Coronavirus State and Local Fiscal Recovery Funds Final Rule, Federal Register (January 27, 2022)
- Date
- 2022-01-27
Summary
A Department of the Treasury final rule on the Coronavirus State and Local Fiscal Recovery Funds, published in the Federal Register, Vol. 87, No. 18, on Thursday, January 27, 2022, at 31 CFR Part 35 (RIN 1505–AC77). The rule adopts as final, with amendments, the interim final rule published on May 17, 2021, and its provisions are effective April 1, 2022. Its introduction states that Treasury has disbursed over $240 billion and received over 1,500 public comments on the interim final rule. An executive summary of major changes covers capital expenditures, premium pay, a standard allowance for revenue loss of up to $10 million, and water, sewer and broadband infrastructure. The rule also sets out ineligible uses, including deposits into a pension fund, and discusses public comments and Treasury's responses on the revenue loss formula.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
Cite this document
“Coronavirus State and Local Fiscal Recovery Funds Final Rule, Federal Register (January 27, 2022).”
Dated 2022-01-27. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/2022-01-27-2022-00292-40baa88e87/
, SHA-256 a6745c939adb734b40ea97a9d9fdaf9317194d1352dbd252eb73c27ff624953d.Full text
4338 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations
DEPARTMENT OF THE TREASURY makes several changes to the provisions exceeded its pre-pandemic size 8 and
of the interim final rule, summarized unemployment had fallen below 5
31 CFR Part 35 below in the section Executive percent,9 but despite this progress, too
RIN 1505–AC77 Summary of Major Changes. many Americans remain unemployed,
Since Treasury issued the interim out of the labor force, or unable to pay
Coronavirus State and Local Fiscal final rule in May 2021, both the public their bills, with this pain particularly
Recovery Funds health and economic situations facing acute among lower-income Americans
the country have evolved. On the public and communities of color. Again,
AGENCY: Department of the Treasury. moving forward, state, local, and Tribal
ACTION: Final rule.
health front, the United States has made
tremendous progress in the fight against governments will remain on the
COVID–19, including a historic frontlines of the economic response and
SUMMARY: The Secretary of the Treasury
vaccination campaign that has reached rebuilding a stronger economy in the
(Treasury) is adopting as final the
over 80 percent of adults with at least aftermath of the pandemic.
interim final rule published on May 17,
However, as state, local, and Tribal
2021, with amendments. This rule one dose and is reaching millions of
governments continue to face
implements the Coronavirus State Fiscal children as well.4 However, the disease
substantial needs to respond to public
Recovery Fund and the Coronavirus continues to present an imminent threat
health and economic conditions, they
Local Fiscal Recovery Fund established to public health, especially among
have also experienced severe impacts
under the American Rescue Plan Act. unvaccinated individuals. As the Delta
from the pandemic and resulting
DATES: The provisions in this final rule variant spread across the country this recession. State, local, and Tribal
are effective April 1, 2022. summer and fall, the United States faced governments cut over 1.5 million jobs in
FOR FURTHER INFORMATION CONTACT: another severe wave of cases, deaths, the early months of the pandemic amid
Katharine Richards, Director, and strain on the healthcare system, sharp declines in revenue and remain
Coronavirus State and Local Fiscal with the risk of hospitalization and over 950,000 jobs below their pre-
Recovery Funds, Office of Recovery mortality exponentially greater to pandemic levels.10 As the Great
Programs, Department of the Treasury, unvaccinated Americans. COVID–19 has Recession demonstrated, austerity
(844) 529–9527. now infected over 50 million and killed among state, local, and Tribal
SUPPLEMENTARY INFORMATION: over 800,000 Americans since January governments can hamper overall
2020; tens of thousands of Americans economic growth and severely curtail
I. Introduction continue to be infected each day.5 Even the ability of governments to serve their
Overview as the nation recovers, new and constituents.
emerging COVID–19 variants may Recognizing these imperatives, the
Since the first case of coronavirus continue to pose threats to both public
disease 2019 (COVID–19) was SLFRF program provides vital resources
health and the economy. Moving for state, local, and Tribal governments
discovered in the United States in forward, state, local, and Tribal
January 2020, the pandemic has caused to respond to the pandemic and its
governments will continue to play a economic effects and to replace revenue
severe, intertwined public health and major role in responding through
economic crises. In March 2021, as lost due to the public health emergency,
vaccination campaigns, testing, and preventing cuts to government services.
these crises continued, the American other services.
Rescue Plan Act of 2021 (ARPA) 1 Specifically, the ARPA provides that
established the Coronavirus State and The economic recovery similarly has SLFRF funds 11 may be used:
made tremendous progress but faces (a) To respond to the public health
Local Fiscal Recovery Funds (SLFRF) to
continued risks from the disease and the emergency or its negative economic
provide state, local, and Tribal
disruptions it has caused. In the early impacts, including assistance to
governments 2 with the resources
months of the pandemic, the United households, small businesses, and
needed to respond to the pandemic and
States experienced the sharpest nonprofits, or aid to impacted industries
its economic effects and to build a
economic downturn on record, with such as tourism, travel, and hospitality;
stronger, more equitable economy (b) To respond to workers performing
during the recovery. The U.S. unemployment spiking to 14.8 percent
in April 2020.6 The economy has essential work during the COVID–19
Department of the Treasury (Treasury)
issued an interim final rule gradually added back jobs, with growth 8 U.S. Bureau of Economic Analysis, Real Gross
implementing the SLFRF program on accelerating in the first half of 2021.7 Domestic Product [GDPC1], retrieved from FRED,
May 10, 2021 3 and has since disbursed However, as the Delta variant spread, Federal Reserve Bank of St. Louis, https://fred.
over $240 billion to state, local, and the intensified health risks and renewed stlouisfed.org/series/GDPC1 (last visited December
disruptions slowed growth, 7, 2021).
Tribal governments and received over 9 U.S. Bureau of Labor Statistics, supra note 6.
1,500 public comments on the interim demonstrating the continued risks from 10 U.S. Bureau of Labor Statistics, All Employees,
final rule. Treasury is now issuing this the virus. By fall 2021, the economy had State Government [CES9092000001] and All
final rule which responds to public Employees, Local Government [CES9093000001],
4 Centers for Disease Control and Prevention, retrieved from FRED, Federal Reserve Bank of St.
comments, implements the ARPA Louis, https://fred.stlouisfed.org/series/
COVID Data Tracker: COVID–19 Vaccinations in the
statutory provisions on eligible and United States, https://covid.cdc.gov/covid-data- CES9092000001 and https://fred.stlouisfed.org/
ineligible uses of SLFRF funds, and tracker/#vaccinations (last visited December 31,
series/CES9093000001 (last visited December 7,
2021).
2021). 11 The ARPA adds section 602 of the Social
1 Public Law 117–2. https://www.congress.gov/ 5 Centers for Disease Control and Prevention,
Security Act, which creates the State Fiscal
117/plaws/publ2/PLAW-117publ2.pdf. COVID Data Tracker, http://www.covid.cdc.gov/
Recovery Fund, and section 603 of the Social
2 Throughout this Supplementary Information, covid-data-tracker/#datatracker-home (last visited
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Security Act, which creates the Local Fiscal
Treasury uses ‘‘state, local, and Tribal December 7, 2021). Recovery Fund (together, SLFRF). Sections 602 and
governments’’ or ‘‘recipients’’ to refer generally to 6 U.S. Bureau of Labor Statistics, Unemployment
603 contain substantially similar eligible uses; the
governments receiving SLFRF funds; this includes Rate [UNRATE], retrieved from FRED, Federal primary difference between the two sections is that
states, territories, Tribal governments, counties, Reserve Bank of St. Louis; https://fred. section 602 establishes a fund for states, territories,
metropolitan cities, and nonentitlement units of stlouisfed.org/series/UNRATE (last visited and Tribal governments and section 603 establishes
local government. December 7, 2021). a fund for metropolitan cities, nonentitlement units
3 86 FR 26786 (May 17, 2021). 7 Id. of local government, and counties.
