Attachment B - Interim Final Rule.pdf

DEPARTMENT OF THE TREASURY 
31 CFR Part 35 
RIN 1505-AC77 
Coronavirus State and Local Fiscal Recovery Funds 
AGENCY:  Department of the Treasury 
ACTION: Interim Final Rule 
SUMMARY:  The Secretary of the Treasury (Treasury) is issuing this Interim Final Rule to 
implement the Coronavirus State Fiscal Recovery Fund and the Coronavirus Local Fiscal 
Recovery Fund established under the American Rescue Plan Act. 
DATES: Effective date: The provisions in this Interim Final Rule are effective [____], 2021. 
Comment date: Comments must be received on or before [____], 2021. 
ADDRESSES: Please submit comments electronically through the Federal eRulemaking Portal: 
http://www.regulations.gov [(if hard copy, preferably an original and two copies to the [Office of 
the Undersecretary for Domestic Finance], Attention: [Name], Room [####] MT, Department of 
the Treasury, 1500 Pennsylvania Avenue, NW, Washington, DC 20220. Because postal mail 
may be subject to processing delay, it is recommended that comments be submitted 
electronically.] All comments should be captions with “Coronavirus State and Local Fiscal 
Recovery Funds Interim Final Rule Comments.”  Please include your name, organization 
affiliation, address, email address and telephone number in your comment. Where appropriate, a 
comment should include a short executive summary (no more than [#] single-spaced pages).] 
In general, comments received will be posted on http://www.regulations.gov without change, 
including any business or personal information provided.  Comments received, including 
attachments and other supporting materials, will be part of the public record and subject to public 
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Attachment B

disclosure.  Do not enclose any information in your comment or supporting materials that you 
consider confidential or inappropriate for public disclosure. 
FOR FURTHER INFORMATION CONTACT: 
[Name], [Title], [Office], 202-622-[####], or [Name], [Title], [Office], 202-622-[####]. 
SUPPLEMENTARY INFORMATION: 
I. 
Background Information 
A. Overview 
Since the first case of coronavirus disease 2019 (COVID-19) was discovered in the 
United States in January 2020, the disease has infected over 32 million and killed over 575,000 
Americans.1 The disease has impacted every part of life: as social distancing became a 
necessity, businesses closed, schools transitioned to remote education, travel was sharply 
reduced, and millions of Americans lost their jobs. In April 2020, the national unemployment 
rate reached its highest level in over seventy years following the most severe month-over-month 
decline in employment on record. 2 As of April 2021, there were still 8.2 million fewer jobs than 
before the pandemic.3 During this time, a significant share of households have faced food and 
housing insecurity.4 Economic disruptions impaired the flow of credit to households, State and 
1 Centers for Disease Control and Prevention, COVID Data Tracker, http://www.covid.cdc.gov/covid­
data-tracker/#datatracker-home (last visited May 8, 2021). 
2 U.S. Bureau of Labor Statistics, Unemployment Rate [UNRATE], retrieved from FRED, Federal 
Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/UNRATE, May 3, 2021. U.S. Bureau of 
Labor Statistics, Employment Level [LNU02000000], retrieved from FRED, Federal Reserve Bank of St. 
Louis; https://fred.stlouisfed.org/series/LNU02000000, May 3, 2021. 
3 U.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, May 7, 2021. 
4 Nirmita 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
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local governments, and businesses of all sizes.5 As businesses weathered closures and sharp 
declines in revenue, many were forced to shut down, especially small businesses.6 
Amid this once-in-a-century crisis, State, territorial, Tribal, and local governments (State, 
local, and Tribal governments) have been called on to respond at an immense scale. 
Governments have faced myriad needs to prevent and address the spread of COVID-19, 
including testing, contact tracing, isolation and quarantine, public communications, issuance and 
enforcement of health orders, expansions to health system capacity like alternative care facilities, 
and in recent months, a massive nationwide mobilization around vaccinations. Governments 
also have supported major efforts to prevent COVID-19 spread through safety measures in 
settings like nursing homes, schools, congregate living settings, dense worksites, incarceration 
settings, and public facilities. The pandemic’s impacts on behavioral health, including the toll of 
pandemic-related stress, have increased the need for behavioral health resources. 
At the same time, State, local and Tribal governments launched major efforts to address 
the economic impacts of the pandemic. These efforts have been tailored to the needs of their 
communities and have included expanded assistance to unemployed workers; food assistance; 
health-and-substance­
use/#:~:text=Older%20adults%20are%20also%20more,prior%20to%20the%20current%20crisis; U.S. 
Census Bureau, Household Pulse Survey: Measuring Social and Economic Impacts during the 
Coronavirus Pandemic, https://www.census.gov/programs-surveys/household-pulse-survey.html (last 
visited Apr. 26, 2021); Rebecca 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. 
5 Board of Governors of the Federal Reserve System, Monetary Policy Report (June 12, 2020), 
https://www.federalreserve.gov/monetarypolicy/2020-06-mpr-summary.htm. 
6 Joseph R. Biden, Remarks by President Biden on Helping Small Businesses (Feb. 22, 2021), 
https://www.whitehouse.gov/briefing-room/speeches-remarks/2021/02/22/remarks-by-president-biden­
on-helping-small-businesses/. 
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rent, mortgage, and utility support; cash assistance; internet access programs; expanded services 
to support individuals experiencing homelessness; support for individuals with disabilities and 
older adults; and assistance to small businesses facing closures or revenue loss or implementing 
new safety measures. 
In responding to the public health emergency and its negative economic impacts, State, 
local, and Tribal governments have seen substantial increases in costs to provide these services, 
often amid substantial declines in revenue due to the economic downturn and changing economic 
patterns during the pandemic.7 Facing these budget challenges, many State, local, and Tribal 
governments have been forced to make cuts to services or their workforces, or delay critical 
investments. From February to May of 2020, State, local, and Tribal governments reduced their 
workforces by more than 1.5 million jobs and, in April of 2021, State, local, and Tribal 
government employment remained nearly1.3 million jobs below pre-pandemic levels.8 These 
cuts to State, local, and Tribal government workforces come at a time when demand for 
government services is high, with State, local, and Tribal governments on the frontlines of 
fighting the pandemic. Furthermore, State, local, and Tribal government austerity measures can 
hamper overall economic growth, as occurred in the recovery from the Great Recession.9 
7 Michael Leachman, House Budget Bill Provides Needed Fiscal Aid for States, Localities, Tribal 
Nations, and Territories (Feb. 10, 2021), https://www.cbpp.org/research/state-budget-and-tax/house­
budget-bill-provides-needed-fiscal-aid-for-states-localities. 
8 U.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 May 8, 2021). 
9 Tracy Gordon, State and Local Budgets and the Great Recession, Brookings Institution (Dec. 31, 2012), 
http://www.brookings.edu/articles/state-and-local-budgets-and-the-great-recession. 
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Finally, although the pandemic’s impacts have been widespread, both the public health 
and economic impacts of the pandemic have fallen most severely on communities and 
populations disadvantaged before it began. Low-income communities, people of color, and 
Tribal communities have faced higher rates of infection, hospitalization, and death,10 as well as 
higher rates of unemployment and lack of basic necessities like food and housing.11 Pre-existing 
social vulnerabilities magnified the pandemic in these communities, where a reduced ability to 
work from home and, frequently, denser housing amplified the risk of infection.  Higher rates of 
pre-existing health conditions also may have contributed to more severe COVID-19 health 
outcomes.12 Similarly, communities or households facing economic insecurity before the 
pandemic were less able to weather business closures, job losses, or declines in earnings and 
were less able to participate in remote work or education due to the inequities in access to 
reliable and affordable broadband infrastructure.13 Finally, though schools in all areas faced 
challenges, those in high poverty areas had fewer resources to adapt to remote and hybrid 
10 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. 
11 Center on Budget and Policy Priorities, Tracking the COVID-19 Recession’s Effects on Food, Housing, 
and Employment Hardships, https://www.cbpp.org/research/poverty-and-inequality/tracking-the-covid­
19-recessions-effects-on-housing-and (last visited May 4, 2021). 
12 Lisa R. Fortuna et al., Inequity and the Disproportionate Impact of COVID-19 on Communities of 
Color in the United States: The Need for Trauma-Informed Social Justice Response, Psychological 
Trauma Vol. 12(5):443-45 (2020), available at https://psycnet.apa.org/fulltext/2020-37320-001.pdf. 
13 Emily Vogles et al., 53% of Americans Say the Internet Has Been Essential During the COVID-19 
Outbreak (Apr. 30, 2020), https://www.pewresearch.org/internet/2020/04/30/53-of-americans-say-the­
internet-has-been-essential-during-the-covid-19-outbreak/. 
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learning models.14 Unfortunately, the pandemic also has reversed many gains made by 
communities of color in the prior economic expansion.15 
B. The Statute and Interim Final Rule 
On March 11, 2021, the American Rescue Plan Act (ARPA) was signed into law by the 
President.16 Section 9901 of ARPA amended Title VI of the Social Security Act17 (the Act) to 
add section 602, which establishes the Coronavirus State Fiscal Recovery Fund, and section 603, 
which establishes the Coronavirus Local Fiscal Recovery Fund (together, the Fiscal Recovery 
Funds).18 The Fiscal Recovery Funds are intended to provide support to State, local, and Tribal 
governments (together, recipients) in responding to the impact of COVID-19 and in their efforts 
to contain COVID-19 on their communities, residents, and businesses. The Fiscal Recovery 
Funds build on and expand the support provided to these governments over the last year, 
including through the Coronavirus Relief Fund (CRF).19 
14 Emma Dorn et al., COVID-19 and student learning in the United States: The hurt could last a lifetime 
(June 2020), https://webtest.childrensinstitute.net/sites/default/files/documents/COVID-19-and-student-
learning-in-the-United-States_FINAL.pdf; Andrew Bacher-Hicks et al., Inequality in Household 
Adaptation to Schooling Shocks: Covid-Induced Online Engagement in Real Time, J. of Public Econ. 
Vol. 193(C) (July 2020), available at https://www.nber.org/papers/w27555. 
15 See, e.g., Tyler Atkinson & Alex Richter, Pandemic Disproportionately Affects Women, Minority 
Labor Force Participation, https://www.dallasfed.org/research/economics/2020/1110 (last visited May 9, 
2021); Jared Bernstein & Janelle Jones, The Impact of the COVID19 Recession on the Jobs and Incomes 
of Persons of Color, https://www.cbpp.org/sites/default/files/atoms/files/6-2-20bud_0.pdf (last visited 
May 9, 2021).  
16 American Rescue Plan Act of 2021 (ARPA) § 9901, Pub. L. No. 117-2, codified at 42 U.S.C. § 802 et 
seq. 
17 42 U.S.C. 801 et seq. 
18 §§ 602, 603 of the Act. 
19 The CRF was established by the section 601 of the Act as added by the Coronavirus Aid, Relief, and 
Economic Security Act (CARES Act), Pub. L. No. 116-136, 134 Stat. 281 (2020). 
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Through the Fiscal Recovery Funds, Congress provided State, local, and Tribal governments 
with significant resources to respond to the COVID-19 public health emergency and its 
economic impacts through four categories of eligible uses.  Section 602 and section 603 contain 
the same 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.  
Sections 602(c)(1) and 603(c)(1) provide that funds 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 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 clarified two types of uses which do not fall within these four 
categories. Sections 602(c)(2)(B) and 603(c)(2) provide that these eligible uses do not include, 
and thus funds may not be used for, depositing funds into any pension fund.  Section 
602(c)(2)(A) also provides, for States and territories, that the eligible uses do not include: 
“directly or indirectly offset[ting] a reduction in the net tax revenue of [the] State 
or territory resulting from a change in law, regulation, or administrative 
interpretation.” 
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The ARPA provides a substantial infusion of resources to meet pandemic response needs 
and rebuild a stronger, more equitable economy as the country recovers. First, payments from 
the Fiscal Recovery Funds help to ensure that State, local, and Tribal governments have the 
resources needed to continue to take actions to decrease the spread of COVID-19 and bring the 
pandemic under control. Payments from the Fiscal Recovery Funds may also be used by 
recipients to provide support for costs incurred in addressing public health and economic 
challenges resulting from the pandemic, including resources to offer premium pay to essential 
workers, in recognition of their sacrifices over the last year. Recipients may also use payments 
from the Fiscal Recovery Funds to replace State, local, and Tribal government revenue lost due 
to COVID-19, helping to ensure that governments can continue to provide needed services and 
avoid cuts or layoffs. Finally, these resources lay the foundation for a strong, equitable 
economic recovery, not only by providing immediate economic stabilization for households and 
businesses, but also by addressing the systemic public health and economic challenges that may 
have contributed to more severe impacts of the pandemic among low-income communities and 
people of color. 
Within the eligible use categories outlined in the Fiscal Recovery Funds provisions of 
ARPA, State, local, and Tribal governments have flexibility to determine how best to use 
payments from the Fiscal Recovery Funds to meet the needs of their communities and 
populations. The Interim Final Rule facilitates 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 uses that State, local, and Tribal governments may 
consider.  These uses build on eligible expenditures under the CRF, including some expansions 
in eligible uses to respond to the public health emergency, such as vaccination campaigns.  They 
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also reflect changes in the needs of communities, as evidenced by, for example, nationwide data 
demonstrating disproportionate impacts of the COVID-19 public health emergency on certain 
populations, geographies, and economic sectors.  The Interim Final Rule takes into consideration 
these disproportionate impacts by recognizing a broad range of eligible uses to help States, local, 
and Tribal governments support the families, businesses, and communities hardest hit by the 
COVID-19 public health emergency.  
Implementation of the Fiscal Recovery Funds also reflect the importance of public input, 
transparency, and accountability.  Treasury seeks comment on all aspects of the Interim Final 
Rule and, to better facilitate public comment, has included specific questions throughout this 
Supplementary Information.  Treasury encourages State, local, and Tribal governments in 
particular to provide feedback and to engage with Treasury regarding issues that may arise 
regarding all aspects of this Interim Final Rule and Treasury’s work in administering the Fiscal 
Recovery Funds.  In addition, the Interim Final Rule establishes certain regular reporting 
requirements, including by requiring State, local, and Tribal governments to publish information 
regarding uses of Fiscal Recovery Funds payments in their local jurisdiction. These reporting 
requirements reflect the need for transparency and accountability, while recognizing and 
minimizing the burden, particularly for smaller local governments.  Treasury urges State, 
territorial, Tribal, and local governments to engage their constituents and communities in 
developing plans to use these payments, given the scale of funding and its potential to catalyze 
broader economic recovery and rebuilding.  
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II. 
Eligible Uses 
A. Public Health and Economic Impacts 
Sections 602(c)(1)(A) and 603(c)(1)(A) provide significant resources for State, territorial, 
Tribal governments, and counties, metropolitan cities, and nonentitlement units of local 
governments (each referred to as a recipient) to meet the wide range of public health and 
economic impacts of the COVID-19 public health emergency. 
These provisions authorize the use of payments from the Fiscal Recovery Funds to 
respond to the public health emergency with respect to COVID-19 or its negative economic 
impacts.  Section 602 and section 603 also describe several types of uses that would be 
responsive to the impacts of the COVID-19 public health emergency, including assistance to 
households, small businesses, and nonprofits and aid to impacted industries, such as tourism, 
travel, and hospitality.20 
Accordingly, to assess whether a program or service is included in this category of 
eligible uses, a recipient should consider whether and how the use would respond to the 
COVID- 19 public health emergency.  Assessing whether a program or service “responds to” the 
COVID-19 public health emergency requires the recipient 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.  While the COVID-19 
public health emergency affected many aspects of American life, eligible 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.  
20 §§602(c)(1)(A), 603(c)(1)(A) of the Act. 
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The Interim Final Rule implements these provisions by identifying a non-exclusive list of 
programs or services that may be funded as responding to COVID-19 or the negative economic 
impacts of the COVID-19 public health emergency, along with considerations for evaluating 
other potential uses of the Fiscal Recovery Funds not explicitly listed.  The Interim Final Rule 
also provides flexibility for recipients to use payments from the Fiscal Recovery Funds for 
programs or services that are not identified on these non-exclusive lists but that fall under the 
terms of section 602(c)(1)(A) or 603(c)(1)(A) by responding to the COVID-19 public health 
emergency or its negative economic impacts. As an example, in determining whether a program 
or service responds to the negative economic impacts of the COVID-19 public health emergency, 
the Interim Final Rule provides that payments from the Fiscal Recovery Funds should be 
designed to address an economic harm resulting from or exacerbated by the public health 
emergency. Recipients should assess the connection between the negative economic harm and 
the COVID-19 public health emergency, the nature and extent of that harm, and how the use of 
this funding would address such harm.  
As discussed, the pandemic and the necessary actions taken to control the spread had a 
severe impact on households and small businesses, including in particular low-income workers 
and communities and people of color.  While eligible uses under sections 602(c)(1)(A) and 
603(c)(1)(A)provide flexibility to recipients to identify the most pressing local needs, Treasury 
encourages recipients to provide assistance to those households, businesses, and non-profits in 
communities most disproportionately impacted by the pandemic. 
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1. Responding to COVID-19 
On January 21, 2020, the Centers for Disease Control and Prevention (CDC) identified 
the first case of novel coronavirus in the United States.21 By late March, the virus had spread to 
many States and the first wave was growing rapidly, centered in the northeast.22 This wave 
brought acute strain on health care and public health systems: hospitals and emergency medical 
services struggled to manage a major influx of patients; response personnel faced shortages of 
personal protective equipment; testing for the virus was scarce; and congregate living facilities 
like nursing homes and prisons saw rapid spread.  State, local, and Tribal governments mobilized 
to support the health care system, issue public health orders to mitigate virus spread, and 
communicate safety measures to the public. The United States has since faced at least two 
additional COVID-19 waves that brought many similar challenges: the second in the summer, 
centered in the south and southwest, and a wave throughout the fall and winter, in which the 
virus reached a point of uncontrolled spread across the country and over 3,000 people died per 
day.23 By early May 2021, the United States has experienced over 32 million confirmed 
COVID-19 cases and over 575,000 deaths.24 
21 Press 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. 
22 Anne Schuchat et al., Public Health Response to the Initiation and Spread of Pandemic COVID-19 in 
the United States, February 24 – April 21, 2021, MMWR Morb Mortal Wkly Rep 2021, 69(18):551-56 
(May 8, 2021), https://www.cdc.gov/mmwr/volumes/69/wr/mm6918e2.htm. 
23 Centers 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-data­
tracker/#trends_dailytrendscases (last visited May 8, 2021). 
24 Id. 
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Mitigating the impact of COVID-19, including taking actions to control its spread and 
support hospitals and health care workers caring for the sick, continues to require a major public 
health response from State, local and Tribal governments.  New or heightened public health 
needs include COVID-19 testing, major expansions in 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 implementing infection 
prevention measures or making ventilation improvements in congregate settings, health care 
settings, or other key locations. 
Other response and adaptation costs include 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. In 
recent months, State, local, and Tribal governments across the country have mobilized to support 
the national vaccination campaign, resulting in over 250 million doses administered to date.25 
The need for public health measures to respond to COVID-19 will continue in the months 
and potentially years to come. This includes the continuation of the vaccination campaign for 
the general public and, if vaccinations are approved for children in the future, eventually for 
25 Centers for Disease Control and Prevention, COVID Data Tracker: COVID-19 Vaccinations in the 
United States, https://covid.cdc.gov/covid-data-tracker/#vaccinations (last visited May 8, 2021). 
13

youths. This also includes monitoring the spread of COVID-19 variants, understanding the 
impact of these variants (especially on vaccination efforts), developing approaches to respond to 
those variants, and monitoring global COVID-19 trends to understand continued risks to the 
United States. 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 
millions of Americans who have been infected.  
Other areas of public health have also been negatively impacted by the COVID-19 
pandemic.  For example, in one survey in January 2021, over 40 percent of American adults 
reported symptoms of depression or anxiety, up from 11 percent in the first half of 2019.26, The 
proportion of children’s emergency department visits related to mental health has also risen 
noticeably.27 Similarly, rates of substance misuse and overdose deaths have spiked:  preliminary 
data from the CDC show a nearly 30 percent increase in drug overdose mortality from 
September 2019 to September 2020.28 Stay-at-home orders and other pandemic responses may 
have also reduced the ability of individuals affected by domestic violence to access services.29 
26 Panchal, supra note 4; Mark É. 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. 
27 Leeb, supra note 4. 
28 Centers 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, 
2021). 
29 Megan L. Evans, et al., A Pandemic within a Pandemic – Intimate Partner Violence during Covid-19, 
N. Engl. J. Med. 383:2302-04 (Dec. 10, 2020), available at 
https://www.nejm.org/doi/full/10.1056/NEJMp2024046. 
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Finally, some preventative public health measures like childhood vaccinations have been 
deferred and potentially forgone.30 
While the pandemic affected communities across the country, it disproportionately 
impacted some demographic groups and exacerbated health inequities along racial, ethnic, and 
socioeconomic lines.31 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.32 
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 223 deaths per 100,000 compared to the U.S. average of 175 deaths 
per 100,000, as of May 2021.33 Counties with high social vulnerability, as measured by factors 
such as poverty and educational attainment, have also fared more poorly than the national 
30 Jeanne M. Santoli et al., Effects of the COVID-19 Pandemic on Routine Pediatric Vaccine Ordering 
and Administration – United States, Morb. Mortal. Wkly. Rep. 69(19):591-93 (May 8, 2020), 
https://www.cdc.gov/mmwr/volumes/69/wr/mm6919e2.htm; Marisa Langdon-Embry et al., Notes from 
the Field: Rebound in Routine Childhood Vaccine Administration Following Decline During the COVID­
19 Pandemic – New York City, March 1-June 27, 2020, Morb. Mortal. Wkly. Rep. 69(30):999-1001 (Jul. 
31 2020), https://www.cdc.gov/mmwr/volumes/69/wr/mm6930a3.htm. 
31 Office 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-and-Pandemic-Preparedness.pdf. 
32 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 Romano, supra note 10. 
33 Centers 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/covid-data­
tracker/#pop-factors_totaldeaths (last visited May 8, 2021). 
15

average, with 211 deaths per 100,000 as of May 2021.34 Over the last year, 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.35 Low-income and minority communities also exhibit higher rates of pre-existing 
conditions that may contribute to an increased risk of COVID-19 mortality.36 
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 over-represented among essential workers, who faced greater risk of exposure.37 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 
34 The 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 Vulnerability Index, https://covid.cdc.gov/covid-data-tracker/#pop­
factors_totaldeaths (last visited May 8, 2021). 
35 Centers 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/investigations­
discovery/hospitalization-death-by-race-ethnicity.html (last visited Apr. 26, 2021). 
36 See, 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 Apr. 26, 2021). 
37 Milena 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://jamanetwork.com/journals/jama/fullarticle/2767630. 
16

screenings for elevated blood lead levels declined during the pandemic.38 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.39 
Eligible Public Health Uses. The Fiscal Recovery Funds provide resources to meet and 
address these emergent public health needs, including through measures to counter the spread of 
COVID-19, through the provision of care for those impacted by the virus, and through programs 
or services that address disparities in public health that have been exacerbated by the pandemic.  
To facilitate implementation and use of payments from the Fiscal Recovery Funds, the Interim 
Final Rule identifies a non-exclusive list of eligible uses of funding to respond to the COVID-19 
public health emergency.  Eligible uses listed under this section build and expand upon 
permissible expenditures under the CRF, while recognizing the differences between the ARPA 
and CARES Act, and recognizing that the response to the COVID-19 public health emergency 
has changed and will continue to change over time.  To 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. 
38 See, 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/. 
39 See, e.g., Centers for Disease Control and Prevention, supra note 34; Benfer & Wiley, supra note 38; 
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. 
17

