Act.''.
    (b) Conforming Amendments.--Section 605 of the Social Security Act 
(42 U.S.C. 805), as amended by subsection (a), is further amended--
            (1) in subsection (a), by inserting ``, subject to 
        subsection (g),'' after ``obligated'';
            (2) in subsection (c), by striking ``or an eligible Tribal 
        government'' and inserting ``, an eligible Tribal government, 
        or an eligible revenue sharing consolidated government'';
            (3) in subsections (d) and (e), by inserting ``or eligible 
        revenue sharing consolidated government'' after ``eligible 
        revenue sharing county'' each place it appears; and
            (4) in subsection (f)--
                    (A) by redesignating paragraphs (1) through (4) as 
                paragraphs (2) through (5), respectively; and
                    (B) by inserting before paragraph (2) (as so 
                redesignated) the following new paragraph:
            ``(1) Eligible revenue sharing consolidated government.--
        The term `eligible revenue sharing consolidated government' 
        means a county, parish, or borough--
                    ``(A) that has been classified by the Bureau of the 
                Census as an active government consolidated with 
                another government; and
                    ``(B) for which, as determined by the Secretary, 
                there is a negative revenue impact due to 
                implementation of a Federal program or changes to such 
                program.''.

SEC. 4. EXTENSION OF AVAILABILITY OF CORONAVIRUS RELIEF FUND PAYMENTS 
              TO TRIBAL GOVERNMENTS.

    Section 601(d)(3) of the Social Security Act (42 U.S.C. 801(d)(3)) 
is amended by inserting ``(or, in the case of costs incurred by a 
Tribal government, during the period that begins on March 1, 2020, and 
ends on December 31, 2022)'' before the period.

SEC. 5. RESCISSION OF CORONAVIRUS RELIEF AND RECOVERY FUNDS DECLINED BY 
              STATES, TERRITORIES, OR OTHER GOVERNMENTAL ENTITIES.

    Title VI of the Social Security Act (42 U.S.C. 801 et seq.) is 
amended by adding at the end the following new section:

``SEC. 606. RESCISSION OF FUNDS DECLINED BY STATES, TERRITORIES, OR 
              OTHER GOVERNMENTAL ENTITIES.

    ``(a) Rescission.--
            ``(1) In general.--Subject to paragraphs (2) and (3), if a 
        State, territory, or other governmental entity provides notice 
        to the Secretary of the Treasury in the manner provided by the 
        Secretary of the Treasury that the State, territory, or other 
        governmental entity intends to decline all or a portion of the 
        amounts that are to be awarded to the State, territory, or 
        other governmental entity from funds appropriated under this 
        title, an amount equal to the unaccepted amounts or portion of 
        such amounts allocated by the Secretary of the Treasury as of 
        the date of such notice that would have been awarded to the 
        State, territory, or other governmental entity shall be 
        rescinded from the applicable appropriation account.
            ``(2) Exclusion.--Paragraph (1) shall not apply with 
        respect to funds that are to be paid to a State under section 
        603 for distribution to nonentitlement units of local 
        government.
            ``(3) Rules of construction.--Paragraph (1) shall not be 
        construed as--
                    ``(A) preventing a sub-State governmental entity, 
                including a nonentitlement unit of local government, 
                from notifying the Secretary of the Treasury that the 
                sub-State governmental entity intends to decline all or 
                a portion of the amounts that a State may distribute to 
                the entity from funds appropriated under this title; or
                    ``(B) allowing a State to prohibit or otherwise 
                prevent a sub-State governmental entity from providing 
                such a notice.
    ``(b) Use for Deficit Reduction.--Amounts rescinded under 
subsection (a) shall be deposited in the general fund of the Treasury 
for the sole purpose of deficit reduction.
    ``(c) State or Other Governmental Entity Defined.--In this section, 
the term `State, territory, or other governmental entity' means any 
entity to which a payment may be made directly to the entity under this 
title other than a Tribal government, as defined in sections 601(g), 
602(g), and 604(d), and an eligible Tribal government, as defined in 
section 605(f).''.
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