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Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4339
public health emergency by providing Executive Summary of Major Changes significantly broadens eligible
premium pay to eligible workers; and Clarifications broadband infrastructure investments to
(c) For the provision of government The final rule provides broader address challenges with broadband
services to the extent of the reduction in flexibility and greater simplicity in the access, affordability, and reliability, and
revenue due to the COVID–19 public program, in response to public adds additional eligible water and sewer
health emergency relative to revenues comments. Among other clarifications infrastructure investments, including a
collected in the most recent full fiscal and changes, the final rule provides for broad range of lead remediation and
year prior to the emergency; and the following: stormwater management projects.
(d) To make necessary investments in • Public Health and Negative Structure of the Supplementary
water, sewer, or broadband Economic Impacts: In addition to Information
infrastructure. programs and services, the final rule In addition to this Introduction, this
In addition, Congress specified two clarifies that recipients may use funds Supplementary Information is organized
types of ineligible uses of funds: funds for capital expenditures that support an into four sections: (1) Eligible Uses, (2)
may not be used for deposit into any eligible COVID–19 public health or Restrictions on Use, (3) Program
pension fund or, for states and economic response. For example, Administration Provisions, and (4)
territories only, to directly or indirectly recipients may build certain affordable Regulatory Analyses.
offset a reduction in net tax revenue housing, childcare facilities, schools, The Eligible Uses section describes
resulting from a change in law, hospitals, and other projects consistent the standards to determine eligible uses
regulation, or administrative with the requirements in this final rule of funds in each of the four eligible use
interpretation. and the Supplementary Information. categories:
In addition, the final rule presumes (1) Responding to the public health
Issued May 10, 2021, Treasury’s
that an expanded set of households and and negative economic impacts of the
interim final rule provided further detail
communities are ‘‘impacted’’ or pandemic (which includes several sub-
on eligible uses of funds within the four
‘‘disproportionately impacted’’ by the categories)
statutory categories, ineligible uses of
pandemic, thereby allowing recipients (2) Providing premium pay to
funds, and administration of the
to provide responses to a broad set of essential workers
program. The interim final rule
households and entities without (3) Providing government services to
provided state, local, and Tribal
requiring additional analysis. Further, the extent of revenue loss due to the
governments substantial flexibility to
the final rule provides a broader set of pandemic, and
determine how best to use payments
enumerated eligible uses available for (4) Making necessary investments in
from the SLFRF program to meet the
these communities as part of COVID–19 water, sewer, and broadband
needs of their communities. The interim
public health and economic response, infrastructure.
final rule aimed to facilitate swift and
including making affordable housing, Each eligible use category has
effective implementation by establishing
childcare, and early learning services separate and distinct standards for
a framework for determining the types
eligible in all impacted communities assessing whether a use of funds is
of programs and services that are
and making certain community eligible. Standards, restrictions, or other
eligible under the ARPA along with
development and neighborhood provisions in one eligible use category
examples of eligible uses of funds that
revitalization activities eligible for do not apply to the others. Therefore,
state, local, and Tribal governments may
disproportionately impacted recipients should first determine which
consider.
communities. eligible use category a potential use of
State, local, and Tribal governments Further, the final rule allows for a funds fits within, then assess whether
are already deploying SLFRF funds to broader set of uses to restore and the potential use of funds meets the
make an impact in their communities. support government employment, eligibility standard or criteria for that
The SLFRF program ensures that state, including hiring above a recipient’s pre- category. In the case of uses to respond
local, and Tribal governments have the pandemic baseline, providing funds to to the public health and negative
resources needed to fight the pandemic, employees that experienced pay cuts or economic impacts of the pandemic,
sustain and strengthen the economic furloughs, avoiding layoffs, and recipients should also determine which
recovery, maintain vital public services, providing retention incentives. sub-category the eligible use fits within
and make investments that support • Premium Pay: The final rule offers (i.e., public health, assistance to
long-term growth, opportunity, and more streamlined options to provide households, assistance to small
equity. Treasury looks forward to premium pay, by broadening the share businesses, assistance to nonprofits, aid
supporting and engaging with state, of essential workers who can receive to impacted industries, or public sector
local, and Tribal governments as they premium pay without a written capacity and workforce), then assess
use these funds to make transformative justification while maintaining a focus whether the potential use of funds
investments in their communities. on lower-income and frontline essential meets the eligibility standard for that
Finally, with so many pressing and workers. sub-category. Treasury does not pre-
effective ways to use SLFRF funds, there • Revenue Loss: The final rule offers approve uses of funds; recipients are
is no excuse for waste, fraud, or abuse a standard allowance for revenue loss of advised to review the final rule and may
of these funds. up to $10 million, not to exceed a pursue eligible projects under it.
Treasury received over 1,500 recipient’s SLFRF award amount, In some sections of the rule, Treasury
comments spanning nearly all aspects of allowing recipients to select between a identifies specific uses of funds that are
the interim final rule. The final rule standard amount of revenue loss or eligible, called ‘‘enumerated eligible
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considers and responds to comments, complete a full revenue loss calculation. uses’’; for example, Treasury provides
provides clarification to many aspects of Recipients that select the standard many enumerated eligible uses of funds
the interim final rule, and makes several allowance may use that amount for to respond to the public health and
changes to eligible uses under the government services. negative economic impacts of the
program, summarized immediately • Water, Sewer, and Broadband pandemic. Uses of funds that are not
below. Infrastructure: The final rule specifically named as eligible in this
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4340 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations
final rule may still be eligible in two indirectly a reduction in net tax revenue summarizing opinions expressed in
ways. First, under the revenue loss resulting from a change in state or public comments. Statements using the
eligible use category, recipients have territory law. term ‘‘encourage’’ refer to
broad latitude to use funds for • For all recipients except Tribal recommendations, not requirements.
government services up to their amount governments, funds may not be used for
deposits into a pension fund. II. Eligible Uses
of revenue loss due to the pandemic. A
potential use of funds that does not fit • For all recipients, funds may not be A. Public Health and Negative
within the other three eligible use used for debt service or replenishing Economic Impacts
categories may be permissible as a financial reserves.
government service, which recipients • All recipients must also comply Background
can fund up to their amount of revenue with three general restrictions. First, a
Since the first case of COVID–19 was
loss. For example, transportation recipient may not use SLFRF funds for
discovered in the United States in
infrastructure projects are generally a program, service, or capital
January 2020, the disease has infected
ineligible as a response to the public expenditure that conflicts with or
over 50 million and killed over 800,000
health and negative economic impacts contravenes the statutory purpose of
Americans.12 The disease—and
of the pandemic; however, a recipient ARPA, including a program, service, or
necessary measures to respond—have
could fund these projects as a capital expenditure that includes a term
had an immense public health and
government service up to its amount of or condition that undermines efforts to
economic impact on millions of
revenue loss, provided that other stop the spread of COVID–19. Second,
recipients may not use SLFRF funds in Americans across many areas of life, as
restrictions on use do not apply. See detailed below in the respective sections
sections Revenue Loss and Restrictions violation of the conflict-of-interest
requirements contained in the Award on Public Health and Negative
on Use for further information. Second, Economic Impacts. Since the release of
the eligible use category for responding Terms and Conditions, including any
self-dealing or violation of ethics rules. the interim final rule in May 2021, the
to the public health and negative country has made major progress in
economic impacts of the pandemic Lastly, recipients should be aware that
federal, state, and local laws and fighting the disease and rebuilding the
provides a non-exhaustive list of economy but faces continued risks, as
enumerated eligible uses, which means regulations, outside of SLFRF program
requirements, also apply, including for illustrated by the spread of the Delta
that the listed eligible uses include variant and the resulting slowdown in
some, but not all, of the uses of funds example, environmental laws and
federal civil rights and the economic recovery. The SLFRF
that could be eligible. The Eligible Uses program, and Treasury’s interim final
section provides a standard for nondiscrimination requirements, which
include prohibitions on discrimination rule, provide substantial flexibility to
determining if other uses of funds,
on the basis of race, color, national recipients to respond to pandemic
beyond those specifically enumerated,
origin, sex (including sexual orientation impacts in their local community; this
are eligible. If a recipient would like to
and gender identity), religion, disability, flexibility is designed to help state,
pursue a use of funds that is not
age, or familial status (having children local, and Tribal governments adapt to
specifically enumerated, the recipient
under the age of 18). the evolving public health emergency
should use the standard and other
The Program Administration and tailor their response as needs evolve
guidance provided in the section Public
Provisions section describes the and to the particular local needs of their
Health and Negative Economic Impacts
processes and requirements for communities.