The Interim Final Rule identifies a non-exclusive list of uses that address the effects of the 
COVID-19 public health emergency, including: 
• COVID-19 Mitigation and Prevention. A broad range of services and programming are 
needed to contain COVID-19.  Mitigation and prevention efforts for COVID-19 include 
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;40 ventilation 
improvements in congregate settings, health care settings, or other key locations; 
enhancement of public health data systems; and other public health responses.41 They 
also include capital investments in public facilities to meet pandemic operational needs, 
such as physical plant improvements to public hospitals and health clinics or adaptations 
40 This includes implementing mitigation strategies consistent with the Centers for Disease Control and 
Prevention’s (CDC) Operational Strategy for K-12 Schools through Phased Prevention, available at 
https://www.cdc.gov/coronavirus/2019-ncov/community/schools-childcare/operation-strategy.html. 
41 Many of these expenses were also eligible in the CRF.  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 here (e.g., telemedicine costs, costs to facilitate compliance with 
public health orders, disinfection of public areas, facilitating distance learning, increased solid waste 
disposal needs related to PPE, paid sick and paid family and medical leave to public employees to enable 
compliance with COVID–19 public health precautions), with the following two exceptions: 1) the 
standard for eligibility of public health and safety payrolls has been updated (see details on page 20) and 
2) expenses related to the issuance of tax-anticipation notes are no longer an eligible funding use (see 
discussion of debt service on page 44). 
18

to public buildings to implement COVID-19 mitigation tactics. These COVID-19 
prevention and mitigation programs and services, among others, were eligible 
expenditures under the CRF and are eligible uses under this category of eligible uses for 
the Fiscal Recovery Funds.42 
• Medical Expenses. The COVID-19 public health emergency continues to have 
devastating effects on public health; the United States continues to average hundreds of 
deaths per day and the spread of new COVID-19 variants has raised new risks and 
genomic surveillance needs.43 Moreover, our understanding of the potentially serious 
and long-term effects of the virus is growing, including the potential for symptoms like 
shortness of breath to continue for weeks or months, for multi-organ impacts from 
COVID-19, or for post-intensive care syndrome.44 State and local governments may 
need to continue to provide care and services to address these near- and longer-term 
needs.45 
• Behavioral Health Care. In addition, new or enhanced State, local, and Tribal 
government services may be needed to meet behavioral health needs exacerbated by the 
pandemic and respond to other public health impacts.  These services include mental 
health treatment, substance misuse treatment, other behavioral health services, hotlines or 
42 Coronavirus Relief Fund for States, Tribal Governments, and Certain Eligible Local Governments, 86 
Fed. Reg. 4182 (Jan. 15, 2021), available at https://home.treasury.gov/system/files/136/CRF-Guidance­
Federal-Register_2021-00827.pdf. 
43 Centers for Disease Control and Prevention, supra note 24. 
44 Centers for Disease Control and Prevention, Long-Term Effects (Apr. 8, 2021), 
https://www.cdc.gov/coronavirus/2019-ncov/long-term-effects.html (last visited Apr. 26, 2021). 
45 Pursuant to 42 CFR 433.51 and 45 CFR 75.306, Fiscal Recovery Funds may not serve as a State or 
locality’s contribution of certain Federal funds. 
19

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. 
• Public Health and Safety Staff.  Treasury recognizes that responding to the public health 
and negative economic impacts of the pandemic, including administering the services 
described above, requires a substantial commitment of State, local, and Tribal 
government human resources.  As a result, the Fiscal Recovery Funds may be used for 
payroll and covered benefits expenses for public safety, public health, health care, human 
services, and similar employees, to the extent that their services are devoted to mitigating 
or responding to the COVID–19 public health emergency.46 Accordingly, the Fiscal 
Recovery Funds may be used to support the payroll and covered benefits for the portion 
of the employee’s time that is dedicated to responding to the COVID-19 public health 
emergency.  For administrative convenience, the recipient may consider public health and 
safety employees to be entirely devoted to mitigating or responding to the COVID-19 
public health emergency, and therefore fully covered, if the employee, or his or her 
operating unit or division, is primarily dedicated to responding to the COVID-19 public 
health emergency.  Recipients may consider other presumptions for assessing the extent 
to which an employee, division, or operating unit is engaged in activities that respond to 
46 In general, if an employee’s wages and salaries are an eligible use of Fiscal Recovery Funds, recipients 
may treat the employee’s covered benefits as an eligible use of Fiscal Recovery Funds. For purposes of 
the Fiscal Recovery 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). 
20

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.  Recipients need not routinely track 
staff hours.  
• Expenses to Improve the Design and Execution of Health and Public Health Programs.  
State, local, and Tribal governments may use payments from the Fiscal Recovery Funds 
to engage in planning and analysis in order to improve programs addressing the COVID­
19 pandemic, including through use of targeted consumer outreach, improvements to data 
or technology infrastructure, impact evaluations, and data analysis. 
Eligible Uses to Address Disparities in Public Health Outcomes. In addition, in recognition of 
the disproportionate impacts of the COVID-19 pandemic on health outcomes in low-income and 
Native American communities and the importance of mitigating these effects, the Interim Final 
Rule identifies a broader range of services and programs that will be presumed to be responding 
to the public health emergency when provided in these communities.  Specifically, Treasury will 
presume that certain types of services, outlined below, are eligible uses when provided in a 
Qualified Census Tract (QCT),47 to families living in QCTs, or when these services are provided 
47 Qualified Census Tracts are a common, readily-accessible, and geographically granular method of 
identifying communities with a large proportion of low-income residents.  Using an existing measure may 
speed implementation and decrease administrative burden, while identifying areas of need at a highly-
localized level. 
While QCTs are an effective tool generally, many tribal communities have households with a wide range 
of income levels due in part to non-tribal member, high income residents living in the community. Mixed 
income communities, with a significant share of tribal members at the lowest levels of income, are often 
not included as eligible QCTs yet tribal residents are experiencing disproportionate impacts due to the 
pandemic. Therefore, including all services provided by Tribal governments is a more effective means of 
ensuring that disproportionately impacted Tribal members can receive services. 
21

by Tribal governments.48 Recipients may also provide these services to other populations, 
households, or geographic areas that are disproportionately impacted by the pandemic.  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. 
Given the exacerbation of health disparities during the pandemic and the role of pre-existing 
social vulnerabilities in driving these disparate outcomes, services to address health disparities 
are presumed to be responsive to the public health impacts of the pandemic.  Specifically, 
recipients may use payments from the Fiscal Recovery Funds to facilitate access to resources that 
improve health outcomes, including services that connect residents with health care resources 
and public assistance programs and build healthier environments, such as: 
• 
Funding community health workers to help community members access health 
services and services to address the social determinants of health;49, 
• 
Funding public benefits navigators to assist community members with navigating 
and applying for available Federal, State, and local public benefits or services; 
48 U.S. Department of Housing and Urban Development (HUD), Qualified Census Tracts and Difficult 
Development Areas, https://www.huduser.gov/portal/datasets/qct.html (last visited Apr. 26, 2021); U.S. 
Department of the Interior, Bureau of Indian Affairs, Indian Lands of Federally Recognized Tribes of the 
United States (June 2016), https://www.bia.gov/sites/bia.gov/files/assets/bia/ots/webteam/pdf/idc1­
028635.pdf (last visited Apr. 26, 2021). 
49 The social determinants of health are the social and environmental conditions that affect health 
outcomes, specifically economic stability, health care access, social context, neighborhoods and built 
environment, and education access. See, e.g., U.S. Department of Health and Human Services, Office of 
Disease Prevention and Health Promotion, Healthy People 2030: Social Determinants of Health, 
https://health.gov/healthypeople/objectives-and-data/social-determinants-health (last visited Apr. 26, 
2021). 
22

• 
Housing services to support healthy living environments and neighborhoods 
conducive to mental and physical wellness; 
• 
Remediation of lead paint or other lead hazards to reduce risk of elevated blood lead 
levels among children; and 
• 
Evidence-based community violence intervention programs to prevent violence and 
mitigate the increase in violence during the pandemic.50 
2. Responding to Negative Economic Impacts 
Impacts on Households and Individuals.  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 20 million jobs were lost in March and 
April 2020.51 Although many have returned to work, as of April 2021, the economy remains 
8.2 million jobs below its pre-pandemic peak,52 and more than 3 million workers have dropped 
out of the labor market altogether relative to February 2020.53 
Rates of unemployment are particularly severe among workers of color and workers with 
lower levels of educational attainment; for example, the overall unemployment rate in the United 
50 National Commission on COVID-19 and Criminal Justice, Impact Report: COVID-19 and Crime (Jan. 
31, 2021), https://covid19.counciloncj.org/2021/01/31/impact-report-covid-19-and-crime-3/ (showing a 
spike in homicide and assaults); Brad Boesrup et al., Alarming Trends in US domestic violence during the 
COVID-19 pandemic, Am. J. of Emerg. Med. 38(12): 2753-55 (Dec. 1, 2020), available at 
https://www.ajemjournal.com/article/S0735-6757(20)30307-7/fulltext (showing a spike in domestic 
violence). 
51 U.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 May 8, 2021). 
52 Id. 
53 U.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 May 8, 2021). 
23

States was 6.1 percent in April 2021, but certain groups saw much higher rates:  9.7 percent for 
Black workers, 7.9 percent for Hispanic or Latino workers, and 9.3 percent for workers without a 
high school diploma.54 Job losses have also been particularly steep among low wage workers, 
with these workers remaining furthest from recovery as of the end of 2020.55 A severe 
recession–and its concentrated impact among low-income workers–has amplified food and 
housing insecurity, with an estimated nearly 17 million adults living in households where there is 
sometimes or often not enough food to eat and an estimated 10.7 million adults living in 
households that were not current on rent.56 Over the course of the pandemic, inequities also 
manifested along gender lines, as schools closed to in-person activities, leaving many working 
families without child care during the day.57 Women of color have been hit especially hard: the 
54 U.S. Bureau of Labor Statistics, Labor Force Statistics from the Current Population Survey: 
Employment status of the civilian population by sex and age (May 8 2021), 
https://www.bls.gov/news.release/empsit.t01.htm (last visited May 8, 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 (May 8, 2021), 
https://www.bls.gov/web/empsit/cpseea04.htm (last visited May 8, 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 (May 8, 2021), 
https://www.bls.gov/web/empsit/cpseea05.htm (last visited May 8, 2021). 
55 Elise 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 (Feb. 2021), https://www.bls.gov/osmr/research­
papers/2021/pdf/ec210020.pdf. 
56 Center on Budget and Policy Priorities, Tracking the COVID-19 Recession’s Effects on Food, Housing, 
and Employment Hardships, https://www.cbpp.org/research/poverty-and-inequality/tracking-the-covid­
19-recessions-effects-on-food-housing-and (last visited May 8, 2021). 
57 Women have carried a larger share of childcare responsibilities than men during the COVID-19 crisis. 
See, e.g., Gema Zamarro & María 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. 
24

labor force participation rate for Black women has fallen by 3.2 percentage points58 during the 
pandemic as compared to 1.0 percentage points for Black men59 and 2.0 percentage points for 
White women.60 
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.61 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 scores62 and reduced familial 
and childhood wellbeing.63 These potential long-term economic consequences underscore the 
continued need for robust policy support.  
58 U.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 May 8, 2021). 
59 U.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 May 8, 2021). 
60 U.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.stlouisfed.org/series/LNS11300029 (last visited May 8, 2021). 
61 See, 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, 2021), 
https://www.brookings.edu/blog/jobs/2011/11/04/unemployment-and-earnings-losses-a-look-at-long­
term-impacts-of-the-great-recession-on-american-workers/. 
62 Chi Chi Wu, Solving the Credit Conundrum: Helping Consumers’ Credit Records Impaired by the 
Foreclosure Crisis and Great Recession (Dec. 2013), 
https://www.nclc.org/images/pdf/credit_reports/report-credit-conundrum-2013.pdf. 
63 Irwin Garfinkel, Sara McLanahan, Christopher Wimer, eds., Children of the Great Recession, Russell 
Sage Foundation (Aug. 2016), available at https://www.russellsage.org/publications/children-great­
recession. 
25

Impacts on Businesses. The pandemic has also severely impacted many businesses, with 
small businesses hit especially hard. Small businesses make up nearly half of U.S. private-sector 
employment64 and play a key role in supporting the overall economic recovery as they are 
responsible for two-thirds of net new jobs.65 Since the beginning of the pandemic, however, 
400,000 small businesses have closed, with many more at risk.66 Sectors with a large share of 
small business employment have been among those with the most drastic drops in employment.67 
The negative outlook for small businesses has continued: as of April 2021, approximately 
70 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.68 
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.69 In general, small 
businesses can face greater hurdles in accessing credit,70 and many small businesses were 
64 Board of Governors of the Federal Reserve System, supra note 5. 
65 U.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-businesses-generate­
44-percent-of-u-s-economic-activity/. 
66 Biden, supra note 6. 
67 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-Small­
Business.pdf. 
68 U.S. Census Bureau, Small Business Pulse Survey, https://portal.census.gov/pulse/data/ (last visited 
May 8, 2021). 
69 Olivia 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. 
70 See 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-credit-to-small-businesses.htm. 
26

already financially fragile at the outset of the pandemic.71 Non-profits, which provide vital 
services to communities, have similarly faced economic and financial challenges due to the 
pandemic.72 
Impacts to State, Local, and Tribal Governments.  State, local, and Tribal governments 
have felt substantial fiscal pressures.  As noted above, State, local, and Tribal governments have 
faced significant revenue shortfalls and remain over 1 million jobs below their pre-pandemic 
staffing levels.73 These reductions in staffing may undermine the ability to deliver services 
effectively, as well as add to the number of unemployed individuals in their jurisdictions. 
Exacerbation of Pre-existing Disparities. The COVID-19 public health emergency may 
have lasting negative effects on economic outcomes, particularly in exacerbating disparities that 
existed prior to the pandemic.  
The negative economic impacts of the COVID-19 pandemic are particularly pronounced 
in certain communities and families.  Low- and moderate-income jobs make up a substantial 
portion of both total pandemic job losses,74 and jobs that require in-person frontline work, which 
71 Alexander 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. 
72 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-nonprofits­
serving-western-united-states.pdf. 
73 Wolfe & Kassa, supra note 7; Elijah Moreno & Heather Sobrepena, Tribal entities remain resilient as 
COVID-19 batters their finances, Federal Reserve Bank of Minneapolis (Nov. 10, 2021), 
https://www.minneapolisfed.org/article/2020/tribal-entities-remain-resilient-as-covid-19-batters-their­
finances. 
74 Kim Parker et al., Economic Fallout from COVID-19 Continues to Hit Lower-Income Americans the 
Hardest, Pew Research Center (Sept. 24, 2020), https://www.pewresearch.org/social­
trends/2020/09/24/economic-fallout-from-covid-19-continues-to-hit-lower-income-americans-the­
hardest/; Gould, supra note 55. 
27

are exposed to greater risk of contracting COVID-19.75 Both factors compound pre-existing 
vulnerabilities and the likelihood of food, housing, or other financial insecurity in low- and 
moderate-income families and, given the concentration of low- and moderate-income families 
within certain communities,76 raise a substantial risk that the effects of the COVID-19 public 
health emergency will be amplified within these communities. 
These compounding effect of recessions on concentrated poverty and the long-lasting 
nature of this effect were observed after the 2007-2009 recession, including a large increase in 
concentrated poverty with the number of people living in extremely poor neighborhoods more 
than doubling by 2010-2014 relative to 2000.77 Concentrated poverty has a range of deleterious 
impacts, including additional burdens on families and reduced economic potential and social 
cohesion.78 Given the disproportionate impact of COVID-19 on low-income households 
discussed above, there is a risk that the current pandemic-induced recession could further 
increase concentrated poverty and cause long-term damage to economic prospects in 
neighborhoods of concentrated poverty. 
The negative economic impacts of COVID-19 also include significant impacts to children 
in disproportionately affected families and include impacts to education, health, and welfare, all 
75 See infra Section II.B of this Supplementary Information. 
76 Elizabeth Kneebone, The Changing geography of US poverty, Brookings Institution (Feb. 15, 2017), 
https://www.brookings.edu/testimonies/the-changing-geography-of-us-poverty/. 
77 Elizabeth Kneebone & Natalie Holmes, U.S. concentrated poverty in the wake of the Great Recession, 
Brookings Institution (Mar. 31, 2016), https://www.brookings.edu/research/u-s-concentrated-poverty-in­
the-wake-of-the-great-recession/. 
78 David Erickson et al., The Enduring Challenge of Concentrated Poverty in America: Case Studies from 
Communities Across the U.S. (2008), available at https://www.frbsf.org/community­
development/files/cp_fullreport.pdf. 
28

of which contribute to long-term economic outcomes.79 Many low-income and minority 
students, who were disproportionately served by remote or hybrid education during the 
pandemic, lacked the resources to participate fully in remote schooling or live in households 
without adults available throughout the day to assist with online coursework.80 Given these 
trends, the pandemic may widen educational disparities and worsen outcomes for low-income 
students,81 an effect that would substantially impact their long-term economic outcomes. 
Increased economic strain or material hardship due to the pandemic could also have a long-term 
impact on health, educational, and economic outcomes of young children.82 Evidence suggests 
79 Educational quality, as early as Kindergarten, has a long-term impact on children’s public health and 
economic outcomes. See, e.g., Tyler W. Watts et al., The Chicago School Readiness Project: Examining 
the long-term impacts of an early childhood intervention, PLoS ONE 13(7) (2018), available at 
https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0200144; Opportunity Insights, How 
Can We Amplify Education as an Engine of Mobility? Using big data to help children get the most from 
school, https://opportunityinsights.org/education/ (last visited Apr. 26, 2021); U.S. Department of Health 
and Human Services (HHS), Office of Disease Prevention and Health Promotion, Early Childhood 
Development and Education, https://www.healthypeople.gov/2020/topics-objectives/topic/social­
determinants-health/interventions-resources/early-childhood-development-and-education (last visited 
Apr. 26, 2021). 
80 See, e.g., Bacher-Hicks, supra note 14. 
81 A Department of Education survey found that, as of February 2021, 42 percent of fourth grade students 
nationwide were offered only remote education, compared to 48 percent of economically disadvantaged 
students, 54 percent of Black students and 57 percent of Hispanic students. Large districts often 
disproportionately serve low-income students.  See Institute of Education Sciences, Monthly School 
Survey Dashboard, https://ies.ed.gov/schoolsurvey/ (last visited Apr. 26, 2021).  In summer 2020, a 
review found that 74 percent of the largest 100 districts chose remote learning only. See Education Week, 
School Districts’ Reopening Plans: A Snapshot (Jul. 15, 2020), 
https://www.edweek.org/leadership/school-districts-reopening-plans-a-snapshot/2020/07 (last visited May 
4, 2021). 
82 HHS, supra note 79. 
29

that adverse conditions in early childhood, including exposure to poverty, food insecurity, 
housing insecurity, or other economic hardships, are particularly impactful.83 
The pandemic’s disproportionate economic impacts are also seen in Tribal communities 
across the country—for Tribal governments as well as families and businesses on and off Tribal 
lands.  In the early months of the pandemic, Native American unemployment spiked to 
26 percent and, while partially recovered, remains at nearly 11 percent.84 Tribal enterprises are a 
significant source of revenue for Tribal governments to support the provision of government 
services.  These enterprises, notably concentrated in gaming, tourism, and hospitality, frequently 
closed, significantly reducing both revenues to Tribal governments and employment.  As a result, 
Tribal governments have reduced essential services to their citizens and communities.85 
Eligible Uses. Sections 602(c)(1)(A) and 603(c)(1)(A) permit use of payments from the 
Fiscal Recovery Funds to respond to the negative economic impacts of the COVID-19 public 
health emergency. Eligible 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 
83 Hirokazu Yoshikawa, Effects of the Global Coronavirus Disease – 2019 Pandemic on Early Childhood 
Development: Short- and Long-Term Risks and Mitigating Program and Policy Actions, J. of Pediatrics 
Vol. 223:188-93 (Aug. 1, 2020), available at https://www.jpeds.com/article/S0022-3476(20)30606­
5/abstract. 
84 Based on calculations conducted by the Minneapolis Fed’s Center for Indian Country Development 
using Flood et al. (2020)’s Current Population Survey.”  Sarah Flood, Miriam King, Renae Rodgers, 
Steven Ruggles and J. Robert Warren. Integrated Public Use Microdata Series, Current Population 
Survey: Version 8.0 [dataset]. Minneapolis, MN: IPUMS, 2020. https://doi.org/10.18128/D030.V8.0; see 
also Donna Feir & Charles Golding, Native Employment During COVID-19:  Hard hit in April but 
Starting to Rebount? (Aug. 5, 2020), https://www.minneapolisfed.org/article/2020/native-employment­
during-covid-19-hit-hard-in-april-but-starting-to-rebound. 
85 Moreno & Sobrepena, supra note 73. 
30

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 or address this 
harm.86 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.  While economic 
impacts may either be immediate or delayed, assistance or aid to individuals or businesses that 
did not experience a negative economic impact from the public health emergency would not be 
an eligible use under this category.   
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.  Where there has been a negative economic impact 
resulting from the public health emergency, States, local, and Tribal governments have broad 
latitude to choose whether and how to use the Fiscal Recovery Funds to respond to and address 
the negative economic impact.  Sections 602(c)(1)(A) and 603(c)(1)(A) describe several types of 
uses that would be eligible under this category, including assistance to households, small 
businesses, and nonprofits and aid to impacted industries such as tourism, travel, and hospitality.  
To facilitate implementation and use of payments from the Fiscal Recovery Funds, the 
Interim Final Rule identifies a non-exclusive list of eligible uses of funding that respond to the 
negative economic impacts of the public health emergency.  Consistent with the discussion 
above, the eligible uses listed below would respond directly to the economic or financial harms 
resulting from and or exacerbated by the public health emergency. 
86 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 the Act. 
31

• 
Assistance to Unemployed Workers. This includes assistance to unemployed 
workers, including services like job training to accelerate rehiring of unemployed 
workers; these services may extend to workers unemployed due to the pandemic or 
the resulting recession, or who were already unemployed when the pandemic 
began and remain so due to the negative economic impacts of the pandemic. 
• 
State Unemployment Insurance Trust Funds. Consistent with the approach taken 
in the CRF, recipients may make deposits into the state 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 balances 
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 [INSERT DATE OF PUBLICATION IN THE 
FEDERAL REGISTER], given the close nexus between Unemployment Trust 
Fund costs, solvency of Unemployment Trust Fund systems, and pandemic 
economic impacts. Further, Unemployment Trust Fund deposits can decrease 
fiscal strain on Unemployment Insurance systems impacted by the pandemic. 
States facing a sharp increase in Unemployment Insurance claims during the 
pandemic may have drawn down positive Unemployment Trust Fund balances 
and, after exhausting the balance, required advances to fund continuing obligations 
to claimants.  Because both of these impacts were driven directly by the need for 
assistance to unemployed workers during the pandemic, replenishing 
Unemployment Trust Funds up to the pre-pandemic level responds to the 
pandemic’s negative economic impacts on unemployed workers. 
32