to assess whether the use of funds is
eligible. administering the program on an Indeed, state, local, and Tribal
Next, the Restrictions on Use section ongoing basis, specifically as relates to governments face continued needs to
describes limitations on how funds may the following: Distribution of funds, respond at scale to the public health
be used. Treasury has divided the timeline for using funds, transfer of emergency. This includes continued
Restriction on Use section into (A) funds from a recipient to different public health efforts to slow the spread
statutory restrictions under the ARPA, organizations, use of funds for program of the disease, to increase vaccination
which include (1) offsetting a reduction administration, reporting on use of rates and provide vaccinations to new
in net tax revenue, and (2) deposits into funds, and remediation and recoupment populations as they become eligible, to
pension funds, and (B) other restrictions of funds used for ineligible purposes. Of protect individuals living in congregate
on use, which include (1) debt service note, SLFRF funds may only be used for facilities, and to address the broader
and replenishing reserves, (2) costs incurred within a specific time impacts of the pandemic on public
settlements and judgments, and (3) period, beginning March 3, 2021, with health. Similarly, while a strong
general restrictions. These restrictions all funds obligated by December 31, economic recovery is underway, the
apply to all eligible use categories; 2024 and all funds spent by December economy remains 3.9 million jobs below
however, some restrictions apply only 31, 2026. Recipients are advised to also its pre-pandemic level, pointing to the
to certain types of recipient consult Treasury’s Reporting and continued need for response efforts,
governments, and recipients are advised Compliance Guidance for additional with low-income workers and
to review the final rule to determine information on program administration communities of color facing elevated
which restrictions apply to their type of processes and requirements, including rates of unemployment and economic
government (e.g., state, territory, Tribal applicability of the Uniform Guidance. hardship.13 Long-standing disparities in
government, county, metropolitan city, Finally, the section Regulatory health and economic outcomes in
or nonentitlement unit of government). Analyses provides Treasury’s analysis of
To reiterate, for recipient governments the impacts of this rulemaking, as 12 Centers for Disease Control and Prevention,
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covered by a specific restriction, that required by several laws, regulations, COVID Data Tracker, http://www.covid.cdc.gov/
restriction applies to all eligible use and Executive Orders. covid-data-tracker/#datatracker-home (last visited
Throughout this Supplementary December 31, 2021).
categories and any use of funds under 13 U.S. Bureau of Labor Statistics, All Employees,
the SLFRF program. Specifically: Information, statements using the terms Total Nonfarm [PAYEMS] https://fred.
• For states and territories only, funds ‘‘should’’ or ‘‘must’’ refer to stlouisfed.org/series/PAYEMS (last visited
may not be used to offset directly or requirements, except when used in December 7, 2021).
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Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4341
underserved 14 communities, that pandemic, for disproportionately under this category, the recipient should
amplified and exacerbated the impacts impacted communities. assess whether, and the extent to which,
of the pandemic, also present continued The interim final rule established the there has been an economic harm, such
barriers to full and equitable recovery. method to determine which specific as loss of earnings or revenue, that
As state, local, and Tribal programs or services may be eligible to resulted from the COVID–19 public
governments work to meet the public respond to the public health emergency health emergency and whether, and the
health and economic needs of their or to respond to the negative economic extent to which, the use would respond
communities, these governments are impacts of the public health emergency to or address this harm.17 A recipient
also confronting the need to rebuild within this framework. The interim final should first consider whether an
their own capacity. Facing severe rule included multiple enumerated uses economic harm exists and whether this
budget challenges during the pandemic, that are eligible within each of these harm was caused or made worse by the
many state, local, and Tribal categories when provided to eligible COVID–19 public health emergency.’’
governments have been forced to make populations, including populations that The interim final rule went on to say
cuts to services or their workforces, the interim final rule presumed to have that: ‘‘In addition, the eligible use must
including cutting over 1.5 million jobs been impacted (in the case of public ‘respond to’ the identified negative
from February to May 2020, or delay health responses and responses to economic impact. Responses must be
critical investments. As of fall 2021, negative economic impacts) or related and reasonably proportional to
state, local, and Tribal government disproportionately impacted (in the case the extent and type of harm
employment remained over 950,000 jobs of disproportionately impacted experienced; uses that bear no relation
below pre-pandemic levels.15 In the communities). Finally, the interim final or are grossly disproportionate to the
recovery from the Great Recession, cuts rule also allowed recipients to designate type or extent of harm experienced
to state, local, and Tribal governments additional individuals or classes as would not be eligible uses.’’
became a meaningful drag on economic impacted or disproportionately Throughout this final rule, Treasury
growth for several years, and the SLFRF impacted. The standards for each of refers to households, communities,
program provides the resources needed these criteria under the interim final small businesses, nonprofits, and
to re-invest in vital public services and rule are discussed below. industries that experienced public
workers to avoid this outcome.16 To assess whether a program or health or negative economic impacts of
service would be eligible to respond to the pandemic as ‘‘impacted.’’ The first
1. General Provisions: Structure and the public health emergency or its section in the interim final rule under
Standards negative economic impacts, the interim this eligible use category included
Background: Sections 602(c)(1)(A) final rule stated that, ‘‘the recipient [is public health responses for these
and 603(c)(1)(A) of the Social Security required] to, first, identify a need or impacted classes. The second category
Act establish that recipients may use negative impact of the COVID–19 public in the interim final rule under this
funds ‘‘to respond to the public health health emergency and, second, identify eligible use category included responses
emergency with respect to COVID–19 or how the program, service, or other to the negative economic impacts that
its negative economic impacts, intervention addresses the identified were experienced by these impacted
including assistance to households, need or impact [. . . .] [E]ligible uses classes as a result of the pandemic.
small businesses, and nonprofits, or aid under this category must be in response The interim final rule further
to impacted industries such as tourism, to the disease itself or the harmful recognized that certain populations
travel, and hospitality.’’ The interim consequences of the economic have experienced disproportionate
final rule established three categories disruptions resulting from or health or negative economic impacts
exacerbated by the COVID–19 public during the pandemic, as pre-existing
within this eligible use: (1) Public
health emergency.’’ The enumerated disparities in these communities
health responses for those impacted by
eligible uses were presumed to meet this amplified the impacts of the pandemic.