• 
Assistance to Households.  Assistance to households or populations facing 
negative economic impacts due to COVID-19 is also an eligible use.  This 
includes: food assistance; rent, mortgage, or utility assistance; counseling and legal 
aid to prevent eviction or homelessness; cash assistance (discussed below); 
emergency assistance for burials, home repairs, weatherization, or other needs; 
internet access or digital literacy assistance; or job training to address negative 
economic or public health impacts experienced due to a worker’s occupation or 
level of training.  As discussed above, in considering whether a potential use is 
eligible under this category, a recipient must consider whether, and the extent to 
which, the household has experienced a negative economic impact from the 
pandemic.  In assessing whether a household or population experienced economic 
harm as a result of the pandemic, a recipient may presume that a household or 
population that experienced unemployment or increased food or housing insecurity 
or is low- or moderate-income experienced negative economic impacts resulting 
from the pandemic.  For example, a cash transfer program may focus on 
unemployed workers or low- and moderate-income families, which have faced 
disproportionate economic harms due to the pandemic.  Cash transfers must be 
reasonably proportional to the negative economic impact they are intended to 
address. Cash transfers grossly in excess of the amount needed to address the 
negative economic impact identified by the recipient would not be considered to be 
a response to the COVID-19 public health emergency or its negative impacts. In 
particular, when considering the appropriate size of permissible cash transfers 
made in response to the COVID-19 public health emergency, State, local and 
33

Tribal governments may consider and take guidance from the per person amounts 
previously provided by the Federal government in response to the COVID-19 
crisis. Cash transfers that are grossly in excess of such amounts would be outside 
the scope of eligible uses under section 602(c)(1)(A) and 603(c)(1)(A) and could 
be subject to recoupment. In addition, a recipient could provide survivor’s benefits 
to surviving family members of COVID-19 victims, or cash assistance to widows, 
widowers, and dependents of eligible COVID-19 victims. 
• 
Expenses to Improve Efficacy of Economic Relief Programs.  State, local, and 
Tribal governments may use payments from the Fiscal Recovery Funds to improve 
efficacy of programs addressing negative economic impacts, including through use 
of data analysis, targeted consumer outreach, improvements to data or technology 
infrastructure, and impact evaluations. 
• 
Small Businesses and Non-profits.  As discussed above, small businesses and non­
profits 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.  State, local, and Tribal governments 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: 
o 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; 
34

o Loans, grants, or in-kind assistance to implement COVID-19 prevention 
or mitigation tactics, such as physical plant changes to enable social 
distancing, enhanced cleaning efforts, barriers or partitions, or COVID-19 
vaccination, testing, or contact tracing programs; and 
o Technical assistance, counseling, or other services to assist with business 
planning needs. 
As discussed above, these services should respond to the negative economic 
impacts of COVID-19.  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 disadvantaged 
communities. Recipients should consider local economic conditions and business 
data when establishing such criteria.87 
• Rehiring State, Local, and Tribal Government Staff.  State, local, and Tribal 
governments continue to see pandemic impacts in overall staffing levels: State, 
local, and Tribal government employment remains more than 1 million jobs lower 
87 See Federal Reserve Bank of Cleveland, An Uphill Battle: COVID-19’s Outsized Toll on Minority-
Owned Firms (Oct. 8, 2020), https://www.clevelandfed.org/newsroom-and­
events/publications/community-development-briefs/db-20201008-misera-report.aspx (discussing the 
impact of COVID-19 on minority owned businesses). 
35

in April 2021 than prior to the pandemic.88 Employment losses decrease a state 
or local government’s ability to effectively administer services. Thus, the Interim 
Final Rule includes as an eligible use payroll, covered benefits, and other costs 
associated with rehiring public sector staff, up to the pre-pandemic staffing level 
of the government. 
• Aid to Impacted Industries. Sections 602(c)(1)(A) and 603(c)(1)(A) recognize 
that certain industries, such as tourism, travel, and hospitality, were 
disproportionately and negatively impacted by the COVID-19 public health 
emergency.  Aid provided to tourism, travel, and hospitality industries should 
respond to the negative economic impacts of the pandemic on those and similarly 
impacted industries.  For example, aid may include assistance to implement 
COVID-19 mitigation and infection prevention measures to enable safe 
resumption of tourism, travel, and hospitality services, for example, 
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. 
Aid may be considered responsive to the negative economic impacts of the 
pandemic if it supports businesses, attractions, business districts, and Tribal 
development districts operating prior to the pandemic and affected by required 
88 U.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 May 8, 2021). 
36

closures and other efforts to contain the pandemic.  For example, a recipient may 
provide aid to support safe reopening of businesses in the tourism, travel, and 
hospitality industries and to business districts that were closed during the COVID­
19 public health emergency, as well as aid for a planned expansion or upgrade of 
tourism, travel, and hospitality facilities delayed due to the pandemic.  
When considering providing aid to industries other than tourism, travel, 
and hospitality, recipients should consider the extent of the economic impact as 
compared to tourism, travel, and hospitality, the industries enumerated in the 
statute.  For example, on net, the leisure and hospitality industry has experienced 
an approximately 24 percent decline in revenue and approximately 17 percent 
decline in employment nationwide due to the COVID-19 public health 
emergency.89 Recipients should also consider whether impacts were due to the 
COVID-19 pandemic, as opposed to longer-term economic or industrial trends 
unrelated to the pandemic. 
To facilitate transparency and accountability, the Interim Final Rule 
requires that State, local, and Tribal governments 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 
89 From February 2020 to April 2021, employment in “Leisure and hospitality” has fallen by 
approximately 17 percent. See U.S. Bureau of Labor Statistics, All Employees, Leisure and Hospitality, 
retrieved from FRED, Federal Reserve Bank of St. Louis, https://fred.stlouisfed.org/series/USLAH (last 
visited May 8, 2021). From 2019Q4 to 2020Q4, gross output (e.g. revenue) in arts, entertainment, 
recreation, accommodation, and food services has fallen by approximately 24 percent. See Bureau of 
Economic Analysis, News Release: Gross Domestic Product (Third Estimate), Corporate Profits, and 
GDP by Industry, Fourth Quarter and Year 2020 (Mar. 25, 2021), Table 17, 
https://www.bea.gov/sites/default/files/2021-03/gdp4q20_3rd.pdf. 
37

economic impacts of the pandemic.  Recipients also should maintain records to 
support their assessment of how businesses or business districts receiving 
assistance were affected by the negative economic impacts of the pandemic and 
how the aid provided responds to these impacts. 
As discussed above, economic disparities that existed prior to the COVID-19 public 
health emergency amplified the impact of the pandemic among low-income and minority groups.  
These families were more likely to face housing, food, and financial insecurity; are over­
represented among low-wage workers; and many have seen their livelihoods deteriorate further 
during the pandemic and economic contraction.  In recognition of the disproportionate negative 
economic impacts on certain communities and populations, the Interim Final Rule identifies 
services and programs that will be presumed to be responding to the negative economic impacts 
of the COVID-19 public health emergency when provided in these communities.  
Specifically, Treasury will presume that certain types of services, outlined below, are 
eligible uses when provided in a QCT, to families and individuals living in QCTs, or when these 
services are provided by Tribal governments.90 Recipients may also provide these services to 
other populations, households, or geographic areas disproportionately impacted by the pandemic.  
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. 
The Interim Final Rule identifies a non-exclusive list of uses that address the disproportionate 
negative economic effects of the COVID-19 public health emergency, including: 
90 HUD, supra note 48. 
38

o 
Building Stronger Communities through Investments in Housing and Neighborhoods. The 
economic impacts of COVID-19 have likely been most acute in lower-income 
neighborhoods, including concentrated areas of high unemployment, limited economic 
opportunity, and housing insecurity.91 Services in this category alleviate the immediate 
economic impacts of the COVID-19 pandemic on housing insecurity, while addressing 
conditions that contributed to poor public health and economic outcomes during the 
pandemic, namely concentrated areas with limited economic opportunity and inadequate 
or poor-quality housing.92 Eligible services include: 
• 
Services to address homelessness such as supportive housing, and to improve 
access to stable, affordable housing among unhoused individuals; 
• 
Affordable housing development to increase supply of affordable and high-quality 
living units; and 
• 
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, to help residents increase their 
economic opportunity and reduce concentrated areas of low economic 
opportunity.93 
91 Stuart M. Butler & Jonathan Grabinsky, Tackling the legacy of persistent urban inequality and 
concentrated poverty, Brookings Institution (Nov. 16, 2020), https://www.brookings.edu/blog/up­
front/2020/11/16/tackling-the-legacy-of-persistent-urban-inequality-and-concentrated-poverty/. 
92 U.S. Department of Health and Human Services (HHS), Office of Disease Prevention and Health 
Promotion, Quality of Housing, https://www.healthypeople.gov/2020/topics-objectives/topic/social­
determinants-health/interventions-resources/quality-of-housing#11 (last visited Apr. 26, 2021). 
93 The Opportunity Atlas, https://www.opportunityatlas.org/ (last visited Apr. 26, 2021); Raj Chetty & 
Nathaniel Hendren, The Impacts of Neighborhoods on Intergenerational Mobility I: Childhood Exposure 
Effects, Quarterly J. of Econ. 133(3):1107-162 (2018), available at 
https://opportunityinsights.org/paper/neighborhoodsi/. 
39

o Addressing Educational Disparities. As outlined above, school closures and the 
transition to remote education raised particular challenges for lower-income students, 
potentially exacerbating educational disparities, while increases in economic hardship 
among families could have long-lasting impacts on children’s educational and economic 
prospects.  Services under this prong would enhance educational supports to help 
mitigate impacts of the pandemic.  Eligible services include: 
• 
New, expanded, or enhanced early learning services, including pre-kindergarten, 
Head Start, or partnerships between pre-kindergarten programs and local 
education authorities, or administration of those services; 
• 
Providing assistance to high-poverty school districts to advance equitable funding 
across districts and geographies; 
• 
Evidence-based educational services and practices to address the academic needs 
of students, including tutoring, summer, afterschool, and other extended learning 
and enrichment programs; and 
• 
Evidence-based practices to address the social, emotional, and mental health 
needs of students; 
o Promoting Healthy Childhood Environments. Children’s economic and family 
circumstances have a long-term impact on their future economic outcomes.94 Increases in 
economic hardship, material insecurity, and parental stress and behavioral health 
challenges all raise the risk of long-term harms to today’s children due to the pandemic. 
Eligible services to address this challenge include: 
94 See supra notes 52 and 84. 
40

• 
New or expanded high-quality childcare to provide safe and supportive care for 
children; 
• 
Home visiting programs to provide structured visits from health, parent educators, 
and social service professionals to pregnant women or families with young 
children to offer education and assistance navigating resources for economic 
support, health needs, or child development; and 
• 
Enhanced services for child welfare-involved families and foster youth to provide 
support and training on child development, positive parenting, coping skills, or 
recovery for mental health and substance use challenges. 
State, local, and Tribal governments are encouraged to use payments from the Fiscal 
Recovery Funds to respond to the direct and immediate needs of the pandemic and its negative 
economic impacts and, in particular, the needs of households and businesses that were 
disproportionately and negatively impacted by the public health emergency.  As highlighted 
above, low-income communities and workers and people of color have faced more severe health 
and economic outcomes during the pandemic, with pre-existing social vulnerabilities like low-
wage or insecure employment, concentrated neighborhoods with less economic opportunity, and 
pre-existing health disparities likely contributing to the magnified impact of the pandemic.  The 
Fiscal Recovery Funds provide resources to not only respond to the immediate harms of the 
pandemic but also to mitigate its longer-term impact in compounding the systemic public health 
and economic challenges of disproportionately impacted populations.  Treasury encourages 
recipients to consider funding uses that foster a strong, inclusive, and equitable recovery, 
especially uses with long-term benefits for health and economic outcomes. 
41

Uses Outside the Scope of this Category.  Certain uses would not be within the scope of 
this eligible use category, although may be eligible under other eligible use categories.  A 
general infrastructure project, for example, typically would not be included unless the project 
responded to a specific pandemic public health need (e.g., investments in facilities for the 
delivery of vaccines) or a specific negative economic impact like those described above (e.g., 
affordable housing in a QCT).  The ARPA explicitly includes infrastructure if it is “necessary” 
and in water, sewer, or broadband.  See Section II.D of this Supplementary Information.  State, 
local, and Tribal governments also may use the Fiscal Recovery Funds under 
sections 602(c)(1)(C) or 603(c)(1)(C) to provide “government services” broadly to the extent of 
their reduction in revenue. See Section II.C of this Supplementary Information.  
This category of eligible uses also would not include contributions to rainy day funds, 
financial reserves, or similar funds.  Resources made available under this eligible use category 
are intended to help meet pandemic response needs and provide relief for households and 
businesses facing near- and long-term negative economic impacts.  Contributions to rainy day 
funds and similar financial reserves would not address these needs or respond to the COVID-19 
public health emergency but would rather constitute savings for future spending needs.  
Similarly, this eligible use category would not include payment of interest or principal on 
outstanding debt instruments, including, for example, short-term revenue or tax anticipation 
notes, or other debt service costs.  As discussed below, payments from the Fiscal Recovery 
Funds are intended to be used prospectively and the Interim Final Rule precludes use of these 
funds to cover the costs of debt incurred prior to March 3, 2021.  Fees or issuance costs 
associated with the issuance of new debt would also not be covered using payments from the 
Fiscal Recovery Funds because such costs would not themselves have been incurred to address 
42

the needs of pandemic response or its negative economic impacts. The purpose of the Fiscal 
Recovery Funds is to provide fiscal relief that will permit State, local, and Tribal governments to 
continue to respond to the COVID-19 public health emergency. 
For the same reasons, this category of eligible uses would not include 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. That is, satisfaction of a settlement 
or judgment would not itself respond to COVID-19 with respect to the public health emergency 
or its negative economic impacts, unless the settlement requires the provision of services or aid 
that did directly respond to these needs, as described above. 
In addition, as described in Section V.III of this Supplementary Information, Treasury 
will establish reporting and record keeping requirements for uses within this category, including 
enhanced reporting requirements for certain types of uses.  
Question 1: Are there other types of services or costs that Treasury should consider as 
eligible uses to respond to the public health impacts of COVID-19?  Describe how these respond 
to the COVID-19 public health emergency. 
Question 2:  The Interim Final Rule permits coverage of payroll and benefits costs of public 
health and safety staff primarily dedicated to COVID-19 response, as well as rehiring of public 
sector staff up to pre-pandemic levels.  For how long should these measures remain in place? 
What other measures or presumptions might Treasury consider to assess the extent to which 
public sector staff are engaged in COVID-19 response, and therefore reimbursable, in an easily-
administrable manner? 
43

Question 3: The Interim Final Rule permits rehiring of public sector staff up to the 
government’s pre-pandemic staffing level, which is measured based on employment as of 
January 27, 2021.  Does this approach adequately measure the pre-pandemic staffing level in a 
manner that is both accurate and easily administrable? Why or why not? 
Question 4: The Interim Final Rule permits deposits to Unemployment Insurance Trust 
Funds, or using funds to pay back advances, up to the pre-pandemic balance. What, if any, 
conditions should be considered to ensure that funds repair economic impacts of the pandemic 
and strengthen unemployment insurance systems? 
Question 5: Are there other types of services or costs that Treasury should consider as 
eligible uses to respond to the negative economic impacts of COVID-19?  Describe how these 
respond to the COVID-19 public health emergency. 
Question 6: What other measures, presumptions, or considerations could be used to assess 
“impacted industries” affected by the COVID-19 public health emergency? 
Question 7: What are the advantages and disadvantages of using Qualified Census Tracts 
and services provided by Tribal governments to delineate where a broader range of eligible uses 
are presumed to be responsive to the public health and economic impacts of COVID-19? What 
other measures might Treasury consider? Are there other populations or geographic areas that 
were disproportionately impacted by the pandemic that should be explicitly included? 
Question 8: Are there 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? Describe how these respond to the COVID-19 public health emergency or its 
negative economic impacts, including its exacerbation of pre-existing challenges in these areas. 
44

Question 9: The Interim Final Rule includes eligible uses to support affordable housing and 
stronger neighborhoods in disproportionately-impacted communities.  Discuss the advantages 
and disadvantages of explicitly including other uses to support affordable housing and stronger 
neighborhoods, including rehabilitation of blighted properties or demolition of abandoned or 
vacant properties.  In what ways does, or does not, this potential use address public health or 
economic impacts of the pandemic?  What considerations, if any, could support use of Fiscal 
Recovery Funds in ways that do not result in resident displacement or loss of affordable housing 
units? 
B. Premium Pay 
Fiscal Recovery Funds payments may be used by recipients to provide premium pay to eligible 
workers performing essential work during the COVID-19 public health emergency or to provide 
grants to third-party employers with eligible workers performing essential work.95 These are 
workers who have been and continue to be relied on to maintain continuity of operations of 
essential critical infrastructure sectors, including those who are critical to protecting the health 
and wellbeing of their communities.  
Since the start of the COVID-19 public health emergency in January 2020, essential 
workers have put their physical wellbeing at risk to meet the daily needs of their communities 
and to provide care for others.  In the course of this work, many essential workers have 
contracted or died of COVID-19.96 Several examples reflect the severity of the health impacts 
95 §§602(c)(1)(B), 603(c)(1)(B) of the Act. 
96 See, e.g., Centers for Disease Control and Prevention, COVID Data Tracker: Cases & Death among 
Healthcare Personnel, https://covid.cdc.gov/covid-data-tracker/#health-care-personnel (last visited May 4, 
2021); Centers for Disease Control and Prevention, COVID Data Tracker: Confirmed COVID-19 Cases 
and Deaths among Staff and Rate per 1,000 Resident-Weeks in Nursing Homes, by Week – United States, 
https://covid.cdc.gov/covid-data-tracker/#nursing-home-staff (last visited May 4, 2021). 
45

for essential workers.  Meat processing plants became “hotspots” for transmission, with 700 new 
cases reported at a single plant on a single day in May 2020.97 In New York City, 120 
employees of the Metropolitan Transit Authority were estimated to have died due to COVID-19 
by mid-May 2020, with nearly 4,000 testing positive for the virus.98 Furthermore, many 
essential workers are people of color or low-wage workers.99 These workers, in particular, have 
borne a disproportionate share of the health and economic impacts of the pandemic.  Such 
workers include: 
• Staff at nursing homes, hospitals, and home care settings; 
• Workers at farms, food production facilities, grocery stores, and restaurants; 
• Janitors and sanitation workers; 
• Truck drivers, transit staff, and warehouse workers; 
• Public health and safety staff; 
• Childcare workers, educators, and other school staff; and 
• Social service and human services staff. 
During the public health emergency, employers’ policies on COVID-19-related hazard 
pay have varied widely, with many essential workers not yet compensated for the heightened 
97 See, e.g., The Lancet, The plight of essential workers during the COVID-19 pandemic, Vol. 395, Issue 
10237:1587 (May 23, 2020), available at https://www.thelancet.com/journals/lancet/article/PIIS0140­
6736%2820%2931200-9/fulltext. 
98 Id. 
99 Joanna Gaitens et al., Covid-19 and essential workers: A narrative review of health outcomes and moral 
injury, Int’l J. of Envtl. Research and Pub. Health 18(4):1446 (Feb. 4, 2021), available at 
https://pubmed.ncbi.nlm.nih.gov/33557075/; Tiana N. Rogers et al., Racial Disparities in COVID‐19 
Mortality Among Essential Workers in the United States, World Med. & Health policy 12(3):311-27 
(Aug. 5, 2020), available at https://onlinelibrary.wiley.com/doi/full/10.1002/wmh3.358 (finding that 
vulnerability to coronavirus exposure was increased among non-Hispanic blacks, who disproportionately 
occupied the top nine essential occupations). 
46

risks they have faced and continue to face.100 Many of these workers earn lower wages on 
average and live in socioeconomically vulnerable communities as compared to the general 
population.101 A recent study found that 25 percent of essential workers were estimated to have 
low household income, with 13 percent in high-risk households.102 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, including working hours lost due to sickness or disruptions to 
childcare and other daily routines, or the likelihood of COVID-19 spread in their households or 
communities. Thus, the threats and costs involved with maintaining the ongoing operation of 
vital facilities and services have been, and continue to be, borne by those that are often the most 
vulnerable to the pandemic.  The added health risk to essential workers is one prominent way in 
which the pandemic has amplified pre-existing socioeconomic inequities. 
The Fiscal Recovery Funds will help respond to the needs of essential workers by 
allowing recipients to remunerate essential workers for the elevated health risks they have faced 
and continue to face during the public health emergency.  To ensure that premium pay is targeted 
to workers that faced or face heightened risks due to the character of their work, the Interim Final 
Rule defines essential work as work involving regular in-person interactions or regular physical 
handling of items that were also handled by others. A worker would not be engaged in essential 
work and, accordingly may not receive premium pay, for telework performed from a residence.  
100 Economic Policy Institute, Only 30% of those working outside their home are receiving hazard pay 
(June 16, 2020), https://www.epi.org/press/only-30-of-those-working-outside-their-home-are-receiving­
hazard-pay-black-and-hispanic-workers-are-most-concerned-about-bringing-the-coronavirus-home/. 
101 McCormack, supra note 37. 
102 Id. 
47

Sections 602(g)(2) and 603(g)(2) define eligible worker to mean “those workers needed 
to maintain continuity of operations of essential critical infrastructure sectors and additional 
sectors as each Governor of a State or territory, or each Tribal government, may designate as 
critical to protect the health and well-being of the residents of their State, territory, or Tribal 
government.”103 The rule incorporates this definition and provides a list of industries recognized 
as essential critical infrastructure sectors.104 These sectors include healthcare, public health and 
safety, childcare, education, sanitation, transportation, and food production and services, among 
others as noted above.  As provided under sections 602(g)(2) and 603(g)(2), the chief executive 
of each recipient has discretion to add additional sectors to this list, so long as additional sectors 
are deemed critical to protect the health and well-being of residents. 
In providing premium pay to essential workers or grants to eligible employers, a recipient 
must consider whether the pay or grant would “respond to” to the worker or workers performing 
essential work.  Premium pay or grants provided under this section respond to workers 
performing essential work if it addresses the heightened risk to workers who must be physically 
present at a jobsite and, for many of whom, the costs associated with illness were hardest to bear 
financially.  Many of the workers performing critical essential services are low- or moderate-
income workers, such as those described above.  The ARPA recognizes this by defining 
premium pay to mean an amount up to $13 per hour in addition to wages or remuneration the 
worker otherwise receives and in an aggregate amount not to exceed $25,000 per eligible worker.  
To ensure the provision is implemented in a manner that compensates these workers, the Interim 
103 §§602(g)(2), 603(g)(2) of the Act. 
104 The list of critical infrastructure sectors provided in the Interim Final Rule is based on the list of 
essential workers under The Heroes Act, H.R. 6800, 116th Cong. (2020). 
48

Final Rule provides that any premium pay or grants provided using the Fiscal Recovery Funds 
should prioritize compensation of those lower income eligible workers that perform essential 
work.  
As such, providing premium pay to eligible workers responds to such workers by helping 
address the disparity between the critical services and risks taken by essential workers and the 
relatively low compensation they tend to receive in exchange. If premium pay would increase a 
worker’s total pay above 150 percent of their residing state’s average annual wage for all 
occupations, as defined by the Bureau of Labor Statistics’ Occupational Employment and Wage 
Statistics, or their residing county’s average annual wage, as defined by the Bureau of Labor 
Statistics’ Occupational Employment and Wage Statistics, whichever is higher, on an annual 
basis, the State, local, or Tribal government must provide Treasury and make publicly available, 
whether for themselves or on behalf of a grantee, a written justification of how the premium pay 
or grant is responsive to workers performing essential worker during the public health 
emergency.105 
The threshold of 150 percent for requiring additional written justification is based on an 
analysis of the distribution of labor income for a sample of 20 occupations that generally 
correspond to the essential workers as defined in the Interim Final Rule.106 For these 
105 County median annual wage is taken to be that of the metropolitan or nonmetropolitan area that 
includes the county.  See U.S. Bureau of Labor Statistics, State Occupational Employment and Wage 
Estimates, https://www.bls.gov/oes/current/oessrcst.htm (last visited May 1, 2021); U.S. Bureau of Labor 
Statistics, May 2020 Metropolitan and Nonmetropolitan Area Estimates listed by county or town, 
https://www.bls.gov/oes/current/county_links.htm (last visited May 1, 2021). 
106 Treasury performed this analysis with data from the U.S. Census Bureau’s 2019 Annual Social and 
Economic Supplement.  In determining which occupations to include in this analysis, Treasury excluded 
management and supervisory positions, as such positions may not necessarily involve regular in-person 
interactions or physical handling of items to the same extent as non-managerial positions. 
49

occupations, labor income for the vast majority of workers was under 150 percent of average 
annual labor income across all occupations.  Treasury anticipates that the threshold of 
150 percent of the annual average wage will be greater than the annual average wage of the vast 
majority of eligible workers performing essential work.  These enhanced reporting requirements 
help to ensure grants are directed to essential workers in critical infrastructure sectors and 
responsive to the impacts of the pandemic observed among essential workers, namely the mis­
alignment between health risks and compensation. Enhanced reporting also provides 
transparency to the public. Finally, using a localized measure reflects differences in wages and 
cost of living across the country, making this standard administrable and reflective of essential 
worker incomes across a diverse range of geographic areas. 
Furthermore, because premium pay is intended to compensate essential workers for 
heightened risk due to COVID-19, it must be entirely additive to a worker’s regular rate of 
wages and other remuneration and may not be used to reduce or substitute for a worker’s normal 
earnings.  The definition of premium pay also clarifies that premium pay may be provided 
retrospectively for work performed at any time since the start of the COVID-19 public health 
emergency, where those workers have yet to be compensated adequately for work previously 
performed.107 Treasury encourages recipients to prioritize providing retrospective premium pay 
where possible, recognizing that many essential workers have not yet received additional 
compensation for work conducted over the course of many months.  Essential workers who have 
already earned premium pay for essential work performed during the COVID-19 public health 
107 However, such compensation must be “in addition to” remuneration or wages already received.  That 
is, employers may not reduce such workers’ current pay and use Fiscal Recovery Funds to compensate 
themselves for premium pay previously provided to the worker. 
50

emergency remain eligible for additional payments, and an essential worker may receive both 
retrospective premium pay for prior work as well as prospective premium pay for current or 
ongoing work.  
To ensure any grants respond to the needs of essential workers and are made in a fair and 
transparent manner, the rule imposes some additional reporting requirements for grants to third-
party employers, including the public disclosure of grants provided.  See Section VIII of this 
Supplementary Information, discussing reporting requirements.  In responding to the needs of 
essential workers, a grant to an employer may provide premium pay to eligible workers 
performing essential work, as these terms are defined in the Interim Final Rule and discussed 
above.  A grant provided to an employer may also be for essential work performed by eligible 
workers pursuant to a contract.  For example, if a municipality contracts with a third party to 
perform sanitation work, the third-party contractor could be eligible to receive a grant to provide 
premium pay for these eligible workers.  
Question 10: Are there additional sectors beyond those listed in the Interim Final Rule 
that should be considered essential critical infrastructure sectors?  
Question 11:  What, if any, additional criteria should Treasury consider to ensure that 
premium pay responds to essential workers?   
Question 12: What consideration, if any, should be given to the criteria on salary 
threshold, including measure and level, for requiring written justification? 
C. Revenue Loss 
Recipients may use payments from the Fiscal Recovery Funds for the provision of 
government services to the extent of the reduction in revenue experienced due to the COVID-19 
51

public health emergency.108 Pursuant to sections 602(c)(1)(C) and 603(c)(1)(C) of the Act, a 
recipient’s reduction in revenue is measured relative to the revenue collected in the most recent 
full fiscal year prior to the emergency. 
Many State, local, and Tribal governments are experiencing significant budget shortfalls, 
which can have a devastating impact on communities.  State government tax revenue from major 
sources were down 4.3 percent in the six months ended September 2020, relative to the same 
period 2019.109 At the local level, nearly 90 percent of cities have reported being less able to 
meet the fiscal needs of their communities and, on average, cities expect a double-digit decline in 
general fund revenues in their fiscal year 2021.110 Similarly, surveys of Tribal governments and 
Tribal enterprises found majorities of respondents reporting substantial cost increases and 
revenue decreases, with Tribal governments reporting reductions in healthcare, housing, social 
services, and economic development activities as a result of reduced revenues.111 These budget 
shortfalls are particularly problematic in the current environment, as State, local, and Tribal 
governments work to mitigate and contain the COVID-19 pandemic and help citizens weather 
the economic downturn. 
108 ARPA, supra note 16. 
109 Major sources include personal income tax, corporate income tax, sales tax, and property tax. See Lucy 
Dadayan., States Reported Revenue Growth in July- – September Quarter, Reflecting Revenue Shifts 
from the Prior Quarter, State Tax and Econ. Rev. (Q. 3, 2020), available at 
https://www.urban.org/sites/default/files/publication/103938/state-tax-and-economic-review-2020­
q3_0.pdf 
110 National League of Cities, City Fiscal Conditions (2020), available at https://www.nlc.org/wp-
content/uploads/2020/08/City_Fiscal_Conditions_2020_FINAL.pdf 
111 Surveys conducted by the Center for Indian Country Development at the Federal Reserve Bank of 
Minneapolis in March, April, and September 2020.  See Moreno & Sobrepena, supra note 73. 
52

Further, 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.112 Inflation-adjusted State and local government revenue did not return to the previous 
peak until 2013,113 while State, local, and Tribal government employment did not recover to its 
prior peak for over a decade, until August 2019 – just a few months before the COVID-19 public 
health emergency began.114 
Sections 602(c)(1)(C) and 603(c)(1)(C) of the Act allow recipients facing budget 
shortfalls to use payments from the Fiscal Recovery Funds to avoid cuts to government services 
and, thus, enable State, local, and Tribal governments to continue to provide valuable services 
and ensure that fiscal austerity measures do not hamper the broader economic recovery.  The 
Interim Final Rule implements these provisions by establishing a definition of “general revenue” 
for purposes of calculating a loss in revenue and by providing a methodology for calculating 
revenue lost due to the COVID-19 public health emergency.  
112 See, e.g., Fitzpatrick, Haughwout & Setren, Fiscal Drag from the State and Local Sector?, Liberty 
Street Economics Blog, Federal Reserve Bank of New York (June 27, 2012), 
https://www.libertystreeteconomics.newyorkfed.org/2012/06/fiscal-drag-from-the-state-and-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 9. 
113 State and local government general revenue from own sources, adjusted for inflation using the GDP 
price index. U.S. Census Bureau, Annual Survey of State Government Finances and U.S. Bureau of 
Economic Analysis, National Income and Product Accounts, 
114 U.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 Apr. 27, 2021). 
53

General Revenue. The Interim Final Rule adopts 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, and for purposes of this 
Interim Final Rule, helps to ensure that the components of general revenue would be calculated 
in a consistent manner.115 By relying on a methodology that is both familiar and comprehensive, 
this approach minimizes burden to recipients and provides consistency in the measurement of 
general revenue across a diverse set of recipients. 
The Interim Final Rule defines the term “general revenue” to include revenues collected 
by a recipient and generated from its underlying economy and would capture a range of different 
types of tax revenues, as well as other types of revenue that are available to support government 
services.116 In calculating revenue, recipients should sum across all revenue streams covered as 
general revenue.  This approach minimizes the administrative burden for recipients, provides for 
greater consistency across recipients, and presents a more accurate representation of the overall 
impact of the COVID-19 public health emergency on a recipient’s revenue, rather than relying 
115 U.S. Census Bureau, Annual Survey of State and Local Government Finances, 
https://www.census.gov/programs-surveys/gov-finances.html (last visited Apr. 30, 2021). 
116 The Interim Final Rule would define tax revenue in a manner consistent with the Census Bureau’s 
definition of tax revenue, with certain changes (i.e., inclusion of revenue from liquor stores and certain 
intergovernmental transfers).  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 
liquor store, utility, and insurance trust revenue), including rents, royalties, lottery proceeds, and fines. 
54

on financial reporting prepared by each recipient, which vary in methodology used and which 
generally aggregates revenue by purpose rather than by source.117 
Consistent with the Census Bureau’s definition of “general revenue from own sources,” 
the definition of general revenue in the Interim Final Rule would exclude refunds and other 
correcting transactions, proceeds from issuance of debt or the sale of investments, and agency or 
private trust transactions.  The definition of general revenue also would exclude revenue 
generated by utilities and insurance trusts.  In this way, the definition of general revenue focuses 
on sources that are generated from economic activity and are available to fund government 
services, rather than a fund or administrative unit established to account for and control a 
particular activity.118 For example, public utilities typically require financial support from the 
State, local, or Tribal government, rather than providing revenue to such government, and any 
revenue that is generated by public utilities typically is used to support the public utility’s 
continued operation, rather than being used as a source of revenue to support government 
services generally. 
The definition of general revenue would include all revenue from Tribal enterprises, as 
this revenue is generated from economic activity and is available to fund government services.  
Tribes are not able to generate revenue through taxes in the same manner as State and local 
governments and, as a result, Tribal enterprises are critical sources of revenue for Tribal 
117 Fund-oriented reporting, such as what is used under the Governmental Accounting Standards Board 
(GASB), focuses on the types of uses and activities funded by the revenue, as opposed to the economic 
activity from which the revenue is sourced. See Governmental Accounting Standards Series, Statement 
No. 54 of the Governmental Accounting Standards Board: Fund Balance Reporting and Governmental 
Fund Type Definitions, No. 287-B (Feb. 2009). 
118 Supra note 116. 
55

governments that enable Tribal governments to provide a range of services, including elder care, 
health clinics, wastewater management, and forestry. 
Finally, the term “general revenue” includes intergovernmental transfers between State 
and local governments, but excludes intergovernmental transfers from the Federal government, 
including Federal transfers made via a State to a local government pursuant to the CRF or as part 
of the Fiscal Recovery Funds.  States and local governments often share or collect revenue on 
behalf of one another, which results in intergovernmental transfers.  When attributing revenue to 
a unit of government, the Census Bureau’s methodology considers which unit of government 
imposes, collects, and retains the revenue and assigns the revenue to the unit of government that 
meets at least two of those three factors.119 For purposes of measuring loss in general revenue 
due to the COVID-19 public health emergency and to better allow continued provision of 
government services, the retention and ability to use the revenue is a more critical factor. 
Accordingly, and to better measure the funds available for the provision of government services, 
the definition of general revenue would include intergovernmental transfers from States or local 
governments other than funds transferred pursuant to ARPA, CRF, or another Federal program.  
This formulation recognizes the importance of State transfers for local government revenue.120 
Calculation of Loss.  In general, recipients will compute the extent of the reduction in 
revenue by comparing actual revenue to a counterfactual trend representing what could have 
been expected to occur in the absence of the pandemic.  This approach measures losses in 
119 U.S. Census Bureau, Government Finance and Employment Classification Manual (Dec. 2000), 
https://www2.census.gov/govs/class/classfull.pdf 
120 For example, in 2018, state transfers to localities accounted for approximately 27 percent of local 
revenues.  U.S. Census Bureau, Annual Survey of State and Local Government Finances, Table 1 (2018), 
https://www.census.gov/data/datasets/2018/econ/local/public-use-datasets.html. 
56

revenue relative to the most recent fiscal year prior to the COVID-19 public health emergency by 
using the most recent pre-pandemic fiscal year as the starting point for estimates of revenue 
growth absent the pandemic.  In other words, the counterfactual trend starts with the last full 
fiscal year prior to the COVID-19 public health emergency and then assumes growth at a 
constant rate in the subsequent years.  Because recipients can estimate the revenue shortfall at 
multiple points in time throughout the covered period as revenue is collected, this approach 
accounts for variation across recipients in the timing of pandemic impacts.121 Although revenue 
may decline for reasons unrelated to the COVID-19 public health emergency, to minimize the 
administrative burden on recipients and taking into consideration the devastating effects of the 
COVID-19 public health emergency, any diminution in actual revenues relative to the 
counterfactual pre-pandemic trend would be presumed to have been due to the COVID-19 public 
health emergency. 
For purposes of measuring revenue growth in the counterfactual trend, recipients may use 
a growth adjustment of either 4.1 percent per year or the recipient’s average annual revenue 
growth over the three full fiscal years prior to the COVID-19 public health emergency, 
whichever is higher. The option of 4.1 percent represents the average annual growth across all 
State and local government “General Revenue from Own Sources” in the most recent three years 
121 For example, following the 2007-09 recession, local government property tax collections did not begin 
to decline until 2011, suggesting that property tax collection declines can lag downturns. See U.S. Bureau 
of Economic Analysis, Personal current taxes: State and local: Property taxes [S210401A027NBEA], 
retrieved from Federal Reserve Economic Data, Federal Reserve Bank of St. Louis, 
https://fred.stlouisfed.org/graph/?g=r3YI (last visited Apr. 22, 2021).  Estimating the reduction in revenue 
at points throughout the covered period will allow for this type of lagged effect to be taken into account 
during the covered period.  
57

of available data.122 This approach provides recipients with 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. 
Recipients should calculate the extent of the reduction in revenue as of four points in 
time:  December 31, 2020; December 31, 2021; December 31, 2022; and December 31, 2023.  
To calculate the extent of the reduction in revenue at each of these dates, recipients should 
follow 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 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 4.1 percent and the recipient’s average annual revenue growth in the 
three full fiscal years prior to the COVID-19 public health emergency. 
• Step 3:  Identify actual revenue, which equals revenues collected over the past 
twelve months as of the calculation date. 
122 Together with revenue from liquor stores from 2015 to 2018. This estimate does not include any 
intergovernmental transfers.  A recipient using the three-year average to calculate their growth adjustment 
must be based on the definition of general revenue, including treatment of intergovernmental transfers.  
2015 – 2018 represents the most recent available data. See U.S. Census Bureau, State & Local 
Government Finance Historical Datasets and Tables (2018), https://www.census.gov/programs­
surveys/gov-finances/data/datasets.html. 
58

c:::::::::J --
+--
------
---
--
--
---
• 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.  In 
Step 2, the hypothetical recipient finds that 4.1 percent is greater than the recipient’s average 
annual revenue growth in the three full fiscal years prior to the public health emergency.  
Furthermore, this recipient’s base year ends June 30. 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: 
106.2 
110.6 
115.1 
119.8 
The overall methodology for calculating the reduction in revenue is illustrated in the 
figure below: 
140 
Base year revenue 
Extent of reduction in revenue 
130 
Actual revenue (last twelve months) 
Counterfactual revenue 
120 
110 
100 
90 
80 
59

Upon receiving Fiscal Recovery Fund payments, recipients may immediately calculate revenue 
loss for the period ending December 31, 2020.  
Sections 602(c)(1)(C) and 603(c)(1)(C) of the Act provide recipients with broad latitude to 
use the Fiscal Recovery Funds for the provision of government services. Government services 
can include, but are not limited to, maintenance or pay-go funded building123 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.  However, expenses 
associated with obligations under instruments evidencing financial indebtedness for borrowed 
money would not be considered the provision of government services, as these financing 
expenses do not directly provide services or aid to citizens.  Specifically, government 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.  That is, satisfaction of a settlement or judgment itself is not a government service, 
unless the settlement required the provision of government services. In addition, replenishing 
financial reserves (e.g., rainy day or other reserve funds) would not be considered provision of a 
123 Pay-go infrastructure funding refers to the practice of funding capital projects with cash-on-hand from 
taxes, fees, grants, and other sources, rather than with borrowed sums. 
60

government service, since such expenses do not directly relate to the provision of government 
services. 
Question 13: Are there sources of revenue that either should or should not be included in 
the Interim Final Rule’s measure of “general revenue” for recipients?  If so, discuss why these 
sources either should or should not be included. 
Question 14: In the Interim Final Rule, recipients are expected to calculate the reduction 
in revenue on an aggregate basis. Discuss the advantages and disadvantages of, and any 
potential concerns with, this approach, including circumstances in which it could be necessary 
or appropriate to calculate the reduction in revenue by source. 
Question 15: Treasury is considering 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.  Discuss the advantages and disadvantages of this presumption, 
including when, if ever, during the covered period it would be appropriate to reevaluate the 
presumption that all losses are attributable to the COVID-19 public health emergency. 
Question 16:  Do recipients anticipate lagged revenue effects of the public health 
emergency?  If so, when would these lagged effects be expected to occur, and what can Treasury 
to do support these recipients through its implementation of the program?  
Question 17:  In the Interim Final Rule, paying interest or principal on government debt 
is not considered provision of a government service. Discuss the advantages and disadvantages of 
this approach, including circumstances in which paying interest or principal on government debt 
could be considered provision of a government service. 
61

D. Investments in Infrastructure 
To assist in meeting the critical need for investments and improvements to existing 
infrastructure in water, sewer, and broadband, the Fiscal Recovery Funds provide funds to State, 
local, and Tribal governments to make necessary investments in these sectors.  The Interim Final 
Rule outlines eligible uses within each category, allowing for a broad range of necessary 
investments in projects that improve access to clean drinking water, improve wastewater and 
stormwater infrastructure systems, and provide access to high-quality broadband service.  
Necessary investments are designed to provide an adequate minimum level of service and are 
unlikely to be made using private sources of funds.  Necessary investments include projects that 
are required to maintain a level of service that, at least, meets applicable health-based standards, 
taking into account resilience to climate change, or establishes or improves broadband service to 
unserved or 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.124 
It is important that necessary investments in water, sewer, or broadband infrastructure be 
carried out in ways that produce high-quality infrastructure, avert disruptive and costly delays, 
and promote efficiency. Treasury encourages recipients to ensure that water, sewer, and 
broadband projects use strong labor standards, including project labor agreements and 
community benefits agreements that offer wages at or above the prevailing rate and include local 
hire provisions, not only to promote effective and efficient delivery of high-quality infrastructure 
projects but also to support the economic recovery through strong employment opportunities for 
workers. Using these practices in construction projects may help to ensure a reliable supply of 
124 Treasury notes that using funds to support or oppose collective bargaining would not be included as 
part of “necessary investments in water, sewer, or broadband infrastructure.” 
62

skilled labor that would minimize disruptions, such as those associated with labor disputes or 
workplace injuries. 
To provide public transparency on whether projects are using practices that promote on-
time and on-budget delivery, Treasury will seek information from recipients on their workforce 
plans and practices related to water, sewer, and broadband projects undertaken with Fiscal 
Recovery Funds. Treasury will provide additional guidance and instructions on the reporting 
requirements at a later date. 
1. Water and Sewer Infrastructure 
The ARPA provides funds to State, local, and Tribal governments to make necessary 
investments in water and sewer infrastructure.125 By permitting funds to be used for water and 
sewer infrastructure needs, Congress recognized the critical role that clean drinking water and 
services for the collection and treatment of wastewater and stormwater play in protecting public 
health. Understanding that State, local, and Tribal governments have a broad range of water and 
sewer infrastructure needs, the Interim Final Rule provides these governments with wide latitude 
to identify investments in water and sewer infrastructure that are of the highest priority for their 
own communities, which may include projects on privately-owned infrastructure.  The Interim 
Final Rule does this by aligning eligible uses of the Fiscal Recovery Funds with the wide range 
of types or categories of projects that would be eligible to receive financial assistance through 
the Environmental Protection Agency’s (EPA) Clean Water State Revolving Fund (CWSRF) or 
Drinking Water State Revolving Fund (DWSRF).126 
125 §§ 602(c)(1)(D), 603(c)(1)(D) of the Act. 
126 Environmental Protection Agency, Drinking Water State Revolving fund, https://www.epa.gov/dwsrf 
(last visited Apr. 30, 2021); Environmental Protection Agency, Clean Water State Revolving Fund, 
https://www.epa.gov/cwsrf (last visited Apr. 30, 2021). 
63

Established by the 1987 amendments127 to the Clean Water Act (CWA),128 the CWSRF 
provides financial assistance for a wide range of water infrastructure projects to improve water 
quality and address water pollution in a way that enables each State to address and prioritize the 
needs of their populations.  The types of projects eligible for CWSRF assistance include projects 
to construct, improve, and repair wastewater treatment plants, control non-point sources of 
pollution, improve resilience of infrastructure to severe weather events, create green 
infrastructure, and protect waterbodies from pollution.129 Each of the 51 State programs 
established under the CWSRF have the flexibility to direct funding to their particular 
environmental needs, and each State may also have its own statutes, rules, and regulations that 
guide project eligibility.130 
127 Water Quality Act of 1987, P.L. 100-4. 
128 Federal Water Pollution Control Act as amended, codified at 33 U.S.C. §§ 1251 et. seq., common 
name (Clean Water Act).  In 2009, the American Recovery and Reinvestment Act created the Green 
Project Reserve, which increased the focus on green infrastructure, water and energy efficient, and 
environmentally innovative projects.  P.L. 111-5.  The CWA was amended by the Water Resources 
Reform and Development Act of 2014 to further expand the CWSRF’s eligibilities.  P.L. 113-121.  The 
CWSRF’s eligibilities were further expanded in 2018 by the America’s Water Infrastructure Act of 2018, 
P.L. 115-270. 
129 See Environmental Protection Agency, The Drinking Water State Revolving Funds: Financing 
America’s Drinking Water, EPA-816-R-00-023 (Nov. 2000), 
https://nepis.epa.gov/Exe/ZyPDF.cgi/200024WB.PDF?Dockey=200024WB.PDF; See also 
Environmental Protection Agency, Learn About the Clean Water State Revolving Fund, 
https://www.epa.gov/cwsrf/learn-about-clean-water-state-revolving-fund-cwsrf (last visited Apr. 30, 
2021). 
130 33 U.S.C. § 1383(c). See also Environmental Protection Agency, Overview of Clean Water State 
Revolving Fund Eligibilities(May 2016), https://www.epa.gov/sites/production/files/2016­
07/documents/overview_of_cwsrf_eligibilities_may_2016.pdf; Claudia Copeland, Clean Water Act: A 
Summary of the Law, Congressional Research Service (Oct. 18, 2016), 
https://fas.org/sgp/crs/misc/RL30030.pdf; Jonathan L Ramseur, Wastewater Infrastructure: Overview, 
Funding, and Legislative Developments, Congressional Research Service (May 22, 2018), 
https://fas.org/sgp/crs/misc/R44963.pdf. 
64