the pandemic, including the general
criterion. For example, the interim final rule
public; (2) responses to the negative With respect to uses not specifically
economic impacts that were recognized that the negative economic
enumerated in the interim final rule as
experienced by those impacted as a effects of the pandemic were
eligible public health responses, the
result of the pandemic; and (3) particularly pronounced among lower-
interim final rule stated that, ‘‘[t]o assess
additional services, either as a public income families, who were more likely
whether additional uses would be
health response or a response to the eligible under this category, recipients to experience income loss and more
negative economic impacts of the should identify an effect of COVID–19 likely to have a job that required in-
on public health, including either or person work. The interim final rule
14 Treasury uses ‘‘underserved’’ to refer to
both of immediate effects or effects that recognized the role of pre-existing social
populations sharing a particular characteristic, as vulnerabilities and disparities in driving
well as geographic communities, that have been may manifest over months or years, and
systematically denied a full opportunity to assess how the use would respond to or the disparate health and economic
participate in aspects of economic, social, and civic address the identified need.’’ outcomes and presumed that programs
life. In the interim final rule, Treasury generally
With respect to uses not specifically designed to address these health or
used the term ‘‘disadvantaged’’ to refer to these economic disparities are responsive to
same populations and communities. enumerated in the interim final rule as
15 U.S. Bureau of Labor Statistics, All Employees, eligible responses to a negative the public health or negative economic
State Government [CES9092000001] and All economic impact of the public health impacts of the COVID–19 public health
Employees, Local Government [CES9093000001], emergency, the interim final rule stated emergency, when provided in
retrieved from FRED, Federal Reserve Bank of St. disproportionately impacted
Louis, https://fred.stlouisfed.org/series/ that ‘‘[e]ligible uses that respond to the
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CES9092000001 and https://fred.stlouisfed.org/ negative economic impacts of the public communities. In addition to identifying
series/CES9093000001 (last visited December 7, health emergency must be designed to certain populations and communities
2021). address an economic harm resulting
16 Tracy Gordon, State and Local Budgets and the 17 In some cases, a use may be permissible under
Great Recession, Brookings Institution (Dec. 31,
from or exacerbated by the public health another eligible use category even if it falls outside
2012), http://www.brookings.edu/articles/state-and- emergency. In considering whether a the scope of section (c)(1)(A) of section 602 and 603
local-budgets-and-the-great-recession. program or service would be eligible of the Social Security Act.
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4342 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations
presumed to be disproportionately certain services provided in Qualified regarding the broad flexibility provided
impacted, it also empowered recipients Census Tracts (QCTs), to individuals under the interim final rule to pursue
to identify other disproportionately living in QCTs, or by Tribal additional programs that respond to the
impacted households, populations, governments are responsive to public health or negative economic
communities, or small businesses. The disproportionate impacts of the impacts of the pandemic or the process
interim final rule provided that, in pandemic. In addition to the for doing so.
identifying these disproportionately populations presumed to be impacted or Treasury Response: Treasury
impacted communities, recipients disproportionately impacted, under the recognizes that many commenters felt
should be able to support their interim final rule, recipients could the structure of the interim final rule
determination that the pandemic identify other impacted households or could be clarified. These comments are
resulted in disproportionate public classes, as described above, as well as consistent with many of the questions
health or economic outcomes to the other populations, households, or that Treasury has received from
specific populations, households, or geographic areas that are recipients, which requested clarification
geographic areas to be served. disproportionately impacted by the regarding the category their desired
Throughout this final rule, Treasury pandemic. response fits into. Treasury observes
refers to those households, Third, as mentioned previously, the that these comments and questions
communities, small businesses, and interim final rule included a non- generally fall into four categories: (1)
nonprofits that experienced exhaustive list of uses of funds that How to identify the correct public
disproportionate public health or Treasury identified as responsive to the health or negative economic impact
negative economic impacts of the impacts or disproportionate impacts of category for a particular response, (2)
pandemic as ‘‘disproportionately the pandemic. Treasury refers to these how to identify whether a particular use
impacted.’’ The third category in the as ‘‘enumerated eligible uses.’’ is eligible, (3) how to identify an
interim final rule under this eligible use To summarize, the interim final rule impacted or disproportionately
included public health responses and identified certain populations that are impacted class, and (4) whether an
responses to the negative economic presumed to be impacted by the enumerated use can be provided to a
impacts for these disproportionately pandemic (and specific enumerated class other than those presumed
impacted classes. uses of funds that are responsive to that impacted or disproportionately
The interim final rule provided impact) and populations that are impacted. In response to comments,
significant flexibility for recipients to presumed to be disproportionately Treasury is adjusting the structure of the
determine which households, impacted by the pandemic (and specific public health and negative economic
populations, communities, or small enumerated uses of funds that are impacts eligible use section of the final
businesses have been impacted and/or responsive to those disproportionate rule to improve clarity and make it
disproportionately impacted by the impacts). In addition, the interim final
easier for recipients to interpret and
pandemic and to identify appropriate rule provided standards for recipients to
apply the final rule.
responses. The interim final rule assess whether additional uses of funds,
Specifically, Treasury is restructuring
included several provisions to provide beyond the enumerated eligible uses,
the rule to aid recipients in determining
simple methods for recipients to are eligible for impacted and
whether a particular response is eligible
identify impacts and design programs to disproportionately impacted
and how the particular response might
address those impacts. First, the interim populations and permitted recipients to
be eligible under a particular category.
final rule allowed recipients to identify other households or classes that
This restructuring reinforces the
demonstrate a negative economic experienced impacts of the pandemic or
fundamental criteria that a use of funds
impact on a population or class and disproportionate impacts of the
provide assistance to households or pandemic. is eligible based on its responsiveness to
small businesses that fall within that a public health or negative economic
Rule Structure impact experienced by individuals,
population or class. In such cases, the
recipient need only demonstrate that an Public Comment: Many commenters households, small businesses,
individual household or business is expressed concern regarding the nonprofits, or impacted industries
within the class that experienced a structure of the eligible uses, indicating (together ‘‘beneficiaries’’).18 This
negative economic impact, rather than they found the structure of the public restructuring is intended to make the
requiring a recipient to demonstrate that health and negative economic impacts rule easier to navigate and to
each individual household or small section of the interim final rule to be implement, including any criteria or
business experienced a negative confusing or difficult to navigate. Other conditions on particular uses of funds.
economic impact, because the impact commenters indicated that they The reorganization of the public
was already identified for the class. understood the enumerated uses to be health and negative economic impacts
Second, in the interim final rule, the only eligible uses and/or the section of the final rule is also intended
Treasury presumed that certain presumed eligible populations to be the to clarify the enumerated eligible uses
populations have been impacted or only eligible populations. Several described in the interim final rule. The
disproportionately impacted and are commenters expressed frustration about reorganization itself is not intended to
thus eligible for services that respond to the number of eligible uses specifically change the scope of the enumerated
these impacts or disproportionate enumerated in the interim final rule, uses that were included in the interim
impacts. Specifically, the interim final which they considered too few, and final rule or that were allowable under
rule permitted recipients to presume commenters proposed a wide range of the interim final rule. In some cases,
that households that experienced additional enumerated eligible uses (for specific enumerated uses are being
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unemployment, increased food or further discussion, see the section altered, and those changes are discussed
housing insecurity, or are low- or Public Health and section Negative
18 Note that small businesses, nonprofits, and
moderate-income experienced a Economic Impacts). Commenters
industries may also function as subrecipients. For
negative economic impact from the expressed concern with pursuing uses additional information on these distinctions see
pandemic. The interim final rule also of funds not explicitly enumerated in section Distinguishing Subrecipients versus
permitted recipients to presume that the eligible use section or uncertainty Beneficiaries.
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Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4343
as changes within the section on that consider the two eligibility use is reasonably proportional,
enumerated use. requirements discussed below. These recipients should consider relevant
The final rule streamlines and aligns standards apply to all proposed public factors about the harm identified and
services and standards that are generally health uses. the response. For example, recipients
applicable or are provided for public First, there must be a negative public may consider the size of the population
health purposes. Under this approach, health impact or harm experienced by impacted and the severity, type, and
eligible uses to respond to the public an individual or a class. For ease of duration of the impact. Recipients may
health emergency are organized based administration, the interim final rule also consider the efficacy, cost, cost-
on the type of public health problem: (1) allowed, and the final rule maintains effectiveness, and time to delivery of the
COVID–19 mitigation and prevention, the ability for, recipients to identify a response.
(2) medical expenses, (3) behavioral public health impact on a population or If a recipient intends to fund capital
health care, and (4) preventing and group of individuals, referred to as a expenditures in response to the public
responding to violence. Under this ‘‘class,’’ and to provide assistance to health impacts of the pandemic,
approach, eligible uses to respond to the that class. In determining whether an recipients should refer to the section
negative economic impacts of the public individual is eligible for a program Capital Expenditures for details about
health emergency are organized based designed to address a harm experienced the eligibility of capital expenditures.
on the type of beneficiary: (1) Assistance by a class, the recipient need only Standards: Designating a Negative
to households, (2) assistance to small document that the individual is within Economic Impact
businesses, and (3) assistance to the class that experienced a public
nonprofits, alongside a fourth health impact, see section Standards: Public Comment: Many commenters
standalone eligibility category for aid to Designating Other Impacted Classes. In expressed uncertainty about how to
travel, tourism, hospitality, and other the case of some impacts, for example determine whether uses of funds,
impacted industries. The first three impacts of COVID–19 itself that are beyond those specifically enumerated as
categories, assistance to households, addressed by providing prevention and eligible, might be eligible responses to
small businesses, and nonprofits, mitigation services, such a class could negative economic impacts. For
include enumerated eligible uses for reasonably include the general public. example, many commenters submitted
Second, the program, service, or other questions asking whether specific uses
impacted and disproportionately
intervention must address or respond to of funds would be eligible. Others
impacted beneficiaries. This change in
the identified impact or harm. The final described what they considered to be
structure is intended to provide a
rule maintains the interim final rule impacts of the pandemic and argued
framework that clearly identifies the
that uses of funds to respond to these
intended beneficiaries of uses of funds requirement that eligible uses under this
issues should be eligible. Some
and provides clarity about what types of category must be in response to the
commenters requested that Treasury
assistance are ‘‘responsive to the disease itself or other public health
provide additional detail to guide their
pandemic or its negative economic harms that it caused.19
assessments of eligible uses of funds.
impacts’’ for these beneficiaries. Responses must be reasonably
These comments ranged in their
designed to benefit the individual or
a. Standards for Identifying a Public specificity and covered the full range of
class that experienced the public health
Health or Negative Economic Impact eligible uses to respond to negative
impact or harm. Uses of funds should be
economic impacts. Several commenters
Standards: Designating a Public Health assessed based on their responsiveness
asked for clarification about what types
Impact to their intended beneficiaries and the
of food assistance would be considered
Public Comment: Many commenters ability of the response to address the
eligible. Another commenter requested
expressed uncertainty about how to impact or harm experienced by those
that the establishment of outdoor dining
determine whether a use of funds, beneficiaries.
be eligible. Many commenters inquired
beyond those specifically enumerated as Responses must also be related and
about homeless shelters as an eligible
eligible, might be an eligible public reasonably proportional to the extent
use of SLFRF funds.
health response. For example, many and type of public health impact or Commenters also expressed
commenters submitted questions asking harm experienced. Uses that bear no uncertainty about the ability to establish
whether specific uses of funds would be relation or are grossly disproportionate classes, including geographic areas, that
eligible. Others described what they to the type or extent of harm experienced a negative economic impact
considered to be impacts of the experienced would not be eligible uses. or disagreed with the requirement that
pandemic and argued that uses of funds Reasonably proportional refers to the an individual entity be impacted by the
to respond to these issues should be scale of the response compared to the pandemic in order to receive assistance.
eligible. Some commenters requested scale of the harm. It also refers to the For example, a commenter argued that
that Treasury provide additional detail targeting of the response to beneficiaries interventions should not be limited to
to guide their assessments of eligible compared to the amount of harm they individuals or businesses that
uses of funds. For example, a experienced. In evaluating whether a experienced an economic impact and
commenter requested more clarification 19 In designing an intervention to mitigate
should instead be used broadly to
around exactly what and whose medical COVID–19, the recipient should consider guidance support economic growth. These
expenses can be covered. These from public health authorities, particularly the commenters argued that an expenditure
comments ranged in their specificity Centers for Disease Control and Prevention (CDC), that supports a more robust economy
and covered the full range of the in assessing appropriate COVID–19 mitigation and may help combat the pandemic’s
prevention strategies (see Centers for Disease
enumerated eligible uses. negative economic impacts, and it can
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Control and Prevention, COVID–19, https://
Treasury Response: Treasury is www.cdc.gov/coronavirus/2019-ncov/index.html). do so even if funding is provided to
clarifying that when assessing whether A program or service that imposes conditions on individuals or entities that did not
a program or service is an eligible use participation in or acceptance of the service that themselves experience a negative
would undermine efforts to stop the spread of
to respond to the public health impacts COVID–19 or discourage compliance with practices economic impact during the pandemic.
of the COVID–19 public health in line with CDC guidance for stopping the spread Treasury Response: The final rule
emergency, the Department will of COVID–19 is not a permissible use of funds. maintains the standard articulated in
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4344 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations
the interim final rule. For clarity, the educational activities like extending experienced severe harm and in a much
final rule re-articulates that when learning opportunities, among other larger amount to a group that
assessing whether a program or service critical activities. In that case, the experienced relatively little harm. In
is an eligible use to respond to the recipient would only need to identify a evaluating whether a use is reasonably
negative economic impacts of the negative economic impact to the class of proportional, recipients should consider
COVID–19 public health emergency, ‘‘households with children’’ and would relevant factors about the harm
Treasury will consider the two not need to document or otherwise identified and the response. For
eligibility requirements discussed demonstrate that each individual example, recipients may consider the
below. household served experienced a size of the population impacted and the
First, there must be a negative negative economic impact. severity, type, and duration of the
economic impact, or an economic harm, Second, the response must be impact. Recipients may also consider
experienced by an individual or a class. designed to address the identified the efficacy, cost, cost-effectiveness, and
The recipient should assess whether, economic harm or impact resulting from time to delivery of the response.
and the extent to which, there has been or exacerbated by the public health Finally, recipients should be aware of
an economic harm, such as loss of emergency. In selecting responses, the the distinction between beneficiaries of
earnings or revenue, that resulted from recipient must assess whether, and the funds and subrecipients; a recipient
the COVID–19 public health emergency. extent to which, the use would respond may provide services to beneficiaries
A recipient should first consider to or address this harm or impact. This through subrecipients that did not
whether an economic harm exists and approach is consistent with the text of experience a negative economic impact,
then whether this harm was caused or the statute, which provides that funds see section Distinguishing Subrecipients
made worse by the COVID–19 public may be used to ‘‘respond to’’ the versus Beneficiaries. That is, a recipient
health emergency. This approach is ‘‘negative economic impacts’’ of the may award SLFRF funds to an entity
consistent with the text of the statute, public health emergency ‘‘including that did not experience a negative
which provides that funds in this assistance to households, small economic impact in order to implement
category must be used to ‘‘respond to businesses, and nonprofits, or aid to a program or provide a service to
the public health emergency with impacted industries such as tourism, beneficiaries on its behalf. Such
respect to . . . its negative economic travel, and hospitality.’’ The list of transfers, when implementing a public
impacts.’’ potential responses (‘‘assistance’’ or health or negative economic impact
While economic impacts may either ‘‘aid’’) suggests that responses should response, should be responsive to and
be immediate or delayed, individuals or address the ‘‘negative economic designed to benefit individuals,
classes that did not experience a impacts’’ of particular types of households, small businesses,
negative economic impact from the beneficiaries (e.g., households or small nonprofits, or impacted industries that
public health emergency would not be businesses). did experience a public health or
eligible beneficiaries under this Responses must be reasonably negative economic impact.