The DWSRF was modeled on the CWSRF and created as part of the 1996 amendments to 
the Safe Drinking Water Act (SDWA),131 with the principal objective of helping public water 
systems obtain financing for improvements necessary to protect public health and comply with 
drinking water regulations.132 Like the CWSRF, the DWSRF provides States with the flexibility 
to meet the needs of their populations.133 The primary use of DWSRF funds is to assist 
communities in making water infrastructure capital improvements, including the installation and 
replacement of failing treatment and distribution systems.134 In administering these programs, 
States must give priority to projects that ensure compliance with applicable health and 
environmental safety requirements; address the most serious risks to human health; and assist 
systems most in need on a per household basis according to State affordability criteria.135 
By aligning use of Fiscal Recovery Funds with the categories or types of eligible projects 
under the existing EPA state revolving fund programs, the Interim Final Rule provides recipients 
with the flexibility to respond to the needs of their communities while ensuring that investments 
in water and sewer infrastructure made using Fiscal Recovery Funds are necessary.  As discussed 
above, the CWSRF and DWSRF were designed to provide funding for projects that protect 
public health and safety by ensuring compliance with wastewater and drinking water health 
131 42 U.S.C. 300j-12.  
132 Environmental Protection Agency, Drinking Water State Revolving Fund Eligibility Handbook, (June 
2017), https://www.epa.gov/sites/production/files/2017­
06/documents/dwsrf_eligibility_handbook_june_13_2017_updated_508_version.pdf; Environmental 
Protection Agency, Drinking Water Infrastructure Needs Survey and Assessment: Sixth Report to 
Congress (March 2018), https://www.epa.gov/sites/production/files/2018­
10/documents/corrected_sixth_drinking_water_infrastructure_needs_survey_and_assessment.pdf “. 
133 Id. 
134 Id. 
135 42 U.S.C. 300j-12(b)(3)(A). 
65

standards.136 The need to provide funding through the state revolving funds suggests that these 
projects are less likely to be addressed with private sources of funding; for example, by 
remediating failing or inadequate infrastructure, much of which is publicly owned, and by 
addressing non-point sources of pollution.  This approach of aligning with the EPA state 
revolving fund programs also supports expedited project identification and investment so that 
needed relief for the people and communities most affected by the pandemic can deployed 
expeditiously and have a positive impact on their health and wellbeing as soon as possible.  
Further, the Interim Final Rule is intended to preserve flexibility for award recipients to direct 
funding to their own particular needs and priorities and would not preclude recipients from 
applying their own additional project eligibility criteria. 
In addition, responding to the immediate needs of the COVID-19 public health 
emergency may have diverted both personnel and financial resources from other State, local, and 
Tribal priorities, including projects to ensure compliance with applicable water health and 
quality standards and provide safe drinking and usable water.137 Through sections 602(c)(1)(D) 
and 603(c)(1)(D), the ARPA provides resources to address these needs.  Moreover, using Fiscal 
Recovery Funds in accordance with the priorities of the CWA and SWDA to “assist systems 
most in need on a per household basis according to state affordability criteria” would also have 
136 Environmental Protection Agency, Learn About the Clean Water State Revolving Fund, 
https://www.epa.gov/cwsrf/learn-about-clean-water-state-revolving-fund-cwsrf (last visited Apr. 30, 
2021); 42 U.S.C. 300j-12. 
137 House Committee on the Budget, State and Local Governments are in Dire Need of Federal Relief 
(Aug. 19, 2020), https://budget.house.gov/publications/report/state-and-local-governments-are-dire-need­
federal-relief. 
66

the benefit of providing vulnerable populations with safe drinking water that is critical to their 
health and, thus, their ability to work and learn.138 
Recipients may use Fiscal Recovery Funds to invest in 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.  Given the lifelong 
impacts of lead exposure for children, and the widespread nature of lead service lines, Treasury 
encourages recipients to consider projects to replace lead service lines. 
Fiscal Recovery Funds may also be used to support the consolidation or establishment of 
drinking water systems. With respect to wastewater infrastructure, recipients may use Fiscal 
Recovery Funds to construct publicly owned treatment infrastructure, manage and treat 
stormwater or subsurface drainage water, facilitate water reuse, and secure publicly owned 
treatment works, among other uses.  Finally, consistent with the CWSRF and DWSRF, Fiscal 
Recovery 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. 
Many of the types of projects eligible under either the CWSRF or DWSRF 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 the ARPA may reduce energy required to treat drinking water.  Similarly, 
138 Environmental Protection Agency, Drinking Water State Revolving Fund (Nov. 2019), 
https://www.epa.gov/sites/production/files/2019-11/documents/fact_sheet_­
_dwsrf_overview_final_0.pdf; Environmental Protection Agency, National Benefits Analysis for 
Drinking Water Regulations, https://www.epa.gov/sdwa/national-benefits-analysis-drinking-water­
regulations (last visited Apr. 30, 2020). 
67

projects eligible under the CWSRF include measures to conserve and reuse water or reduce the 
energy consumption of public water treatment facilities.  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 rain gardens 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 Fiscal Recovery 
Funds to provide relief, such as interconnecting water systems or rehabilitating existing wells 
during an extended drought. 
Question 18:  What are the advantages and disadvantages of aligning eligible uses with 
the eligible project type requirements of the DWSRF and CWSRF?  What other water or sewer 
project categories, if any, should Treasury consider in addition to DWSRF and CWSRF eligible 
projects?  Should Treasury consider a broader general category of water and sewer projects? 
Question 19:  What additional water and sewer infrastructure categories, if any, should 
Treasury consider to address and respond to the needs of unserved, undeserved, or rural 
communities?  How do these projects differ from DWSFR and CWSRF eligible projects? 
Question 20:  What new categories of water and sewer infrastructure, if any, should 
Treasury consider to support State, local, and Tribal governments in mitigating the negative 
impacts of climate change? Discuss emerging technologies and processes that support resiliency 
of water and sewer infrastructure.  Discuss any challenges faced by States and local 
governments when pursuing or implementing climate resilient infrastructure projects. 
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Question 21:  Infrastructure projects related to dams and reservoirs are generally not 
eligible under the CWSRF and DWSRF categories.  Should Treasury consider expanding eligible 
infrastructure under the Interim Final Rule to include dam and reservoir projects? Discuss 
public health, environmental, climate, or equity benefits and costs in expanding the eligibility to 
include these types of projects. 
2. Broadband Infrastructure.  
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 critical activities, remote school, healthcare, and work.  
Recognizing the need for such connectivity, the ARPA provides funds to State, territorial, local, 
and Tribal governments to make necessary investments in broadband infrastructure. 
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 access service for every facet of 
daily life including work, study, and healthcare.139 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. 
139 See, e.g., https://www.ntia.gov/blog/2020/more-half-american-households-used-internet-health­
related-activities-2019-ntia-data-show; https://www.ntia.gov/blog/2020/nearly-third-american-employees­
worked-remotely-2019-ntia-data-show; and generally, https://www.ntia.gov/data/digital-nation-data­
explorer. 
69

By at least one measure, however, tens of millions of Americans live in areas where there 
is no broadband infrastructure that provides download speeds greater than 25 Mbps and upload 
speeds of 3 Mbps.140 By contrast, as noted below, many households use upload and download 
speeds of 100 Mbps to meet their daily needs.  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 Co-operation and Development (OECD).141 There are disparities in availability as 
well; historically, Americans living in territories and Tribal lands as well as rural areas have 
disproportionately lacked sufficient broadband infrastructure.142 Moreover, rapidly growing 
demand has, and will likely continue to, quickly outpace infrastructure capacity, a phenomenon 
acknowledged by various states around the country that have set scalability requirements to 
account for this anticipated growth in demand.143 
140 As an example, 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.  Availability was significantly less for rural 
versus urban populations, with 35.57 percent of the rural population lacking such access, compared with 
2.57 percent of the urban population.  Availability was also significantly less for tribal versus non-tribal 
populations, with 35.93 percent of the tribal population lacking such access, compared with 8.74 of the 
non-tribal population.  Federal Communications Commission, Fixed Broadband Deployment, 
https://broadbandmap.fcc.gov/#/ (last visited May 9, 2021). 
141 How Do U.S. Internet Costs Compare To The Rest Of The World?, BroadbandSearch Blog Post, 
available at https://www.broadbandsearch.net/blog/internet-costs-compared-worldwide. 
142 See, e.g., Federal Communications Commission, Fourteenth Broadband Deployment Report, available 
at https://docs.fcc.gov/public/attachments/FCC-21-18A1.pdf. 
143 See, e.g., Illinois Department of Commerce & Economic Opportunity, Broadband Grants, h (last 
visited May 9, 2021), https://www2.illinois.gov/dceo/ConnectIllinois/Pages/BroadbandGrants.aspx; 
Kansas Office of Broadband Development, Broadband Acceleration Grant, 
https://www.kansascommerce.gov/wp-content/uploads/2020/11/Broadband-Acceleration-Grant.pdf (last 
visited May 9, 2021); New York State Association of Counties, Universal Broadband:  Deploying High 
Speed Internet Access in NYS (Jul. 2017), 
https://www.nysac.org/files/BroadbandUpdateReport2017(1).pdf. 
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The Interim Final Rule provides that eligible investments in broadband are those that are 
designed to provide services meeting adequate speeds and are provided to unserved and 
underserved households and businesses.  Understanding that States, territories, localities, and 
Tribal governments have a wide range of varied broadband infrastructure needs, the Interim 
Final Rule provides award recipients with flexibility to identify the specific locations within their 
communities to be served and to otherwise design the project. 
Under the Interim Final Rule, eligible projects are expected to be designed to deliver, 
upon project completion, service that reliably meets or exceeds symmetrical upload and 
download speeds of 100 Mbps.  There may be instances in which 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. In these instances, the affected project would be expected to be 
designed to deliver, upon project completion, service that reliably meets or exceeds 100 Mbps 
download 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.144 In setting these 
standards, Treasury identified speeds necessary to ensure that broadband infrastructure is 
sufficient to enable users to generally meet household needs, including the ability to support the 
simultaneous use of work, education, and health applications, and also sufficiently robust to meet 
increasing household demands for bandwidth.  Treasury also recognizes that different 
communities and their members may have a broad range of internet needs and that those needs 
may change over time. 
144 This scalability threshold is consistent with scalability requirements used in other jurisdictions. Id. 
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In considering the appropriate speed requirements for eligible projects, Treasury 
considered estimates of typical households demands during the pandemic. Using the Federal 
Communication Commission’s (FCC) Broadband Speed Guide, for example, a household with 
two telecommuters and two to three remote learners today are estimated to need 100 Mbps 
download to work simultaneously.145 In households with more members, the demands may be 
greater, and in households with fewer members, the demands may be less.  
In considering the appropriate speed requirements for eligible projects, Treasury also 
considered data usage patterns and how bandwidth needs have changed over time for U.S. 
households and businesses as people’s use of technology in their daily lives has evolved.  In the 
few years preceding the pandemic, market research data showed that average upload speeds in 
the United States surpassed over 10 Mbps in 2017146 and continued to increase significantly, 
with the average upload speed as of November, 2019 increasing to 48.41 Mbps,147 attributable, 
in part to a shift to using broadband and the internet by individuals and businesses to create and 
share content using video sharing, video conferencing, and other applications.148 
The increasing use of data accelerated markedly during the pandemic as households 
across the country became increasingly reliant on tools and applications that require greater 
145 Federal Communications Commission, Broadband Speed Guide, 
https://www.fcc.gov/consumers/guides/broadband-speed-guide (last visited Apr. 30, 2021). 
146 Letter from Lisa R. Youngers, President and CEO of Fiber Broadband Association to FCC, WC 
Docket No. 19-126 (filed Jan. 3, 2020), including an Appendix with research from RVA LLC, Data 
Review Of The Importance of Upload Speeds (Jan. 2020), and Ookla speed test data, available at 
https://ecfsapi.fcc.gov/file/101030085118517/FCC%20RDOF%20Jan%203%20Ex%20Parte.pdf. 
Additional information on historic growth in data usage is provided in Schools, Health & Libraries 
Broadband Coalition, Common Sense Solutions for Closing the Digital Divide, Apr. 29, 2021. 
147 Id. See also United States's Mobile and Broadband Internet Speeds - Speedtest Global Index, available 
at https://www.speedtest.net/global-index/united-states#fixed. 
148 Id. 
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internet capacity, both to download data but also to upload data.  Sending information became as 
important as receiving it.  A video consultation with a healthcare provider or participation by a 
child in a live classroom with a teacher and fellow students requires video to be sent and 
received simultaneously.149 As an example, some video conferencing technology platforms 
indicate that download and upload speeds should be roughly equal to support two-way, 
interactive video meetings.150 For both work and school, client materials or completed school 
assignments, which may be in the form of PDF files, videos, or graphic files, also need to be 
shared with others.  This is often done by uploading materials to a collaboration site, and the 
upload speed available to a user can have a significant impact on the time it takes for the content 
to be shared with others. 151 These activities require significant capacity from home internet 
connections to both download and upload data, especially when there are multiple individuals in 
one household engaging in these activities simultaneously.  
This need for increased broadband capacity during the pandemic was reflected in 
increased usage patterns seen over the last year. As OpenVault noted in recent advisories, the 
pandemic significantly increased the amount of data users consume.  Among data users observed 
by OpenVault, per-subscriber average data usage for the fourth quarter of 2020 was 
482.6 gigabytes per month, representing a 40 percent increase over the 344 gigabytes consumed 
in the fourth quarter of 2019 and a 26 percent increase over the third quarter 2020 average of 
149 One high definition Zoom meeting or class requires approximately 3.8 Mbps/3.0 Mbps (up/down). 
150 See, e.g., Zoom, System Requirements for Windows, macOS, and Linux, 
https://support.zoom.us/hc/en-us/articles/201362023-System-requirements-for-Windows-macOS-and­
Linux#h_d278c327-e03d-4896-b19a-96a8f3c0c69c (last visited May 8, 2021). 
151 By one estimate, to upload a one gigabit video file to YouTube would take 15 minutes at an upload 
speed of 10 Mbps compared with 1 minute, 30 seconds at an upload speed of 100 Mbps, and 30 seconds 
at an upload speed of 300 Mbps.  Reviews.org: What is Symmetrical Internet? (March 2020). 
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383.8 gigabytes.152 OpenVault also noted significant increases in upstream usage among the data 
users it observed, with upstream data usage growing 63 percent – from 19 gigabytes  to 31 
gigabytes – between December, 2019 and December, 2020.153 According to an OECD 
Broadband statistic from June 2020, the largest percentage of U.S. broadband subscribers have 
services providing speeds between 100 Mbps and 1 Gbps.154 
Jurisdictions and Federal programs are increasingly responding to the growing demands 
of their communities for both heightened download and upload speeds. For example, 
Illinois now requires 100 Mbps symmetrical service as the construction standard for its state 
broadband grant programs.  This standard is also consistent with speed levels, particularly 
download speed levels, prioritized by other Federal programs supporting broadband projects.  
Bids submitted as part of the FCC in its Rural Digital Opportunity Fund (RDOF), established to 
support the construction of broadband networks in rural communities across the country, are 
given priority if they offer faster service, with the service offerings of 100 Mbps download and 
152 OVBI: Covid-19 Drove 15 percent Increase in Broadband Traffic in 2020, OpenVault, Quarterly 
Advisory, (Feb. 10, 2021), available at https://openvault.com/ovbi-covid-19-drove-51-increase-in­
broadband-traffic-in-2020; See OpenVault’s data set incorporates information on usage by subscribers 
across multiple continents, including North America and Europe.  Additional data and detail on increases 
in the amount of data users consume and the broadband speeds they are using is provided in OpenVault 
Broadband Insights Report Q4, Quarterly Advisory (Feb. 10, 2021), available at 
https://openvault.com/complimentary-report-4q20/. 
153 OVBI Special Report: 202 Upstream Growth Nearly 4X of Pre-Pandemic Years, OpenVault, Quarterly 
Advisory, (April 1, 20201), available at https://openvault.com/ovbi-special-report-2020-upstream­
growth-rate-nearly-4x-of-pre-pandemic-years/; Additional data is provided in OpenVault Broadband 
Insights Pandemic Impact on Upstream Broadband Usage and Network Capacity, available at 
https://openvault.com/upstream-whitepaper/. 
154 Organisation for Economic Co-operation and Development, Fixed broadband subscriptions per 100 
inhabitants, per speed tiers (June 2020), https://www.oecd.org/sti/broadband/5.1-FixedBB-SpeedTiers­
2020-06.xls  www.oecd.org/sti/broadband/broadband-statistics. 
74

20 Mbps upload being included in the “above baseline” performance tier set by the FCC.155 The 
Broadband Infrastructure Program (BBIP)156 of the Department of Commerce, which provides 
Federal funding to deploy broadband infrastructure to eligible service areas of the country also 
prioritizes projects designed to provide broadband service with a download speed of not less than 
100 Mbps and an upload speed of not less than 20 Mbps.157 
The 100 Mbps upload and download speeds will support the increased and growing needs 
of households and businesses.  Recognizing that, in some instances, 100 Mbps upload speed may 
be impracticable due to geographical, topographical, or financial constraints, the Interim Final 
Rule permits upload speeds of between at least 20 Mbps and 100 Mbps in such instances.  To 
provide for investments that will accommodate technologies requiring symmetry in download 
and upload speeds, as noted above, eligible projects that are not designed to deliver, upon project 
completion, service that reliably meets or exceeds symmetrical speeds of 100 Mbps because it 
would be impracticable to do so should be designed so that they can be scalable to such speeds.  
Recipients are also encouraged to prioritize investments in fiber optic infrastructure where 
feasible, as such advanced technology enables the next generation of application solutions for all 
communities. 
Under the Interim Final Rule, eligible projects are expected to focus on locations that are 
unserved or underserved.  The Interim Final Rule treats users as being unserved or underserved if 
they lack access to a wireline connection capable of reliably delivering at least minimum speeds 
155 Rural Digital Opportunity Fund, Report and Order, 35 FCC Rcd 686, 690, para. 9 (2020), available at 
https://www.fcc.gov/document/fcc-launches-20-billion-rural-digital-opportunity-fund-0. 
156 The BIPP was authorized by the Consolidated Appropriations Act, 2021, Section 905, Public Law 
116-260, 134 Stat. 1182 (Dec. 27, 2020). 
157 Section 905(d)(4) of the Consolidated Appropriations Act, 2021. 
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of 25 Mbps download and 3 Mbps upload as households and businesses lacking this level of 
access are generally not viewed as being able to originate and receive high-quality voice, data, 
graphics, and video telecommunications.  This threshold is consistent with the FCC’s benchmark 
for an “advanced telecommunications capability.”158 This threshold is also consistent with 
thresholds used in other Federal programs to identify eligible areas to be served by programs to 
improve broadband services.  For example, in the FCC’s RDOF program, eligible areas include 
those without current (or already funded) access to terrestrial broadband service providing 
25 Mbps download and 3 Mbps upload speeds.159 The Department of Commerce’s BBIP also 
considers households to be “unserved” generally if they lack access to broadband service with a 
download speed of not less than 25 Mbps download and 3 Mbps upload, among other conditions.  
In selecting an area to be served by a project, recipients are encouraged to avoid investing in 
locations that have 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. 
Recipients are also encouraged to consider ways to integrate affordability options into 
their program design.  To meet the immediate needs of unserved and underserved households 
and businesses, recipients are encouraged to focus on projects that deliver a physical broadband 
connection by prioritizing projects that achieve last mile-connections.  Treasury also encourages 
recipients to prioritize support for broadband networks owned, operated by, or affiliated with 
158 Deployment Report, supra note 142. 
159 Rural Digital Opportunity Fund, supra note 156. 
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local governments, non-profits, and co-operatives—providers with less pressure to turn profits 
and with a commitment to serving entire communities. 
Under sections 602(c)(1)(A) and 603(c)(1)(A), assistance to households facing negative 
economic impacts due to COVID-19 is also an eligible use, including internet access or digital 
literacy assistance. As discussed above, in considering whether a potential use is eligible under 
this category, a recipient must consider whether, and the extent to which, the household has 
experienced a negative economic impact from the pandemic. 
Question 22: What are the advantages and disadvantages of setting minimum 
symmetrical download and upload speeds of 100 Mbps? What other minimum standards would 
be appropriate and why? 
Question 23: Would setting such a minimum be impractical for particular types of 
projects? If so, where and on what basis should those projects be identified? How could such a 
standard be set while also taking into account the practicality of using this standard in 
particular types of projects? In addition to topography, geography, and financial factors, what 
other constraints, if any, are relevant to considering whether an investment is impracticable? 
Question 24: What are the advantages and disadvantages of setting a minimum level of 
service at 100 Mbps download and 20 Mbps upload in projects where it is impracticable to set 
minimum symmetrical download and upload speeds of 100 Mbps? What are the advantages and 
disadvantages of setting a scalability requirement in these cases? What other minimum 
standards would be appropriate and why? 
Question 25: What are the advantages and disadvantages of focusing these investments 
on those without access to a wireline connection that reliably delivers 25 Mbps download by 
3 Mbps upload? Would another threshold be appropriate and why? 
77

Question 26: What are the advantages and disadvantages of setting any particular 
threshold for identifying unserved or underserved areas, minimum speed standards or scalability 
minimum?  Are there other standards that should be set (e.g., latency)? If so, why and 
how? How can such threshold, standards, or minimum be set in a way that balances the public’s 
interest in making sure that reliable broadband services meeting the daily needs of all Americans 
are available throughout the country with the providing recipients flexibility to meet the varied 
needs of their communities? 
III. Restrictions on Use 
As discussed above, recipients have considerable flexibility to use Fiscal Recovery Funds 
to address the diverse needs of their communities. To ensure that payments from the Fiscal 
Recovery Funds are used for these congressionally permitted purposes, the ARPA includes two 
provisions that further define the boundaries of the statute’s eligible uses. Section 602(c)(2)(A) 
of the 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.” In addition, sections 602(c)(2)(B) and 603(c)(2) prohibit 
any recipient, including cities, nonentitlement units of government, and counties, from using 
Fiscal Recovery Funds for deposit into any pension fund. These restrictions support the use of 
funds for the congressionally permitted purposes described in Section II of this Supplementary 
Information by providing a backstop against the use of funds for purposes outside of the eligible 
use categories. 
These provisions give force to Congress’s clear intent that Fiscal Recovery Funds be 
spent within the four eligible uses identified in the statute—(1) to respond to the public health 
78

emergency and its negative economic impacts, (2) to provide premium pay to essential workers, 
(3) to provide government services to the extent of eligible governments’ revenue losses, and 
(4) to make necessary water, sewer, and broadband infrastructure investments—and not 
otherwise. These four eligible uses reflect Congress’s judgment that the Fiscal Recovery Funds 
should be expended in particular ways that support recovery from the COVID-19 public health 
emergency. The further restrictions reflect Congress’s judgment that tax cuts and pension 
deposits do not fall within these eligible uses. The Interim Final Rule describes how Treasury 
will identify when such uses have occurred and how it will recoup funds put toward these 
impermissible uses and, as discussed in Section VIII of this Supplementary Information, 
establishes a reporting framework for monitoring the use of Fiscal Recovery Funds for eligible 
uses. 
A. Deposit into Pension Funds 
The statute provides that recipients may not use Fiscal Recovery Funds for “deposit into 
any pension fund.” For the reasons discussed below, Treasury interprets “deposit” in this context 
to refer to an extraordinary payment into a pension fund for the purpose of reducing an accrued, 
unfunded liability.  More specifically, the Interim Final Rule does not permit this assistance to be 
used to make a payment into a pension fund if both: 
1. the payment reduces a liability incurred prior to the start of the COVID-19 public health 
emergency, and 
2. the payment occurs outside the recipient’s regular timing for making such payments. 
Under this interpretation, a “deposit” is distinct from a “payroll contribution,” which 
occurs when employers make payments into pension funds on regular intervals, with 
contribution amounts based on a pre-determined percentage of employees’ wages and salaries. 
79