category. As noted above, the interim designed to benefit the individual or
final rule permitted recipients to Determining the Appropriate Eligible
class that experienced the negative Use Category
presume that households that economic impact or harm. Uses of funds
experienced unemployment, increased should be assessed based on their Public Comment: Some commenters
food or housing insecurity, or are low- responsiveness to their intended expressed uncertainty about how to
or moderate-income experienced a beneficiary and the ability of the analyze negative economic impacts to
negative economic impact from the response to address the impact or harm different entities (e.g., households, small
pandemic. For discussion of the final experienced by that beneficiary.20 businesses, nonprofits). For example,
rule’s approach to this presumption, see Responses must also be related and commenters asked whether a nonprofit,
section Populations Presumed Eligible. reasonably proportional to the extent which did not experience a negative
The final rule also maintains several and type of harm experienced; uses that economic impact itself, could be granted
provisions included in the interim final bear no relation or are grossly funds to provide services to individuals
rule and subsequent guidance that are disproportionate to the type or extent of experiencing homelessness, who did
intended to ease administration of harm experienced would not be eligible experience negative economic impacts.
identifying that the beneficiary uses.21 Reasonably proportional refers Other commenters proposed providing
experienced a negative economic impact to the scale of the response compared to assistance to support the expansion of
or harm. For example, the interim final the scale of the harm. It also refers to the small businesses, under the theory that
rule allowed, and the final rule targeting of the response to beneficiaries this would create more job
maintains the ability for, recipients to compared to the amount of harm they opportunities for unemployed workers
demonstrate a negative economic experienced; for example, it may not be who experienced negative economic
impact on a population or group, reasonably proportional for a cash impacts.
referred to as a ‘‘class,’’ and to provide assistance program to provide assistance Treasury Response: In the final rule,
assistance to households, small in a very small amount to a group that Treasury is clarifying that recipients
businesses, or nonprofits that fall within should assess a potential use of funds
that class. In such cases, the recipient 20 For example, expenses such as excessive based on which beneficiary experienced
need only demonstrate that the compensation to employees or expenses which the negative economic impact, in other
household, small business, or nonprofit have already been reimbursed through another words, the households, small
is within the class that experienced a federal program, are not reasonably designed to
address a negative economic impact to a
businesses, nonprofits, or impacted
negative economic impact, see section beneficiary. industries that experienced the negative
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Standards: Designating Other Impacted 21 For example, a program or service that imposes economic impact.
Classes. This would allow, for example, conditions on participation in or acceptance of the Treasury notes that recipients may
an internet access assistance program service that would undermine efforts to stop the award SLFRF funds to many different
spread of COVID–19 or discourage compliance with
for all households with children to practices in line with CDC guidance for stopping
types of organizations to carry out
support those households’ ability to the spread of COVID–19 is not a permissible use of eligible uses of funds and serve
participate in healthcare, work, and funds. beneficiaries on behalf of a recipient.
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Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4345
When a recipient provides funds to assistance to a small business that presumed to be impacted by the
another entity to carry out eligible uses experienced a pandemic-related loss of pandemic.
of funds and serve beneficiaries the revenue. This small business is a Treasury Response: The final rule
entity becomes a subrecipient (see beneficiary and may use those funds in maintains the presumptions identified
section Distinguishing a Subrecipient many ways, potentially including hiring in the interim final rule and defines
versus a Beneficiary). For example, a or retaining staff. However, general low- and moderate-income for the
recipient may grant funds to a nonprofit assistance to a business that did not purposes of determining which
organization to provide food assistance experience a negative economic impact households and populations recipients
(an eligible use) to low-income under the theory that this assistance may presume to have been impacted. To
households (the beneficiaries). generally grows the economy and simplify the administration of this
Recipients only need to assess whether therefore enhances opportunities for presumption, the final rule adopts a
the beneficiaries experienced a negative unemployed workers would not be an definition of low- and moderate-income
economic impact and whether the eligible use, because such assistance is based on thresholds established and
eligible use responds to that impact, not reasonably designed to impact the used in other federal programs.
consistent with the two-part framework individuals or classes that experienced Definitions. The final rule defines a
described above; the organization a negative economic impact. In other household as low income if it has (i)
carrying out the eligible use does not words, there is not a reasonable income at or below 185 percent of the
need to have experienced a negative connection between the assistance Federal Poverty Guidelines (FPG) for the
economic impact if it is serving as the provided and an impact on the size of its household based on the most
vehicle for reaching the beneficiaries. beneficiaries. Such an activity would be recently published poverty guidelines
When making determinations about attenuated from and thus not reasonably by the Department of Health and Human
how to implement a program, recipients designed to benefit the households that Services (HHS) or (ii) income at or
should consider whether that method of experienced the negative economic below 40 percent of the Area Median
program implementation is an effective impact. Income (AMI) for its county and size of
and efficient method to implement the household based on the most recently
program and do so in accordance with b. Populations Presumed Eligible published data by the Department of
the Uniform Guidance provisions that Presumed Eligibility: Impacted and Housing and Urban Development
govern procurements and sub-granting Disproportionately Impacted (HUD).22
of federal funds, as applicable. Households and Communities The final rule defines a household as
As noted above, recipients should moderate income if it has (i) income at
analyze eligible uses based on the Background: As noted above, the or below 300 percent of the FPG for the
beneficiary of the assistance or the interim final rule allowed recipients to size of its household based on the most
entity that experienced a negative presume that certain households were recently published poverty guidelines
economic impact. Assistance to a small impacted or disproportionately by HHS or (ii) income at or below 65
business or to an impacted industry impacted by the pandemic and thus percent of the AMI for its county and
must respond to a negative economic eligible for responsive programs or size of household based on the most
impact experienced by that small services. Specifically, under the interim recently published data by HUD.23
business or industry. Recipients may final rule, recipients could presume that Recipients may determine whether to
not provide assistance to small a household or population that measure income levels for specific
businesses or impacted industries that experienced unemployment, households or for a geographic area
did not experience a negative economic experienced increased food or housing based on the type of service to be
impact, although recipients can identify insecurity, or is low- or moderate- provided. For example, recipients
negative economic impacts for classes, income experienced negative economic developing a program that serves
rather than individual businesses, and impacts resulting from the pandemic, specific households (e.g., a subsidy for
may also presume that small businesses and recipients may provide services that internet access, a childcare program)
in certain areas experienced impacts; respond to these impacts. may measure income at the household
see section General Provisions: level. Recipients providing a service
The interim final rule also recognized that reaches a general geographic area
Structure and Standards and section
that pre-existing health, economic, and (e.g., a park) may measure median
Assistance to Small Businesses for
social disparities contributed to income of that area.
details.
Several examples illustrate the disproportionate pandemic impacts in Further, recipients should generally
application of these concepts. For certain communities and allowed for a use the income threshold for the size of
example, a recipient could provide broader list of enumerated eligible uses the household to be served (e.g., when
assistance to households via a contract to respond to the pandemic in providing childcare to a household of
with a business to create subsidized jobs disproportionately impacted five, recipients should reference the
for the long-term unemployed; in this communities. Under the interim final income threshold for a household of
case the business is a subrecipient and rule, recipients were allowed to five); however, recipients may use the
need not have experienced a negative presume that families residing in QCTs income threshold for a default
economic impact, but the recipient or receiving services provided by Tribal household size of three if providing
would need to identify a specific governments were disproportionately
connection between the assistance impacted by the pandemic. 22 AMI is also often referred to as median family
income for the area. Since AMI is synonymous with
provided and addressing the negative Definition of Low- and Moderate- this term and used more generally, the final rule
economic impact experienced by the Income refers to AMI.
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unemployed households. The recipient 23 For the six New England states of Connecticut,
could, for instance, document the Public Comment: As noted earlier, Maine, Massachusetts, New Hampshire, Rhode
subsidized jobs created under the many commenters sought a definition Island, and Vermont, HUD provides AMI for towns
rather than counties. Recipients in these states
contract and their reservation for long- for ‘‘low- and moderate-income’’ to should use the AMI corresponding to their town
term unemployed individuals. provide recipients greater clarity on when determining thresholds for both low and
Similarly, a recipient might provide which specific households could be moderate income.
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4346 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations
services that reach a general geographic nevertheless experienced Guidelines for this information, which
area or if doing so would simplify disproportionate impacts from the is updated annually and available on
administration of the program to be pandemic and provide responsive the HHS website.24 For calculating the
provided (e.g., when developing a park, services. See section General Provisions: thresholds of 40 percent and 65 percent
recipients should use the income Standards for Identifying Other Eligible of AMI, recipients should refer to the
threshold for a household size of three Populations for details on applicable annual HUD Section 8 50 percent
and compare it to median income of the standards. income limits by county and household
geographic area to be served). Applicable levels. For reference, the size published by HUD and available on
Note that recipients can also identify FPG is commonly referred to as the the HUD website; in particular,
and serve other classes of households federal poverty level (FPL) and is recipients should calculate the 40
that experienced negative economic related to—although distinct from—the percent threshold as 0.8 times the 50
impacts or disproportionate impacts U.S. Census Bureau’s poverty threshold. percent income limit, and recipients
from the pandemic; recipients can The final rule uses the FPG when should calculate the 65 percent
identify these classes based on their referring specifically to the HHS threshold as 1.3 times the 50 percent
income levels, including above the guidelines, as these are the quantitative income limit.25 Finally, for median
levels defined as low- and moderate- metrics used for determining low- and income of Census Tracts and other
income in the final rule. For example, moderate-income households. geographic areas, recipients should refer
a recipient may identify that households The FPG by household size for 2021 to the most recent American
in their community with incomes above is included in the table below. Community Survey 5-year estimates
the final rule threshold for low-income Recipients should refer to HHS Poverty available through the Census website.26
2021 FEDERAL POVERTY GUIDELINES
48 contiguous
states and the
Household size Alaska Hawaii
District of
Columbia
1 ................................................................................................................................................... $12,880 $16,090 $14,820
2 ................................................................................................................................................... 17,420 21,770 20,040
3 ................................................................................................................................................... 21,960 27,450 25,260
4 ................................................................................................................................................... 26,500 33,130 30,480
5 ................................................................................................................................................... 31,040 38,810 35,700
6 ................................................................................................................................................... 35,580 44,490 40.920
7 ................................................................................................................................................... 40,120 50,170 46,140
8 ................................................................................................................................................... 44,660 55,850 51,360
For families/households with more than 8 persons, add the following amounts for each additional person:
48 Contiguous States and the District of Columbia: $4,540.
Alaska: $5,680.
Hawaii: $5,220.
Source: ‘‘HHS Poverty Guidelines for 2021,’’ available at https://aspe.hhs.gov/topics/poverty-economic-mobility/poverty-guidelines.
Rationale. In defining low income, the program and the Special Supplemental approximately one-quarter of Americans
final rule uses both the FPG and AMI to Nutrition Program for Women, Infants below 185 percent of the poverty
account for national trends and regional and Children employ this metric as threshold, this approach is broad
differences. The metric of 185 percent of well. In addition, 185 percent of the enough to facilitate use of SLFRF funds
FPG aligns with some other programs; FPG for a family of four is $49,025, across many jurisdictions.28 Because
for instance, under the National School which is approximately the wage regions have different cost and income
Lunch Program, students with earnings for a two-earner household in levels, this definition also allows for
household incomes under 185 percent which both earners receive the median upward adjustment based on AMI for
of FPG qualify for free or reduced-price wage in occupations, such as waiters those regions where 40 percent of AMI
lunch, and schools often use eligibility and waitresses and hotel clerks, that exceeds 185 percent of FPG. The metric
for free or reduced-price lunch as an were heavily impacted by COVID–19.27 of 40 percent of AMI is based on the
indicator of low-income status under This measure is targeted toward those at midpoint of values often used to
Title 1–A of the Elementary and the bottom of the income distribution designate certain categories of low-
Secondary Education Act. Eligibility for and thus helps to promote use of SLFRF income households; specifically, it is
other programs, such as the Federal funds towards populations with the the midpoint of the 30 percent income
Communications Commission’s e-Rate greatest needs. At the same time, with limit and the 50 percent income limit
24 U.S. Department of Health and Human Service, State and Metropolitan Area, available at https:// available at https://data.census.gov/cedsci/table?q=
HHS Poverty Guidelines for 2021, available at www.huduser.gov/portal/datasets/il/il21/area- b19013&tid=ACSDT5Y2019.B19013&hidePreview=
https://aspe.hhs.gov/topics/poverty-economic- definitions-FY21.pdf. true.
mobility/poverty-guidelines. 26 The U.S. Census Bureau provides an interactive
27 See U.S. Bureau of Labor Statistics,
25 U.S. Department of Housing and Urban map: U.S. Census Bureau, Median Household
Occupational Employment and Wage Estimates,
lotter on DSK11XQN23PROD with RULES2
Development, FY 2021 Section 8 Income Limits, Income State Selection Map, available at https://
available at https://www.huduser.gov/portal/ data.census.gov/cedsci/map?q=Median https://www.bls.gov/oes/current/oes_nat.htm (last
datasets/il/il21/Section8-FY21.xlsx. Recipients may %20Household%20Income&g=0100000US visited December 7, 2021).
refer to the list of counties (and New England %2404000%24001&tid=ACSST5Y2019.S1901&cid= 28 U.S. Census Bureau, Poverty Status by State,
towns) identified by state and metropolitan area for S1901_C01_012E&vintage=2019. The U.S. Census https://www.census.gov/data/tables/time-series/
identifying the appropriate area. U.S. Department of Bureau also provides an interactive table: U.S. demo/income-poverty/cps-pov/pov-46.html (last
Housing and Urban Development, FY 2021 List of Census Bureau, Median Household Income In The visited December 7, 2021).