As discussed above, eligible uses for premium pay and responding to the negative 
economic impacts of the COVID-19 public health emergency include hiring and compensating 
public sector employees.  Interpreting the scope of “deposit” to exclude contributions that are 
part of payroll contributions is more consistent with these eligible uses and would reduce 
administrative burden for recipients.  Accordingly, if an employee’s wages and salaries are an 
eligible use of Fiscal Recovery Funds, recipients may treat the employee’s covered benefits as an 
eligible use of Fiscal Recovery Funds. For purposes of the Fiscal Recovery 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 taxes (which includes Social Security and Medicare taxes). 
Treasury anticipates that this approach to employees’ covered benefits will be 
comprehensive and, for employees whose wage and salary costs are eligible expenses, will allow 
all covered benefits listed in the previous paragraph to be eligible under the Fiscal Recovery 
Funds.  Treasury expects that this will minimize the administrative burden on recipients by 
treating all the specified covered benefit types as eligible expenses, for employees whose wage 
and salary costs are eligible expenses. 
Question 27: Beyond a “deposit” and a “payroll contribution,” are there other types of 
payments into a pension fund that Treasury should consider?  
80

B. Offset a Reduction in Net Tax Revenue 
For States and territories (recipient governments160), section 602(c)(2)(A)—the offset 
provision—prohibits the use of Fiscal Recovery Funds to directly or indirectly offset a reduction 
in net tax revenue resulting from a change in law, regulation, or administrative interpretation161 
during the covered period. If a State or territory uses Fiscal Recovery Funds to offset a reduction 
in net tax revenue, the ARPA provides that the State or territory must repay to the Treasury an 
amount equal to the lesser of (i) the amount of the applicable reduction attributable to the 
impermissible offset and (ii) the amount received by the State or territory under the ARPA. See 
Section IV of this Supplementary Information. As discussed below Section IV of this 
Supplementary Information, a State or territory that chooses to use Fiscal Recovery Funds to 
offset a reduction in net tax revenue does not forfeit its entire allocation of Fiscal Recovery 
Funds (unless it misused the full allocation to offset a reduction in net tax revenue) or any non-
ARPA funding received. 
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. A recipient government 
would only be considered to have used Fiscal Recovery Funds to offset a reduction in net tax 
revenue resulting from changes in law, regulation, or interpretation if, and to the extent that, the 
160 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 Fiscal 
Recovery Funds. 
161 For brevity, referred to as “changes in law, regulation, or interpretation” for the remainder of this 
preamble. 
81

recipient government could not identify sufficient funds from sources other than the Fiscal 
Recovery Funds to offset the reduction in net tax revenue. 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, the remaining amount not covered by these sources 
will be considered to have been offset by Fiscal Recovery Funds, in contravention of the offset 
provision. The Interim Final Rule recognizes three sources of funds that may offset a reduction 
in net tax revenue other than Fiscal Recovery Funds—organic growth, increases in revenue (e.g., 
an increase in a tax rate), and certain cuts in spending. 
In order to reduce burden, the Interim Final Rule’s approach also 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 the Fiscal Recovery Funds based on information they likely have or can obtain. This 
approach ensures that recipient governments have the information they need to understand the 
implications of their decisions regarding the use of the Fiscal Recovery Funds—and, in 
particular, whether they are using the funds to directly or indirectly offset a reduction in net tax 
revenue, making them potentially subject to recoupment.  
Reporting on both the eligible uses and on a State’s or territory’s covered tax changes 
that would reduce tax revenue will enable identification of, and recoupment for, use of Fiscal 
Recovery Funds to directly offset reductions in tax revenue resulting from tax relief. Moreover, 
this approach recognizes that, because money is fungible, even if Fiscal Recovery 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 
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the State’s or territory’s funds that would otherwise have been needed to cover the costs of the 
reduction. By focusing on the cost of changes that reduce net tax revenue—and how a recipient 
government is offsetting those reductions in constructing its budget over the covered period—the 
framework prevents efforts to use Fiscal Recovery Funds to indirectly offset reductions in net tax 
revenue for which the recipient government has not identified other offsetting sources of 
funding. 
As discussed in greater detail below in this preamble, the framework set forth in the 
Interim Final Rule establishes a step-by-step process for determining whether, and the extent to 
which, Fiscal Recovery Funds have been used to offset a reduction in net tax revenue. Based on 
information reported annually 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 Fiscal Recovery 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 they are reporting. If the recipient government’s actual tax revenue is 
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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 Fiscal Recovery Funds. These are: 
o 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 
o Spending cuts in areas not being replaced by Fiscal Recovery 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 the 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. 
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• Finally, if there are any amounts that could be subject to recoupment, Treasury will 
provide notice to the recipient government of such amounts. This process is discussed in 
greater detail in Section IV 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 Fiscal Recovery Funds. This process ensures Fiscal Recovery Funds are used in a manner 
consistent with the statute’s defined eligible uses and the offset provision’s limitation on these 
eligible uses, while avoiding undue interference with State and territory decisions regarding tax 
and spending policies. 
The Interim Final Rule also implements a process for recouping Fiscal Recovery Funds 
that were used to offset reductions in net tax revenue, including the calculation of any amounts 
that may be subject to recoupment, a process for a recipient government to respond to a notice of 
recoupment, and clarification regarding amounts excluded from recoupment. See Section IV of 
this Supplementary Information. 
The Interim Final Rule includes several definitions that are applicable to the 
implementation of the offset provision. 
Covered change. The offset provision is triggered by a reduction in net tax revenue 
resulting from “a change in law, regulation, or administrative interpretation.” A covered change 
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 where the phase-in or taking effect was not 
prescribed prior to the start of the covered period. Changed 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 
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period; the operative change in those circumstances is the underlying legislation or regulation 
that occurred prior to the covered period. Moreover, only the changes within the control of the 
State or territory are considered covered changes. 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. For 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.162 This would not be considered a covered change. In addition, 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. Finally, Treasury has determined and previously announced that income tax 
changes—even those made during the covered period—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) are permissible under the offset provision. 
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 will be calculated as fiscal year 2019 (FY 2019) tax revenue indexed for inflation in 
162 See, e.g., Tax Policy Center, How do state earned income tax credits work?, 
https://www.taxpolicycenter.org/briefing-book/how-do-state-earned-income-tax-credits-work/ (last 
visited May 9, 2021). 
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each year of the covered period, with inflation calculated using the Bureau of Economic 
Analysis’s Implicit Price Deflator.163 
FY 2019 was chosen as the starting year for the baseline because it is the last full fiscal 
year prior to the COVID-19 public health emergency.164 This baseline year is consistent with the 
approach directed by the ARPA in 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. U.S. gross domestic product is 
projected to rebound to pre-pandemic levels in 2021,165 suggesting that an FY 2019 pre­
pandemic baseline is a reasonable comparator for future revenue levels. The FY 2019 baseline 
revenue will be 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. 
Reporting year. The Interim Final Rule defines “reporting year” as a single year within 
the covered period, aligned to the current fiscal year of the recipient government during the 
covered period, for which a recipient government reports the value of covered changes and any 
sources of offsetting revenue increases (“in-year” value), regardless of when those changes were 
enacted. For the fiscal years ending in 2021 or 2025 (partial years), the term “reporting year” 
163 U.S. Department of Commerce, Bureau of Economic Analysis, GDP Price Deflator, 
https://www.bea.gov/data/prices-inflation/gdp-price-deflator (last visited May 9, 2021). 
164 Using Fiscal Year 2019 is consistent with section 602 as Congress provided for using that baseline for 
determining the impact of revenue loss affecting the provision of government services.  See section 
602(c)(1)(C). 
165 Congressional Budget Office, An Overview of the Economic Outlook: 2021 to 2031 (February 1, 
2021), available at https://www.cbo.gov/publication/56965. 
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refers to the portion of the year falling within the covered period. For example, the reporting 
year for a fiscal year beginning July 2020 and ending June 2021 would be from March 3, 2021 to 
July 2021. 
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.166 It 
provides a consistent, well-established definition with which States and territories will be 
familiar and is consistent with the approach taken in Section II.C of this Supplementary 
Information describing the implementation of sections 602(c)(1)(C) and 603(c)(1)(C) of the Act, 
regarding revenue loss. Consistent with the approach described in Section II.C of this 
Supplementary Information, tax revenue does not include revenue taxed and collected by a 
different unit of government (e.g., revenue from taxes levied by a local government and 
transferred to a recipient government). 
Framework. The Interim Final Rule provides a step-by-step framework, to be used in 
each reporting year, to calculate whether the offset provision applies to a State’s or territory’s use 
of Fiscal Recovery Funds: 
(1) Covered changes that reduce tax revenue. For each reporting year, a recipient 
government will identify and value 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 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 
166 U.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). 
88

effects of fiscal policies, and that measures relative to a current law baseline. 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). Further, estimation approaches should not use dynamic 
methodologies that incorporate the projected effects of macroeconomic growth because 
macroeconomic growth is accounted for separately in the framework. Relative to these dynamic 
scoring methodologies, scoring methodologies that do not incorporate projected effects of 
macroeconomic growth rely on fewer assumptions and thus provide greater consistency among 
States and territories. Dynamic scoring that incorporates macroeconomic growth may also 
increase the likelihood of underestimation of the cost of a reduction in tax revenue. 
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, the 
approach of using the projected value of changes in law that enact fiscal policies to estimate the 
net effect of such policies is consistent with the way many States and territories already consider 
tax changes.167 
(2) In excess of the de minimis. The recipient government will next calculate 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 
167 See, e.g., Megan Randall & Kim Rueben, Tax Policy Center, Sustainable Budgeting in the States: 
Evidence on State Budget Institutions and Practices (Nov. 2017), available at 
https://www.taxpolicycenter.org/sites/default/files/publication/149186/sustainable-budgeting-in-the­
states_1.pdf. 
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minimis level, the recipient government will be 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. 
The de minimis level is calculated as 1 percent of the reporting year’s baseline. Treasury 
recognizes that, pursuant to their taxing authority, 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. The de minimis level recognizes the 
inherent challenges and uncertainties that recipient governments face, and thus allows relatively 
small reductions in tax revenue without consequence. Treasury determined the 1 percent level 
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.168 The 1 percent de minimis level 
reflects the historical reductions in revenue due to minor changes in state fiscal policies. 
(3) Safe harbor. The recipient government will then compare 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 Fiscal Recovery Funds only in the 
event that such funds are used to offset a reduction in net tax revenue. If net tax revenue has not 
168 Data provided by the Urban-Brookings Tax Policy Center for state-level EITC changes for 2004-2017. 
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been reduced, this 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 the covered changes. 
(4) Consideration of other sources of funding. Next, the recipient government will 
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. As when identifying and valuing covered 
changes that reduce tax revenue, the value of revenue-raising changes may be reported based on 
estimated values produced by a budget model, incorporating reasonable assumptions, aligned 
with the recipient government’s existing approach for measuring the effects of fiscal policies, 
and measured relative to a current law baseline, or based on actual values using a statistical 
methodology to isolate the change in year-over-year revenue attributable to the covered 
change(s). Further, and as discussed above, estimation approaches should not use dynamic 
scoring methodologies that incorporate the effects of macroeconomic growth because growth is 
accounted for separately under the Interim Final Rule. 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. 
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(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 not in an area where the recipient government has spent Fiscal 
Recovery 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 Fiscal Recovery Funds on that same department, agency, or 
authority. This approach was selected to allow recipient governments to report how Fiscal 
Recovery Funds have been spent using reporting units already incorporated into their budgeting 
process. If they have not spent Fiscal Recovery 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, the Fiscal Recovery Funds generally 
would be deemed to have replaced the amount of spending cut and only reductions in spending 
above the amount of Fiscal Recovery Funds spent on the department, agency, or authority would 
count. 
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 Fiscal Recovery Funds (net reduction in total spending). This approach 
ensures that reported spending cuts actually create fiscal space, rather than simply offsetting 
other spending increases. A net reduction in total spending is measured as the difference 
between total spending in each reporting year, excluding Fiscal Recovery 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 
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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. 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. 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. Treasury chose this approach because 
while many recipient governments may score budget legislation using projections, spending cuts 
are readily observable using actual values. 
This approach—allowing only spending reductions in areas where the recipient 
government has not spent Fiscal Recovery Funds to be used as an offset for a reduction in net tax 
revenue—aims to prevent recipient governments from using Fiscal Recovery Funds to supplant 
State or territory funding in the eligible use areas, and then use those State or territory funds to 
offset tax cuts.  Such an approach helps ensure that Fiscal Recovery Funds are not used to 
“indirectly” offset revenue reductions due to covered changes. 
In order to help ensure recipient governments use Fiscal Recovery Funds in a manner 
consistent with the prescribed eligible uses and do not use Fiscal Recovery Funds to indirectly 
offset a reduction in net tax revenue resulting from a covered change, Treasury will monitor 
changes in spending throughout the covered period. If, over the course of the covered period, a 
spending cut is subsequently replaced with Fiscal Recovery Funds and used to indirectly offset a 
reduction in net tax revenue resulting from a covered change, Treasury may consider such 
change to be an evasion of the restrictions of the offset provision and seek recoupment of such 
amounts.  
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(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 Fiscal Recovery Funds to offset a 
reduction in net tax revenue, up to the amount that revenue has actually declined. That is, the 
maximum value of reduction in revenue due to covered changes which a recipient government 
must cover is capped at the difference between the baseline and actual tax revenue.169 In the 
event that the baseline is above actual tax revenue and 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. For example, if a 
recipient government reduces tax revenue by $1 billion, makes no other changes, and 
experiences revenue growth driven by organic economic growth worth $500 million, it need only 
pay for the remaining $500 million with sources other than Fiscal Recovery Funds. The revenue 
reduction cap implements this approach for permitting organic revenue growth to cover the cost 
of tax cuts.  
Finally, as discussed further in Section IV of this Supplementary Information, a recipient 
government may request reconsideration of any amounts identified as subject to recoupment 
under this framework. This process ensures that all relevant facts and circumstances, including 
information regarding planned spending cuts and budgeting assumptions, are considered prior to 
a determination that an amount must be repaid. Amounts subject to recoupment are calculated 
169 This cap is applied in section 35.8(c) of the Interim Final Rule, calculating the amount of funds used in 
violation of the tax offset provision. 
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on an annual basis; amounts recouped in one year cannot be returned if the State or territory 
subsequently reports an increase in net tax revenue. 
To facilitate the implementation of the framework above, and in addition to reporting 
required on eligible uses, in each year of the reporting period, each State and territory will report 
to Treasury the following items: 
• 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; 
• Each covered spending cut made to date during the covered period, the in-year value of 
each cut, and documentation demonstrating that each spending cut is covered as 
prescribed under the Interim Final Rule; 
Treasury will provide additional guidance and instructions the reporting requirements at a later 
date. 
Question 28: Does the Interim Final Rule’s definition of tax revenue accord with existing 
State and territorial practice and, if not, are there other definitions or elements Treasury should 
consider? Discuss why or why not. 
Question 29: The Interim Final Rule permits certain spending cuts to cover the costs of 
reductions in tax revenue, including cuts in a department, agency, or authority in which the 
recipient government is not using Fiscal Recovery Funds. How should Treasury and recipient 
governments consider the scope of a department, agency, or authority for the use of funds to 
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ensure spending cuts are not being substituted with Fiscal Recovery Funds while also avoiding 
an overbroad definition of that captures spending that is, in fact, distinct? 
Question 30: Discuss the budget scoring methodologies currently used by States and 
territories. How should the Interim Final Rule take into consideration differences in 
approaches? Please discuss the use of practices including but not limited to macrodynamic 
scoring, microdynamic scoring, and length of budget windows. 
Question 31: If a recipient government has a balanced budget requirement, how will that 
requirement impact its use of Fiscal Recovery Funds and ability to implement this framework? 
Question 32: To implement the framework described above, the Interim Final Rule 
establishes certain reporting requirements.  To what extent do recipient governments already 
produce this information and on what timeline? Discuss ways that Treasury and recipient 
governments may better rely on information already produced, while ensuring a consistent 
application of the framework. 
Question 33:  Discuss States’ and territories’ ability to produce the figures and numbers 
required for reporting under the Interim Final Rule. What additional reporting tools, such as a 
standardized template, would facilitate States’ and territories’ ability to complete the reporting 
required under the Interim Final Rule? 
C. 
Other Restrictions on Use 
Payments from the Fiscal Recovery Funds are also subject to pre-existing limitations 
provided in other Federal statutes and regulations and may not be used as non-Federal match for 
other Federal programs whose statute or regulations bar the use of Federal funds to meet 
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matching requirements.  For example, payments from the Fiscal Recovery Funds may not be 
used to satisfy the State share of Medicaid.170 
As provided for in the award terms, payments from the Fiscal Recovery Funds as a 
general matter will be subject to the provisions of the Uniform Administrative Requirements, 
Cost Principles, and Audit Requirements for Federal Awards (2 CFR 200) (the Uniform 
Guidance), including the cost principles and restrictions on general provisions for selected items 
of cost.  
D. Timeline for Use of Fiscal Recovery Funds 
Section 602(c)(1) and section 603(c)(1) require that payments from the Fiscal Recovery 
Funds be used only to cover costs incurred by the State, territory, Tribal government, or local 
government by December 31, 2024.  Similarly, the CARES Act provided that payments from the 
CRF be used to cover costs incurred by December 31, 2021.171 The definition of “incurred” does 
not have a clear meaning.  With respect to the CARES Act, on the understanding that the CRF 
was intended to be used to meet relatively short-term needs, Treasury interpreted this 
requirement to mean that, for a cost to be considered to have been incurred, performance of the 
service or delivery of the goods acquired must occur by December 31, 2021.  In contrast, the 
ARPA, passed at a different stage of the COVID-19 public health emergency, was intended to 
provide more general fiscal relief over a broader timeline.  In addition, the ARPA expressly 
permits the use of Fiscal Recovery Funds for improvements to water, sewer, and broadband 
infrastructure, which entail a longer timeframe.  In recognition of this, Treasury is interpreting 
170 See 42 CFR 433.51 and 45 CFR 75.306. 
171 Section 1001 of Division N of the Consolidated Appropriations Act, 2021 amended section 601(d)(3) 
of the Act by extending the end of the covered period for CRF expenditures from December 30, 2020 to 
December 31, 2021. 
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the requirement in section 602 and section 603 that costs be incurred by December 31, 2024, to 
require only that recipients have obligated the Fiscal Recovery Funds by such date.  The Interim 
Final Rule adopts a definition of “obligation” that is based on the definition used for purposes of 
the Uniform Guidance, which will allow for uniform administration of this requirement and is a 
definition with which most recipients will be familiar. 
Payments from the Fiscal Recovery Funds are grants provided to recipients to mitigate 
the fiscal effects of the COVID-19 public health emergency and to respond to the public health 
emergency, consistent with the eligible uses enumerated in sections 602(c)(1) and 603(c)(1).172 
As such, these funds are intended to provide economic stimulus in areas still recovering from the 
economic effects of the pandemic. In implementing and interpreting these provisions, including 
what it means to “respond to” the COVID-19 public health emergency, Treasury takes into 
consideration pre-pandemic facts and circumstances (e.g., average revenue growth prior to the 
pandemic) as well as impact of the pandemic that predate the enactment of the ARPA (e.g., 
replenishing Unemployment Trust balances drawn during the pandemic).  While assessing the 
effects of the COVID-19 public health emergency necessarily takes into consideration the facts 
and circumstances that predate the ARPA, use of Fiscal Recovery Funds is forward looking.   
As discussed above, recipients are permitted to use payments from the Fiscal Recovery 
Funds to respond to the public health emergency, to respond to workers performing essential 
work by providing premium pay or providing grants to eligible employers, and to make 
necessary investments in water, sewer, or broadband infrastructure, which all relate to 
prospective uses.  In addition, sections 602(c)(1)(C) and 603(c)(1)(C) permit recipients to use 
172 §§ 602(a), 603(a), 602(c)(1) and 603(c)(1) of the Act. 
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Fiscal Recovery Funds for the provision of government services.  This clause provides that the 
amount of funds that may be used for this purpose is measured by reference to the reduction in 
revenue due to the public health emergency relative to revenues collected in the most recent full 
fiscal year, but this reference does not relate to the period during which recipients may use the 
funds, which instead refers to prospective uses, consistent with the other eligible uses.  
Although as discussed above the eligible uses of payments from the Fiscal Recovery 
Funds are all prospective in nature, Treasury considers the beginning of the covered period for 
purposes of determining compliance with section 602(c)(2)(A) to be the relevant reference point 
for this purpose.  The Interim Final Rule thus permits funds to be used to cover costs incurred 
beginning on March 3, 2021.  This aligns the period for use of Fiscal Recovery Funds with the 
period during which these funds may not be used to offset reductions in net tax revenue.  
Permitting Fiscal Recovery Funds to be used to cover costs incurred beginning on this date will 
also mean that recipients that began incurring costs in the anticipation of enactment of the ARPA 
and in advance of the issuance of this rule and receipt of payment from the Fiscal Recovery 
Funds would be able to cover them using these payments.173 
As set forth in the award terms, the period of performance will run until 
December 31, 2026, which will provide recipients a reasonable amount of time to complete 
projects funded with payments from the Fiscal Recovery Funds.  
173 Given the nature of this program, recipients will not be permitted to use funds to cover pre-award 
costs, i.e., those incurred prior to March 3, 2021.  
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IV. Recoupment Process 
Under the ARPA, failure to comply with the restrictions on use contained in 
sections 602(c) and 603(c) of the Act may result in recoupment of funds.174 The Interim Final 
Rule implements these provisions by establishing a process for recoupment. 
Identification and Notice of Violations.  Failure to comply with the restrictions on use 
will be identified based on reporting provided by the recipient. As discussed further in 
Sections III.B and VIII of this Supplementary Information, Treasury will collect information 
regarding eligible uses on a quarterly basis and on the tax offset provision on an annual basis. 
Treasury also may consider other information in identifying a violation, such as information 
provided by members of the public. If Treasury identifies a violation, it will provide written 
notice to the recipient along with an explanation of such amounts. 
Request for Reconsideration.  Under the Interim Final Rule, a recipient may submit a 
request for reconsideration of any amounts identified in the notice provided by Treasury. This 
reconsideration process provides a recipient the opportunity to submit additional information it 
believes supports its request in light of the notice of recoupment, including, for example, 
additional information regarding the recipient’s use of Fiscal Recovery Funds or its tax revenues.  
The process also provides the Secretary with an opportunity to consider all information relevant 
to whether a violation has occurred, and if so, the appropriate amount for recoupment.  
The Interim Final Rule also establishes requirements for the timing of a request for 
reconsideration. Specifically, if a recipient wishes to request reconsideration of any amounts 
identified in the notice, the recipient must submit a written request for reconsideration to the 
174 §§ 602(e) and 603(e) of the Act. 
100

Secretary within 60 calendar days of receipt of such notice. The request must include an 
explanation of why the recipient believes that the finding of a violation or recoupable amount 
identified in the notice of recoupment should be reconsidered.  To facilitate the Secretary’s 
review of a recipient’s request for reconsideration, the request should identify all supporting 
reasons for the request.  Within 60 calendar days of receipt of the recipient’s request for 
reconsideration, 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.  
The process and timeline established by the Interim Final Rule are intended to provide 
the recipient with an adequate opportunity to fully present any issues or arguments in response to 
the notice of recoupment.175 This process will allow the Secretary to respond to the issues and 
considerations raised in the request for reconsideration taking into account the information and 
arguments presented by the recipient along with any other relevant information.  
Repayment. Finally, the Interim Final Rule provides that any amounts subject to 
recoupment must be repaid within 120 calendar days of receipt of any final notice of recoupment 
or, if the recipient has not requested reconsideration, within 120 calendar days of the initial 
notice provided by the Secretary. 
Question 34:  Discuss the timeline for requesting reconsideration under the Interim Final 
Rule.  What, if any, challenges does this timeline present? 
175 The Interim Final Rule also provides that Treasury may extend any deadlines. 
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V. Payments in Tranches to Local Governments and Certain States 
Section 603 of the Act provides that the Secretary will make payments to local 
governments in two tranches, with the second tranche being paid twelve months after the first 
payment.  In addition, section 602(b)(6)(A)(ii) provides that the Secretary may withhold payment 
of up to 50 percent of the amount allocated to each State and territory for a period of up to twelve 
months from the date on which the State or territory provides its certification to the Secretary. 
Any such withholding for a State or territory is required to be based on the unemployment rate in 
the State or territory as of the date of the certification. 
The Secretary has determined to provide in this Interim Final Rule for withholding of 
50 percent of the amount of Fiscal Recovery Funds allocated to all States (and the District of 
Columbia) other than those with an unemployment rate that is 2.0 percentage points or more 
above its pre-pandemic (i.e., February 2020) level. The Secretary will refer to the latest 
available monthly data from the Bureau of Labor Statistics as of the date the certification is 
provided. Based on data available at the time of public release of this Interim Final Rule, this 
threshold would result in a majority of States being paid in two tranches.  
Splitting payments for the majority of States is consistent with the requirement in 
section 603 of the Act to make payments from the Coronavirus Local Fiscal Recovery Fund to 
local governments in two tranches. 176 Splitting payments to States into two tranches will help 
176 With respect to Federal financial assistance more generally, States are subject to the requirements of 
the Cash Management Improvement Act (CMIA), under which Federal funds are drawn upon only on an 
as needed basis and States are required to remit interest on unused balances to Treasury.  Given the 
statutory requirement for Treasury to make payments to States within a certain period, these requirements 
of the CMIA and Treasury’s implementing regulations at 31 CFR part 205 will not apply to payments 
from the Fiscal Recovery Funds.  Providing funding in two tranches to the majority of States reflects, to 
the maximum extent permitted by section 602 of the Act, the general principles of Federal cash 
management and stewardship of federal funding, yet will be much less restrictive than the usual 
requirements to which States are subject. 
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encourage recipients to adapt, as necessary, to new developments that could arise over the 
coming twelve months, including potential changes to the nature of the public health emergency 
and its negative economic impacts. While the U.S. economy has been recovering and adding 
jobs in aggregate, there is still considerable uncertainty in the economic outlook and the 
interaction between the pandemic and the economy.177 For these reasons, Treasury believes it 
will be appropriate for a majority of recipients to adapt their plans as the recovery evolves.  For 
example, a faster-than-expected economic recovery in 2021 could lead a recipient to dedicate 
more Fiscal Recovery Funds to longer-term investments starting in 2022. In contrast, a slower­
than-expected economic recovery in 2021 could lead a recipient to use additional funds for near-
term stimulus in 2022. 
At the same time, the statute contemplates the possibility that elevated unemployment in 
certain States could justify a single payment. Elevated unemployment is indicative of a greater 
need to assist unemployed workers and stimulate a faster economic recovery. For this reason, 
the Interim Final Rule provides that States and territories with an increase in their unemployment 
rate over a specified threshold may receive a single payment, with the expectation that a single 
tranche will better enable these States and territories to take additional immediate action to aid 
the unemployed and strengthen their economies. 
Following the initial pandemic-related spike in unemployment in 2020, States’ 
unemployment rates have been trending back towards pre-pandemic levels.  However, some 
States’ labor markets are healing more slowly than others.  Moreover, States varied widely in 
177 The potential course of the virus, and its impact on the economy, has contributed to a heightened 
degree of uncertainty relative to prior periods. See, e.g., Dave Altig et al., Economic uncertainty before 
and during the COVID-19 pandemic, J. of Public Econ. (Nov. 2020), available at 
https://www.sciencedirect.com/science/article/abs/pii/S0047272720301389 
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their pre-pandemic levels of unemployment, and some States remain substantially further from 
their pre-pandemic starting point.  Consequently, Treasury is delineating States with significant 
remaining elevation in the unemployment rate, based on the net difference to pre-pandemic 
levels. 
Treasury has established that significant remaining elevation in the unemployment rate is 
a net change in the unemployment rate of 2.0 percentage points or more relative to pre-pandemic 
levels. In the four previous recessions going back to the early 1980s, the national unemployment 
rate rose by 3.6, 2.3, 2.0, and 5.0 percentage points, as measured from the start of the recession to 
the eventual peak during or immediately following the recession.178 Each of these increases can 
therefore represent a recession’s impact on unemployment.  To identify States with significant 
remaining elevation in unemployment, Treasury took the lowest of these four increases, 
2.0 percentage points, to indicate states where, despite improvement in the unemployment rate, 
current labor market conditions are consistent still with a historical benchmark for a recession.  
No U.S. territory will be subject to withholding of its payment from the Fiscal Recovery 
Funds. For Puerto Rico, the Secretary has determined that the current level of the unemployment 
rate (8.8 percent, as of March 2021179) is sufficiently high such that Treasury should not 
withhold any portion of its payment from the Fiscal Recovery Funds regardless of its change in 
178 Includes the period during and immediately following recessions, as defined by the National Bureau of 
Economic Research. National Bureau of Economic Research, US Business Cycle Expansions and 
Contractions, https://www.nber.org/research/data/us-business-cycle-expansions-and-contractions (last 
visited Apr. 27, 20201).  Based on data from U.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 Apr. 27, 2021). 
179 U.S. Bureau of Labor Statistics, Economic News Release – Table 1. Civilian labor force and 
unemployment by state and selected area, seasonally adjusted, 
https://www.bls.gov/news.release/laus.t01.htm (last visited Apr. 30, 2021). 
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unemployment rate relative to its pre-pandemic level. For U.S. territories that are not included in 
the Bureau of Labor Statistics’ monthly unemployment rate data, the Secretary will not exercise 
the authority to withhold amounts from the Fiscal Recovery Funds. 
VI. Transfer 
The statute authorizes State, territorial, and Tribal governments; counties; metropolitan 
cities; and nonentitlement units of local government (counties, metropolitan cities, and 
nonentitlement units of local government are collectively referred to as “local governments”) to 
transfer amounts paid from the Fiscal Recovery Funds to a number of specified entities. By 
permitting these transfers, Congress recognized the importance of providing flexibility to 
governments seeking to achieve the greatest impact with their funds, including by working with 
other levels or units of government or private entities to assist recipient governments in carrying 
out their programs. This includes special-purpose districts that perform specific functions in the 
community, such as fire, water, sewer, or mosquito abatement districts. 
Specifically, under section 602(c)(3), a State, territory, or Tribal government may transfer 
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.”180 Similarly, section 603(c)(3) authorizes a local government to 
transfer funds to the same entities (other than Tribal organizations). 
The Interim Final Rule clarifies that the lists of transferees in Sections 602(c)(3) and 
603(c)(3) are not exclusive. The Interim Final Rule permits State, territorial, and Tribal 
governments to transfer Fiscal Recovery Funds to other constituent units of government or 
180 § 602(c)(3) of the Act. 
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private entities beyond those specified in the statute. Similarly, local governments are authorized 
to transfer Fiscal Recovery Funds to other constituent units of government (e.g., a county is able 
to transfer Fiscal Recovery Funds to a city, town, or school district within it) or to private 
entities. This approach is intended to help provide funding to local governments with needs that 
may exceed the allocation provided under the statutory formula. 
State, local, territorial, and Tribal governments that receive a Federal award directly from 
a Federal awarding agency, such as Treasury, are “recipients.”  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. The recipient remains responsible for 
monitoring and overseeing the subrecipient’s use of Fiscal Recovery 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 Fiscal Recovery Funds for 
the duration of the award. 
Transfers under sections 602(c)(3) and 603(c)(3) must qualify as an eligible use of Fiscal 
Recovery Funds by the transferor. Once Fiscal Recovery Funds are received, the transferee must 
abide by the restrictions on use applicable to the transferor under the ARPA and other applicable 
law and program guidance. For example, if a county transferred Fiscal Recovery Funds to a 
town within its borders to respond to the COVID-19 public health emergency, the town would be 
bound by the eligible use requirements applicable to the county in carrying out the county’s goal. 
This also means that county A may not transfer Fiscal Recovery Funds to county B for use in 
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county B because such a transfer would not, from the perspective of the transferor (county A), be 
an eligible use in county A. 
Section 603(c)(4) separately provides for transfers by a local government to its State or 
territory. A transfer under section 603(c)(4) will not make the State a subrecipient of the local 
government, and such Fiscal Recovery Funds may be used by the State for any purpose 
permitted under section 602(c).  A transfer 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 or territory.  The transferor must provide notice of the transfer to 
Treasury in a format specified by Treasury.  If the local government does not provide such 
notice, it will remain legally obligated to Treasury under the award and remain responsible for 
ensuring that the awarded Fiscal Recovery Funds are being used in accordance with the statute 
and program guidance and for reporting on such uses to Treasury. A State that receives a 
transfer from a local government under section 603(c)(4) will be bound by all of the use 
restrictions set forth in section 602(c) with respect to the use of those Fiscal Recovery Funds, 
including the prohibitions on use of such Fiscal Recovery Funds to offset certain reductions in 
taxes or to make deposits into pension funds. 
Question 35: What are the advantages and disadvantages of treating the list of 
transferees in sections 602(c)(3) and 603(c)(3) as nonexclusive, allowing States and localities to 
transfer funds to entities outside of the list? 
Question 36: Are there alternative ways of defining “special-purpose unit of State or 
local government” and “public benefit corporation” that would better further the aims of the 
Funds? 
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VII. Nonentitlement Units of Government 
The Fiscal Recovery Funds provides for $19.53 billion in payments to be made to States 
and territories which will distribute the funds to nonentitlement units of local government 
(NEUs); local governments which generally have populations below 50,000. These local 
governments have not yet received direct fiscal relief from the Federal government during the 
COVID-19 public health emergency, making Fiscal Recovery Funds payments an important 
source of support for their public health and economic responses. Section 603 requires Treasury 
to allocate and pay Fiscal Recovery Funds to the States and territories and requires the States and 
territories to distribute Fiscal Recovery Funds to NEUs based on population within 30 days of 
receipt unless an extension is granted by the Secretary. The Interim Final Rule clarifies certain 
aspects regarding the distribution of Fiscal Recovery by States and territories to NEUs, as well as 
requirements around timely payments from the Fiscal Recovery Funds. 
The ARPA requires that States and territories allocate funding to NEUs in an amount that 
bears the same proportion as the population of the NEU bears to the total population of all NEUs 
in the State or territory, subject to a cap (described below). Because the statute requires States 
and territories to make distributions based on population, States and territories may not place 
additional conditions or requirements on distributions to NEUs, beyond those required by the 
ARPA and Treasury’s implementing regulations and guidance. For example, a State may not 
impose stricter limitations than permitted by statute or Treasury regulations or guidance on an 
NEU’s use of Fiscal Recovery Funds based on the NEU’s proposed spending plan or other 
policies.  States and territories are also not permitted to offset any debt owed by the NEU against 
the NEU’s distribution.  Further, States and territories may not provide funding on a 
reimbursement basis—e.g., requiring NEUs to pay for project costs up front before being 
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reimbursed with Fiscal Recovery Funds payments—because this funding model would not 
comport with the statutory requirement that States and territories make distributions to NEUs 
within the statutory timeframe. 
Similarly, States and territories distributing Fiscal Recovery Funds payments to NEUs are 
responsible for complying with the Fiscal Recovery Funds statutory requirement that 
distributions to NEUs not exceed 75 percent of the NEU’s most recent budget. The most recent 
budget is defined as the NEU’s most recent annual total operating budget, including its general 
fund and other funds, as of January 27, 2020. Amounts in excess of such cap and therefore not 
distributed to the NEU must be returned to Treasury by the State or territory.  States and 
territories may rely for this determination on a certified top-line budget total from the NEU. 
Under the Interim Final Rule, the total allocation and distribution to an NEU, including 
the sum of both the first and second tranches of funding, cannot exceed the 75 percent cap. 
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 cap. This approach will provide an administrable means to implement the cap for 
small local governments that do not adopt a formal budget. 
Section 603(b)(3) of the Social Security Act provides for Treasury to make payments to 
counties but provides that, in the case of an amount to be paid to a county that is not a unit of 
general local government, the amount shall instead be paid to the State in which such county is 
located, and such State shall distribute such amount to each unit of general local government 
within such county in an amount that bears the same proportion to the amount to be paid to such 
county as the population of such units of general local government bears to the total population 
of such county.  As with NEUs, States may not place additional conditions or requirements on 
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distributions to such units of general local government, beyond those required by the ARPA and 
Treasury’s implementing regulations and guidance. 
In the case of consolidated governments, section 603(b)(4) allows consolidated 
governments (e.g., a city-county consolidated government) to receive payments under each 
allocation based on the respective formulas. In the case of a consolidated government, Treasury 
interprets the budget cap to apply to the consolidated government’s NEU allocation under 
section 603(b)(2) but not to the consolidated government’s county allocation under 
section 603(b)(3). 
If necessary, States and territories may use the Fiscal Recovery Funds under 
section 602(c)(1)(A) to fund expenses related to administering payments to NEUs and units of 
general local government, as disbursing these funds itself is a response to the public health 
emergency and its negative economic impacts. If a State or territory requires more time to 
disburse Fiscal Recovery Funds to NEUs than the allotted 30 days, Treasury will grant 
extensions of not more than 30 days for States and territories that submit a certification in writing 
in accordance with section 603(b)(2)(C)(ii)(I). Additional extensions may be granted at the 
discretion of the Secretary. 
Question 37: What are alternative ways for States and territories to enforce the 
75 percent cap while reducing the administrative burden on them? 
Question 38: What criteria should Treasury consider in assessing requests for 
extensions for further time to distribute NEU payments? 
VIII. Reporting 
States (defined to include the District of Columbia), territories, metropolitan cities, 
counties, and Tribal governments will be required to submit one interim report and thereafter 
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quarterly Project and Expenditure reports through the end of the award period on 
December 31, 2026.  The interim report will include a recipient’s expenditures by category at the 
summary level from the date of award to July 31, 2021 and, for States and territories, 
information related to distributions to nonentitlement units. Recipients must submit their interim 
report to Treasury by August 31, 2021. Nonentitlement units of local government are not 
required to submit an interim report. 
The quarterly Project and Expenditure reports will include financial data, information on 
contracts and subawards over $50,000, types of projects funded, and other information regarding 
a recipient’s utilization of the award funds. The reports will include the same general data (e.g., 
on obligations, expenditures, contracts, grants, and sub-awards) as those submitted by recipients 
of the CRF, with some modifications. Modifications will include updates to the expenditure 
categories and the addition of data elements related to specific eligible uses, including some of 
the reporting elements described in sections above.  The initial quarterly Project and Expenditure 
report will cover two calendar quarters from the date of award to September 30, 2021, and must 
be submitted to Treasury by October 31, 2021. The subsequent quarterly reports will cover one 
calendar quarter and must be submitted to Treasury within 30 days after the end of each calendar 
quarter. 
Nonentitlement units of local government will be required to submit annual Project and 
Expenditure reports until the end of the award period on December 31, 2026. The initial annual 
Project and Expenditure report for nonentitlement units of local government will cover activity 
from the date of award to September 30, 2021 and must be submitted to Treasury by 
October 31, 2021. The subsequent annual reports must be submitted to Treasury by October 31 
each year. 
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States, territories, metropolitan cities, and counties with a population that exceeds 
250,000 residents will also be required to submit an annual Recovery Plan Performance report to 
Treasury. The Recovery Plan Performance report will provide the public and Treasury 
information on the projects that recipients are undertaking with program funding and how they 
are planning to ensure project outcomes are achieved in an effective, efficient, and equitable 
manner. Each jurisdiction will have some flexibility in terms of the form and content of the 
Recovery Plan Performance report, as long as it includes the minimum information required by 
Treasury. The Recovery Plan Performance report will include key performance indicators 
identified by the recipient and some mandatory indicators identified by Treasury, as well as 
programmatic data in specific eligible use categories and the specific reporting requirements 
described in the sections above. The initial Recovery Plan Performance report will cover the 
period from the date of award to July 31, 2021 and must be submitted to Treasury by 
August 31, 2021. Thereafter, Recovery Plan Performance reports will cover a 12-month period, 
and recipients will be required to submit the report to Treasury within 30 days after the end of 
the 12-month period. The second Recovery Plan Performance report will cover the period from 
July 1, 2021 to June 30, 2022, and must be submitted to Treasury by July 31, 2022.  Each annual 
Recovery Plan Performance report must be posted on the public-facing website of the recipient. 
Local governments with fewer than 250,000 residents, Tribal governments, and nonentitlement 
units of local government are not required to develop a Recovery Plan Performance report. 
Treasury will provide additional guidance and instructions on the reporting requirements 
outlined above for the Fiscal Recovery Funds at a later date. 
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IX. Comments and Effective Date 
This Interim Final Rule is being issued without advance notice and public comment to 
allow for immediate implementation of this program. As discussed below, the requirements of 
advance notice and public comment do not apply “to the extent that there is involved . . . a matter 
relating to agency . . . grants.”181 The Interim Final Rule implements statutory conditions on the 
eligible uses of the Fiscal Recovery Funds grants, and addresses the payment of those funds, the 
reporting on uses of funds, and potential consequences of ineligible uses.  In addition and as 
discussed below, the Administrative Procedure Act 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.”182 This 
good cause justification also supports waiver of the 60-day delayed effective date for major rules 
under the Congressional Review Act at 5 U.S.C. 808(2).  Although this Interim Final Rule is 
effective immediately, comments are solicited from interested members of the public and from 
recipient governments on all aspects of the Interim Final Rule. 
These comments must be submitted on or before [INSERT DATE 60 DAYS AFTER DATE 
OF PUBLICATION IN THE FEDERAL REGISTER]. 
181 5 U.S.C. 553(a)(2). 
182 5 U.S.C. 553(b)(3)(B); see also 5 U.S.C. 553(d)(3) (creating an exception to the requirement of a 30­
day delay before the effective date of a rule “for good cause found and published with the rule”). 
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X. Regulatory Analyses 
Executive Orders 12866 and 13563 
This Interim Final Rule is economically significant for the purposes of Executive 
Orders 12866 and 13563.  Treasury, however, is proceeding under the emergency provision at 
Executive Order 12866 section 6(a)(3)(D) based on the need to act expeditiously to mitigate the 
current economic conditions arising from the COVID-19 public health emergency. The rule has 
been reviewed by the Office of Management and Budget (OMB) in accordance with Executive 
Order 12866.  This rule is necessary to implement the ARPA in order to provide economic relief 
to State, local, and Tribal governments adversely impacted by the COVID-19 public health 
emergency. 
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: 
(1) Have an annual effect on the economy of $100 million or more, or adversely affect a 
sector of the economy; productivity; competition; jobs; the environment; public 
health or safety; or State, local, or Tribal governments or communities in a material 
way (also referred to as “economically significant” regulations); 
(2) Create a serious inconsistency or otherwise interfere with an action taken or planned 
by another agency; 
(3) Materially alter the budgetary impacts of entitlements, grants, user fees, or loan 
programs or the rights and obligations of recipients thereof; or 
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(4) Raise novel legal or policy issues arising out of legal mandates, the President’s 
priorities, or the principles stated in the Executive Order. 
This regulatory action is an economically significant regulatory action 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 
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include “identifying changing future compliance costs that might result from technological 
innovation or anticipated behavioral changes.” 
Treasury has assessed the potential costs and benefits, both quantitative and qualitative, 
of this regulatory action, and is issuing this Interim 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. Based on the analysis that 
follows and the reasons stated elsewhere in this document, Treasury believes that this Interim 
Final Rule is consistent with the principles set forth in Executive Order 13563. 
Treasury also has determined that this regulatory action does not unduly interfere with States, 
territories, Tribal governments, and localities in the exercise of their governmental functions. 
This Regulatory Impact Analysis discusses the need for regulatory action, the potential 
benefits, and the potential costs. 
Need for Regulatory Action.  This Interim Final Rule implements the $350 billion Fiscal 
Recovery Funds 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 Interim Final Rule is needed to ensure that recipients of Fiscal Recovery 
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’ mandate for targeted fiscal relief. 
This Interim Final Rule is primarily a transfer rule: it transfers $350 billion in aid from the 
Federal government to states, territories, Tribal governments, and localities, generating a 
significant macroeconomic effect on the U.S. economy. In making this transfer, Treasury has 
sought to implement the program in ways that maximize its potential benefits while minimizing 
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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 Fiscal Recovery 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.183 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 2007-09 recession.184 
This Interim Final Rule provides benefits across several areas by implementing the four 
eligible funding uses, as defined in statute: strengthening the response to the COVID-19 public 
health emergency and its economic impacts; easing fiscal pressure on State, local, and Tribal 
governments that might otherwise lead to harmful cutbacks in employment or government 
183 Gabriel Chodorow-Reich et al., Does State Fiscal Relief during Recessions Increase Employment? 
Evidence from the American Recovery and Reinvestment Act, American Econ. J.: Econ. Policy, 4:3 118­
45 (Aug. 2012), available at https://www.aeaweb.org/articles?id=10.1257/pol.4.3.118 
184 See, e.g., Fitzpatrick, Haughwout & Setren, Fiscal Drag from the State and Local Sector?, Liberty 
Street Economics Blog, Federal Reserve Bank of New York (June 27, 2012), 
https://www.libertystreeteconomics.newyorkfed.org/2012/06/fiscal-drag-from-the-state-and-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 9. 
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services; providing premium pay to essential workers; and making necessary investments in 
certain types of infrastructure. In implementing the ARPA, Treasury also sought to support 
disadvantaged communities that have been disproportionately impacted by the pandemic. The 
Fiscal Recovery Funds as implemented by the Interim Final Rule can be expected to channel 
resources toward these uses in order to achieve substantial near-term economic and public health 
benefits, as well as longer-term benefits arising from the allowable investments in water, sewer, 
and broadband infrastructure and aid to families. 
These benefits are achieved in the Interim Final Rule through a broadly flexible approach 
that sets clear guidelines on eligible uses of Fiscal Recovery Funds and provides State, local, and 
Tribal government officials discretion within those eligible uses to direct Fiscal Recovery Funds 
to areas of greatest need within their jurisdiction. While preserving recipients’ overall flexibility, 
the Interim Final Rule includes several provisions that implement statutory requirements and will 
help support use of Fiscal Recovery Funds to achieve the intended benefits. The remainder of 
this section clarifies how Treasury’s approach to key provisions in the Interim Final Rule will 
contribute to greater realization of benefits from the program. 
• Revenue Loss: Recipients will 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’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. Moreover, recipients will have the opportunity to re-calculate revenue loss 
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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 should 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, Treasury’s approach provides 
a more accurate representation of the effect of the pandemic on overall revenues. 
• Premium Pay: Per the statute, recipients have broad latitude to designate critical 
infrastructure sectors and make grants to third-party employers for the purpose of 
providing premium pay or otherwise respond to essential workers. While the Interim 
Final Rule generally preserves the flexibility in the statute, it does add a requirement that 
recipients give written justification in the case that premium pay would increase a 
worker’s annual pay above a certain 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.  Treasury believes the threshold in the Interim Final Rule 
strikes the appropriate balance between preserving flexibility and helping encourage use 
of these resources to help those in greatest need. The Interim Final Rule also requires 
that eligible workers have regular in-person interactions or regular physical handling of 
items that were also handled by others. This requirement will also help encourage use of 
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financial resources for those who have endured the heightened risk of performing 
essential work.   
• Withholding of Payments to Recipients: Treasury believes that for the vast majority of 
recipient entities, it will be appropriate to receive funds in two separate payments. As 
discussed above, withholding of 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 will not withhold any funds from the first payment. 
Treasury believes that this approach strikes the 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. 
• 
Hiring Public Sector Employees: The Interim Final Rule states explicitly that recipients 
may use funds to restore their workforces up to pre-pandemic levels. Treasury believes 
that this statement is beneficial because it eliminates any uncertainty that could cause 
delays or otherwise negatively impact restoring public sector workforces (which, at time 
of publication, remain significantly below pre-pandemic levels).  
Finally, the Interim Final Rule aims to promote and streamline the provision of assistance 
to individuals and communities in greatest need, particularly communities that have been 
historically disadvantaged and have experienced disproportionate impacts of the COVID-19 
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crisis. Targeting relief is in line with Executive Order 13985 On 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.”185 To this end, the Interim Final Rule enumerates a list of services that may be 
provided using Fiscal Recovery Funds in low-income areas to address the disproportionate 
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 Fiscal Recovery Funds to restore (to pre-pandemic levels) state 
and local workforces, where women and people of color are disproportionately represented;186 
and targets investments in broadband infrastructure to unserved and underserved areas. 
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 
pre-statutory baseline. This includes, chiefly, costs required to administer Fiscal Recovery 
Funds, oversee subrecipients and beneficiaries, and file periodic reports with Treasury. It also 
requires States to allocate Fiscal Recovery Funds to nonentitlement units, which are smaller units 
of local government that are statutorily required to receive their funds through States. 
185 Executive Order on Advancing Racial Equity and Support for Underserved Communities through the 
Federal Government (Jan. 20, 2021), https://www.whitehouse.gov/briefing-room/presidential­
actions/2021/01/20/executive-order-advancing-racial-equity-and-support-for-underserved-communities­
through-the-federal-government/ (last visited May 9, 2021). 
186 David Cooper, Mary Gable & Algernon Austin, Economic Policy Institute Briefing Paper, The Public-
Sector Jobs Crisis:  Women and African Americans hit hardest by job losses in state and local 
governments, https://www.epi.org/publication/bp339-public-sector-jobs-crisis (last visited May 9, 2021). 
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Treasury expects that the administrative burden associated with this program will be 
moderate for a grant program of its size.  Treasury expects that most 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 CRF and Treasury 
expects them to rely heavily on established processes developed last year or through prior grant 
funding, mitigating burden on these governments.  
Treasury expects to provide technical assistance to defray the costs of administration of 
Fiscal Recovery Funds to further mitigate burden. In making implementation choices, Treasury 
has hosted numerous consultations with a diverse range of direct recipients—States, small cities, 
counties, and Tribal governments —along with various communities across the United States, 
including those that are underserved. Treasury lacks data to estimate the precise extent to which 
this Interim Final Rule generates administrative burden for State, local, and Tribal governments, 
but seeks comment to better estimate and account for these costs, as well as on ways to lessen 
administrative burdens. 
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 Interim 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 
122

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. 
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 Interim Final Rule implements statutory 
conditions on the eligible uses of the Fiscal Recovery Funds grants, and addresses the payment 
of those funds, the reporting on uses of funds, and potential consequences of ineligible uses.  The 
rule is thus “both clearly and directly related to a federal grant program.” National Wildlife 
Federation v. Snow, 561 F.2d 227, 232 (D.C. Cir. 1976).  The rule sets forth the “process 
necessary to maintain state . . . eligibility for federal funds,” id., as well as the “method[s] by 
which states can . . . qualify for federal aid,” and other “integral part[s] of the grant program,” 
Center for Auto Safety v. Tiemann, 414 F. Supp. 215, 222 (D.D.C. 1976).  As a result, the 
requirements of 5 U.S.C. 553 do not apply. 
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)(3)(B); see also 5 U.S.C. 
123

553(d)(3) (creating an exception to the requirement of a 30-day delay before the effective date of 
a rule “for good cause found and published with the rule”). Assuming 5 U.S.C. 553 applied, 
Treasury would still have good cause under sections 553(b)(3)(B) and 553(d)(3) for not 
undertaking section 553’s requirements.  The ARPA is a law responding to a historic economic 
and public health emergency; it is “extraordinary” legislation about which “both Congress and 
the President articulated a profound sense of ‘urgency.’” Petry v. Block, 737 F.2d 1193, 1200 
(D.C. Cir. 1984).  Indeed, several provisions implemented by this Interim Final Rule (sections 
602(c)(1)(A) and 603(c)(1)(A)) explicitly provide funds to “respond to the public health 
emergency,” and the urgency is further exemplified by Congress’s command (in sections 
602(b)(6)(B) and 603(b)(7)(A)) that, “[t]o the extent practicable,” funds must be provided to 
Tribes and cities “not later than 60 days after the date of enactment.”  See Philadelphia Citizens 
in Action v. Schweiker, 669 F.2d 877, 884 (3d Cir. 1982) (finding good cause under 
circumstances, including statutory time limits, where APA procedures would have been 
“virtually impossible”). Finally, there is an urgent need for States to undertake the planning 
necessary for sound fiscal policymaking, which requires an understanding of how funds provided 
under the ARPA will augment and interact with existing budgetary resources and tax policies. 
Treasury understands that many states require immediate rules on which they can rely, especially 
in light of the fact that the ARPA “covered period” began on March 3, 2021.  The statutory 
urgency and practical necessity are good cause to forego the ordinary requirements of notice­
and-comment rulemaking.  
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 
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Congressional Review Act or CRA) (5 U.S.C. 804(2) et seq.).  Under the CRA, a major rule 
takes effect 60 days after the rule is published in the Federal Register.  5 U.S.C. 801(a)(3). 
Notwithstanding this requirement, the CRA allows agencies to dispense with the requirements of 
section 801 when the agency for good cause finds that such procedure would be impracticable, 
unnecessary, or contrary to the public interest and the rule shall take effect at such time as the 
agency promulgating the rule determines.  5 U.S.C. 808(2).  Pursuant to section 808(2), for the 
reasons discussed above, Treasury for good cause finds that a 60-day delay to provide public 
notice is impracticable and contrary to the public interest.  
Paperwork Reduction Act 
The information collections associated with State, territory, local, and Tribal government 
applications materials necessary to receive Fiscal Recovery Funds (e.g., payment information 
collection and acceptance of award terms) have been reviewed and approved by OMB pursuant 
to the Paperwork Reduction Act (44 U.S.C. Chapter 35) (PRA) emergency processing 
procedures and assigned control number 1505-0271.  The information collections related to 
ongoing reporting requirements, as discussed in this Interim Final Rule, will be submitted to 
OMB for emergency processing in the near future.  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.  Burden 
estimates below are preliminary. 
125

Reporting 
# 
Respondents 
(Estimated) 
# Responses 
Per 
Respondent 
Total 
Responses 
Hours 
per 
response 
Total 
Burden 
in Hours 
Cost to 
Respondent 
($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 
Quarterly 
Project and 
Expenditure 
Report 
5,050 
4 per year 
after first year 
20,200 
25 
505,000 
$24,644,000 
Annual 
Project and 
Expenditure 
Report from 
NEUs 
TBD 
1 per year 
20,000­
40,000 
(Estimate 
only) 
15 
300,000 – 
600,000 
$14,640,000 
-
$29,280,000 
Annual 
Recovery 
Plan 
Performance 
report 
418 
1 per year 
418 
100 
41,800 
$2,039,840 
Total 
5,050 – TBD 
N/A 
55,768 ­
75,768 
141 
851,850 ­
1,151,850 
$41,570,280 
-
$56,210,280 
* 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. 
Periodic reporting is required by section 602(c) of Section VI of the Social Security Act 
and under the Interim Final Rule. 
126

As discussed in Section VIII of this Supplementary Information, recipients of Fiscal 
Recovery Funds will be required to submit one interim report and thereafter quarterly Project and 
Expenditure reports until the end of the award period.  Recipients must submit interim reports to 
Treasury by August 31, 2021.  The quarterly Project and Expenditure reports will include 
financial data, information on contracts and subawards over $50,000, types of projects funded, 
and other information regarding a recipient’s utilization of the award funds. 
Nonentitlement unit recipients will be required to submit annual Project and Expenditure 
reports until the end of the award period. The initial annual Project and Expenditure report for 
Nonentitlement unit recipients must be submitted to Treasury by October 31, 2021.  The 
subsequent annual reports must be submitted to Treasury by October 31 each year. 
States, territories, metropolitan cities, and counties with a population that exceeds 250,000 
residents will also be required to submit an annual Recovery Plan Performance report to 
Treasury. The Recovery Plan Performance report will include descriptions of the projects 
funded and information on the performance indicators and objectives of the award.  Each annual 
Recovery Plan Performance report must be posted on the public-facing website of the recipient. 
Treasury will provide additional guidance and instructions on the all the reporting requirements 
outlined above for the Fiscal Recovery Funds program at a later date.  
These and related periodic reporting requirements are under consideration and will be 
submitted to OMB for approval under the PRA emergency provisions in the near future.  
Treasury invites comments on all aspects of the reporting and recordkeeping requirements 
including: (a) Whether the collection of information is necessary for the proper performance of 
the functions of the agency, including whether the information has practical utility; (b) the 
accuracy of the estimate of the burden of the collection of information; (c) ways to enhance the 
127

quality, utility, and clarity of the information to be collected; (d) ways to minimize the burden of 
the collection of information; and (e) estimates of capital or start-up costs and costs of operation, 
maintenance, and purchase of services to provide information.  Comments should be sent by the 
comment deadline to the www.regulations.gov docket with a copy to the Office of Information 
and Regulatory Affairs, U.S. Office of Management and Budget, 725 17th Street NW, 
Washington, DC 20503; or email to oira_submission@omb.eop.gov. 
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 are also exempt from the 
RFA 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.  Since this rule is exempt from the 
notice and comment requirements of the APA, Treasury is not required to conduct a regulatory 
flexibility analysis. 
128

RULE TEXT 
List of Subjects in 31 CFR Part 35 
Executive compensation, State and Local Governments, Tribal Governments, Public health 
emergency. 
Title 31—Money and Finance: Treasury 
Part 35 - PANDEMIC RELIEF PROGRAMS 
1. The authority citation for Part 35 is revised to read as follows: 
Authority: 42 U.S.C. 802(f); 42 U.S.C. 803(f); 31 U.S.C. 321; Consolidated Appropriations Act, 
2021 (Pub. L. 116-260), Division N, Title V, Subtitle B; Community Development Banking and 
Financial Institutions Act of 1994 (enacted as part of the Riegle Community and Regulatory 
Improvement Act of 1994 (Pub. L. 103-325)), as amended (12 U.S.C. 4701 et seq.), Section 
104A; Pub. L. 117-2. 
2. Revise the part heading as shown above. 
3. Add 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) 
129

§ 35.1 Purpose. 
This part implements section 9901 of the American Rescue Plan Act (Subtitle M of Title 
IX of Public Law 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. 
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. A 
change in law includes any final legislative or regulatory action, a new or changed administrative 
130

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, Territory, or Tribal government, the 
period that: 
(1) Begins on March 3, 2021; and 
(2) Ends on the last day of the fiscal year of such State, Territory, or Tribal government 
in which all funds received by the State, Territory, or Tribal government 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 
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 
131

diagnostics; home- and community-based health care or assistance with activities of daily living; 
family or child care; 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; 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 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 
sectors as each Governor of a State or Territory, or each Tribal government, may designate as 
critical to protect the health and well-being 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 
132

(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.  
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, 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 does not include revenues from 
utilities.  Revenue from Tribal business enterprises must be included in general revenue.  
Intergovernmental transfers means money received from other governments, including 
grants and shared taxes.  
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. 
133

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) 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. 
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 with respect to any single eligible worker.  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 
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 workers’ current and prospective 
wages or remuneration. 
134

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. 
135

Tribal enterprise means a business concern: 
(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)). 
Unserved and underserved households or businesses means one or more households or 
businesses that are not currently served by a wireline connection that reliably delivers at least 
25 Mbps download speed and 3 Mbps of upload speed. 
136

§ 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 covered period, recipients 
shall provide to the Secretary periodic reports providing detailed accounting of the uses of funds, 
all 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, 
137

including those enumerated in section § 35.6 of this subpart, 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, and any funds not expended to cover such obligations by 
December 31, 2026. 
§ 35.6 Eligible uses. 
(a) In General. Subject to §§ 35.7 and 35.8 of this subpart, a recipient may use funds for 
one or more of the purposes described in paragraphs (b)-(e) 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, including for one or more of the following purposes: 
(1) COVID-19 response and prevention. Expenditures for the mitigation and prevention 
of COVID-19, including: 
(i) Expenses related to COVID-19 vaccination programs and sites, including staffing, 
acquisition of equipment or supplies, facilities costs, and information technology or other 
administrative expenses; 
(ii) COVID–19-related expenses of public hospitals, clinics, and similar facilities; 
(iii) COVID-19 related expenses in congregate living facilities, including skilled nursing 
facilities, long-term care facilities, incarceration settings, homeless shelters, residential foster 
care facilities, residential behavioral health treatment, and other group living facilities; 
138

(iv) Expenses of establishing temporary public medical facilities and other measures to 
increase COVID-19 treatment capacity, including related construction costs and other capital 
investments in public facilities to meet COVID-19-related operational needs; 
(v) Expenses of establishing temporary public medical facilities and other measures to 
increase COVID-19 treatment capacity, including related construction costs and other capital 
investments in public facilities to meet COVID-19-related operational needs; 
(vi) Costs of providing COVID-19 testing and monitoring, contact tracing, and 
monitoring of case trends and genomic sequencing for variants; 
(vii) Emergency medical response expenses, including emergency medical transportation, 
related to COVID-19; 
(viii) Expenses for establishing and operating public telemedicine capabilities for 
COVID-19-related treatment; 
(ix) Expenses for communication related to COVID-19 vaccination programs and 
communication or enforcement by recipients of public health orders related to COVID-19; 
(x) Expenses for acquisition and distribution of medical and protective supplies, 
including sanitizing products and personal protective equipment; 
(xi) Expenses for disinfection of public areas and other facilities in response to the 
COVID-19 public health emergency; 
(xii) Expenses for technical assistance to local authorities or other entities on mitigation 
of COVID-19-related threats to public health and safety; 
(xiii) Expenses for quarantining or isolation of individuals; 
(xiv) Expenses of providing paid sick and paid family and medical leave to public 
employees to enable compliance with COVID-19 public health precautions; 
139

(xv) Expenses for treatment of the long-term symptoms or effects of COVID-19, 
including post-intensive care syndrome; 
(xvi) Expenses for the improvement of ventilation systems in congregate settings, public 
health facilities, or other public facilities; 
(xvii) Expenses related to establishing or enhancing public health data systems; and 
(xviii) Mental health treatment, substance misuse treatment, and other behavioral health 
services. 
(2) Public Health and Safety Staff.  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. 
(3) Hiring State and Local Government Staff. Payroll, covered benefit, and other costs 
associated with the recipient increasing the number of its employees up to the number of 
employees that it employed on January 27, 2020. 
(4) Assistance to Unemployed Workers.  Assistance, including job training, for 
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; 
(5) Contributions to State Unemployment Insurance Trust Funds. Contributions to an 
Unemployment Trust Fund up to the level required to restore the Unemployment Trust Fund to 
its balance on 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 
[INSERT DATE OF PUBLICATION IN THE FEDERAL REGISTER]; 
140

(6) Small Businesses.  Assistance to small businesses, including loans, grants, in-kind 
assistance, technical assistance or other services, that responds to the negative economic impacts 
of the COVID-19 public health emergency; 
(7) Nonprofits. Assistance to nonprofit organizations, including loans, grants, in-kind 
assistance, technical assistance or other services, that responds to the negative economic impacts 
of the COVID-19 public health emergency; 
(8) Assistance to Households. Assistance programs, including cash assistance programs, 
that respond to the COVID-19 public health emergency; 
(9) Aid to Impacted Industries. Aid to tourism, travel, hospitality, and other impacted 
industries that responds to the negative economic impacts of the COVID-19 public health 
emergency; 
(10) 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. 
(11) Survivor’s Benefits. Benefits for the surviving family members of individuals who 
have died from COVID-19, including cash assistance to widows, widowers, or dependents of 
individuals who died of COVID-19; 
(12) Disproportionately Impacted Populations and Communities. A program, service, or 
other assistance that is provided in a Qualified Census Tract, that is provided to households and 
populations living in a Qualified Census Tract, that is provided by a Tribal government, or that is 
provided to other households, businesses, or populations disproportionately impacted by the 
COVID-19 public health emergency, such as: 
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(i) Programs or services that facilitate access to health and social services, including: 
(A) Assistance accessing or applying for public benefits or services; 
(B) Remediation of lead paint or other lead hazards; and 
(C) Community violence intervention programs; 
(ii) Programs or services that address housing insecurity, lack of affordable housing, or 
homelessness, including: 
(A) Supportive housing or other programs or services to improve access to stable, 
affordable housing among individuals who are homeless; 
(B) Development of affordable housing to increase supply of affordable and high-quality 
living units; and 
(C) Housing vouchers and assistance relocating to neighborhoods with higher levels of 
economic opportunity and to reduce concentrated areas of low economic opportunity; 
(iii) Programs or services that address or mitigate the impacts of the COVID-19 public 
health emergency on education, including: 
(A) New or expanded early learning services; 
(B) Assistance to high-poverty school districts to advance equitable funding across 
districts and geographies; and 
(C) Educational and evidence-based services to address the academic, social, emotional, 
and mental health needs of students; 
(iv) Programs or services that address or mitigate the impacts of the COVID-19 public 
health emergency on childhood health or welfare, including: 
(A) New or expanded childcare; 
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(B) 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 
(C) 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. 
(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, 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 
it prioritizes low- and moderate-income persons.  The recipient must provide, whether for 
themselves or on behalf of a grantee, a written justification to the Secretary of how the premium 
pay or grant provided under this paragraph (c) responds to eligible workers performing essential 
work if the premium pay or grant would increase an eligible worker’s total wages and 
remuneration above 150 percent of such eligible worker’s residing State’s average annual wage 
for all occupations or their residing county’s average annual wage, whichever is higher.  
(d) Providing Government Services. For the provision of government services to the 
extent of a reduction in the recipient’s general revenue, calculated according to paragraphs (d)(1) 
and (d)(2). 
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(1) Frequency. A recipient must calculate the reduction in its general revenue using 
information as-of December 31, 2020, December 31, 2021, December 31, 2022, and December 
31, 2023 (each, a calculation date) and following each calculation date. 
(2) Calculation.  A reduction in a recipient’s general revenue equals: 
𝑛𝑛𝑡𝑡 
𝑀𝑀𝑀𝑀𝑀𝑀 {[𝐵𝐵𝑀𝑀𝐵𝐵𝐵𝐵 𝑌𝑌𝐵𝐵𝑀𝑀𝑌𝑌 𝑅𝑅𝐵𝐵𝑅𝑅𝐵𝐵𝑅𝑅𝑅𝑅𝐵𝐵 ∗ (1 + 𝐺𝐺𝑌𝑌𝐺𝐺𝐺𝐺𝐺𝐺ℎ 𝐴𝐴𝐴𝐴𝐴𝐴𝑅𝑅𝐵𝐵𝐺𝐺𝐴𝐴𝐵𝐵𝑅𝑅𝐺𝐺)ቀ12ቁ] − 𝐴𝐴𝐴𝐴𝐺𝐺𝑅𝑅𝑀𝑀𝐴𝐴 𝐺𝐺𝐵𝐵𝑅𝑅𝐵𝐵𝑌𝑌𝑀𝑀𝐴𝐴 𝑅𝑅𝐵𝐵𝑅𝑅𝐵𝐵𝑅𝑅𝑅𝑅𝐵𝐵𝑡𝑡; 0} 
Where: 
(i) Base Year Revenue is the recipient’s general revenue for the most recent full fiscal 
year prior to the COVD-19 public health emergency; 
(ii) Growth Adjustment is equal to the greater of 4.1 percent (or 0.041) and the recipient’s 
average annual revenue growth over the three full fiscal years prior to the COVID-19 public 
health emergency. 
(iii) n equals the number of months elapsed from the end of the base year to the 
calculation date. 
(iv) Actual General Revenue is a recipient’s actual general revenue collected during 12­
month period ending on each calculation date; 
(v) Subscript t denotes the specific calculation date. 
(e) To Make Necessary Investments in Infrastructure. A recipient may use funds to make 
investments in: 
(1) Clean Water State Revolving Fund and Drinking Water State Revolving Fund 
investments. Projects or activities of the type that would be eligible under section 603(c) of the 
Federal Water Pollution Control Act (33 U.S.C. 1383(c)) or section 1452 of the Safe Drinking 
Water Act (42 U.S.C. 300j-12); or, 
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(2) Broadband.  Broadband infrastructure that is designed to provide service to unserved 
or underserved households and businesses and that is designed to, upon completion: 
(A) Reliably meet or exceed symmetrical 100 Mbps download speed and upload speeds; 
or 
(B) 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 meeting the 
standards set forth in paragraph (e)(2)(A) of this section: 
(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. 
§ 35.7 Pensions. 
A recipient 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 
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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 
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(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 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)-(ii). 
§ 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 §§ 35.6 
or 35.7 of this subpart 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 of this 
subpart. 
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(b) Calculation of Amounts Subject to Recoupment – (1) In general. Except as provided 
in paragraph (b)(2), Treasury will calculate any amounts subject to recoupment resulting from a 
violation of §§ 35.6 or 35.7 of this subpart as the amounts used in violation of such restrictions. 
(2) Violations of Section 35.8.  Treasury will calculate any amounts subject to 
recoupment resulting from a violation of § 35.8 of this subpart, equal to the lesser of: 
(i) The amount set forth in § 35.8(c) of this subpart; and, 
(ii) The amount of funds received by such recipient.   
(c) Notice. If Treasury calculates an amount subject to recoupment under paragraph (b) 
of this section, Treasury will provide the recipient a written notice of the amount subject to 
recoupment along with an explanation of such amounts.  
(d) Request for Reconsideration.  Unless Treasury extends the time period, within 60 
calendar days of receipt of a notice of recoupment provided under paragraph (c) of this section, a 
recipient may submit a written request to Treasury 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 Treasury a written request that 
includes: 
(i) An explanation of why the recipient believes all or some of the amount should not be 
subject to recoupment; and 
(ii) A discussion of supporting reasons, along with any additional information.  
(e) Final Amount Subject to Recoupment. Unless Treasury extends the time period, 
within 60 calendar days of receipt of the recipient’s request for reconsideration provided 
pursuant to paragraph (d) of this section, the recipient will be notified of the Secretary’s decision 
to affirm, withdraw, or modify the notice of recoupment.  Such notification will include an 
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explanation of the decision, including responses to the recipient’s supporting reasons and 
consideration of additional information provided. 
(f) Repayment of Funds. Unless Treasury extends the time period, a recipient shall repay 
to the Secretary any amounts subject to recoupment in accordance with instructions provided by 
Treasury: 
(i) 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 
(ii) 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.  
§ 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 the 
date that is 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 at least 30 days 
prior to the date referenced in paragraph (a) the following information: 
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(i) 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, 
(ii) 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 Treasury pursuant to section 603(b)(2)(B) of the Social Security Act shall 
distribute the amount of the payment to nonentitlement units of 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.  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 January 27, 2020, and a State or 
Territory may rely on such certification for purposes of complying with this subsection.  
(c) Units of General Local Government.  Each State or Territory that receives a payment 
from Treasury pursuant to section 603(b)(3)(B)(ii) of the Social Security Act, in the case of an 
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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.  
Dated: 
[
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