Counties (and New England Towns) Identified by Past 12 Months (In 2019 Inflation-Adjusted Dollars),
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Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4347
used in programs such as the families living in QCTs or receiving governments were presumed to be
Community Development Block Grant services from Tribal governments were disproportionately impacted, Treasury
(CDBG) Program. disproportionately impacted by the emphasizes that under the interim final
In defining moderate income, the final pandemic. While many commenters rule recipients could also identify other
rule uses both the FPG and AMI to supported the interim final rule’s households, populations, or geographic
account for national trends and regional recognition of disproportionate impacts areas that were disproportionately
differences. While there are different of the pandemic on low-income impacted by the pandemic and provide
definitions of moderate income, 300 communities, many commenters services to respond.
percent of FPG falls within the range disagreed with treating QCTs as the only The final rule maintains the
commonly used by researchers.29 presumed eligible group of presumptions identified in the interim
Analysis of median wages among a disproportionately impacted final rule, as well as recipients’ ability
sample of occupations likely impacted households, apart from households to identify other impacted or
by the pandemic also suggests that an served by Tribal governments. While disproportionately impacted classes.
income cutoff of 300 percent of FPG acknowledging a potential increase in The final rule also allows recipients to
would include many households with administrative burden, commenters presume that low-income households
workers in such occupations.30 recommended that Treasury presume were disproportionately impacted, and
Moreover, the metric of 300 percent of other households or geographic areas, in as discussed above, defines low- and
FPG covers households that, while addition to QCTs, were moderate-income. Finally, under the
above the poverty line, often lack disproportionately impacted; final rule recipients may also presume
economic security.31 Treasury suggestions included all low- and that households residing in the U.S.
determined the AMI threshold for moderate-income households, territories or receiving services from
moderate income by maintaining the geographic areas designated as territorial governments were
same ratio of FPG multiplier to AMI Opportunity Zones, Difficult disproportionately impacted.
multiplier as in the definition of low Development Areas (DDAs), areas with Households presumed to be impacted:
income. This anchors the threshold to a certain amount of Real Estate Impacted households are those that
the existing definitions of moderate Advantage Program (REAP) recipients, experienced a public health or negative
income from the literature while taking or use of eligibility criteria from the economic impact from the pandemic.
Community Reinvestment Act. One With regard to public health impacts,
into account geographical variation in
commenter generally recommended that recipients may presume that the general
income and expenses in the same
a clearer definition of public experienced public health
manner as the definition of low income.
‘‘disproportionately impacted’’ should impacts from the pandemic for the
Eligibility Presumptions be provided and that any definition purposes of providing services for
Public Comment: Many commenters should include communities of color COVID–19 mitigation and behavioral
believed that a broader range of groups and people of limited means. Another health. In other words, recipients may
recommended specific eligibility for provide a wide range of enumerated
should be considered presumptively
people that had recently interacted with eligible uses in these categories to the
impacted and disproportionately
the criminal justice system. Many general public without further analysis.
impacted, arguing that many
commenters representing Tribal As discussed in the introduction,
households had been affected by the
governments and groups recommended COVID–19 as a disease has directly
pandemic and that broader presumed
a presumption of eligibility for all Tribal affected the health of tens of millions of
eligibility would help recipients provide
uses of funds, clarification that off Americans, and efforts to prevent and
assistance quickly and effectively.
reservation members remained eligible, mitigate the spread of the disease are
Treasury also received many
and broad flexibility on use of funds. needed and in use across the country.
comments on the presumption that
Additionally, commenters noted that Further, the stress of the pandemic and
29 For instance, Melissa Kearney et al. (2013) cap some areas are technically eligible to be resulting recession have affected nearly
the ‘‘struggling lower middle-income class’’ at 250 QCTs but fall short because of the all Americans. Accordingly, the final
percent of the federal poverty level, while Isabel aggregate population of eligible tracts. rule presumes that the general public
Sawhill and Edward Rodrigue (2015) define the One commenter noted that these areas are impacted by and eligible for services
‘‘middle class’’ as those with incomes of at least 300
percent of the poverty line. Melissa Kearney et al., should be considered the same as QCTs to respond to COVID–19 mitigation and
‘‘A Dozen Facts about America’s Struggling Lower- for the purpose of SLFRF funds. Some prevention needs, as well as behavioral
Middle Class,’’ The Hamilton Project (December commenters argued that rural counties health needs.
2013), https://www.hamiltonproject.org/assets/ typically have few QCTs despite high With regard to negative economic
legacy/files/downloads_and_links/THP_12Low impacts, as with the interim final rule,
IncomeFacts_Final.pdf; Isabel Sawhill and Edward
levels of poverty and disruption caused
Rodrigue, ‘‘An Agenda for Reducing Poverty and by the COVID–19 pandemic. Other rural under the final rule recipients may
Improving Opportunity,’’ Brookings Institution, commenters recommended that the presume that a household or population
https://www.brookings.edu/wp-content/uploads/ designation be by county rather than at that experienced unemployment,
2016/07/Sawhill_FINAL.pdf. experienced increased food or housing
30 Data on median annual wages from: U.S.
a more granular level, arguing that the
Bureau of Labor and Statistics, Occupational QCT designation is biased towards insecurity, or is low- or moderate-
Employment and Wage Statistics, available at urban areas and understates the harm income experienced negative economic
https://www.bls.gov/oes/current/oes_nat.htm (last done to rural America. Many impacts resulting from the pandemic.
visited December 7, 2021). commenters representing Tribal The final rule’s definition of low- and
31 For instance, households earning between 200
governments supported the moderate-income, by providing
and 300 percent of the FPG have significantly
presumption that services provided by standard metrics based on widely
lotter on DSK11XQN23PROD with RULES2
higher rates of food and housing insecurity than
those earning above 300 percent of the FPG. Table Tribal governments respond to available data, is intended to simplify
1, Kyle J. Caswell and Stephen Zuckerman, Food disproportionate impacts. administration for recipients.
Insecurity, Housing Hardship, and Medical Care Households presumed to be
Utilization, Urban Institute (June 2018), https:// Treasury Response disproportionately impacted:
www.urban.org/sites/default/files/publication/
98701/2001896_foodinsecurity_housinghardship_ Summary: While households residing Disproportionately impacted
medicalcareutilization_finalized.pdf. in QCTs or served by Tribal households are those that experienced a
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4348 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations
disproportionate, or meaningfully more communities disproportionately administration that can significantly
severe, impact from the pandemic. As impacted by the pandemic, in addition ease administrative burden on both
discussed in the interim final rule, pre- to those presumed to be program administrators and
existing disparities in health and disproportionately impacted. beneficiaries.
economic outcomes magnified the Additionally, Tribal and territorial Treasury Response: Treasury agrees
impact of the COVID–19 public health governments may face both that allowing recipients to identify
emergency on certain households and disproportionate impacts of the impacted and disproportionately
communities. As with the interim final pandemic and administrability impacted beneficiaries based on their
rule, under the final rule recipients may challenges with operationalizing the eligibility for other programs with
presume that households residing in income-based standard; therefore, similar income tests would ease
QCTs or receiving services provided by Treasury has presumed that services administrative burden. To the extent
Tribal governments were provided by these governments respond that the other program’s eligibility
disproportionately impacted by the to disproportionate pandemic impacts. criteria align with a population or class
pandemic. In addition, under the final Given a lack of regularly published data that experienced a negative economic
rule recipients may presume that low- on household incomes in most impact of the pandemic, this approach
income households were territories,32 as well as a lack of poverty is also consistent with the process
disproportionately impacted by the guidelines developed for these allowed under the final rule for
pandemic. Finally, under the final rule jurisdictions,33 it may be highly recipients to determine that a class has
recipients may also presume that challenging to assess disproportionate experienced a negative economic
households residing in the U.S. impact in these communities according impact, and then document that an
territories or receiving services from to an income- or poverty-based individual receiving services is a
territorial governments were standard. Similarly, data on incomes in member of the class. For these reasons,
disproportionately impacted. Tribal communities are not readily the final rule recognizes categorical
Treasury notes that households available.34 Finally, as described in the eligibility for the following programs
presumed to be disproportionately sections on Public Health and Negative and populations:
impacted would also be presumptively Economic Impacts, Tribal communities • Impacted households. Treasury will
impacted, as these households have not have faced particularly severe health recognize a household as impacted if it
only experienced pandemic impacts but and economic impacts of the pandemic.
otherwise qualifies for any of the
have experienced disproportionate Similarly, available research suggests
following programs:
pandemic impacts; as a result, these that preexisting health and economic
Æ Children’s Health Insurance
households are presumptively eligible disparities in the territories amplified
for responsive services for both the impact of the pandemic on these Program (CHIP)
impacted and disproportionately communities.35 Æ Childcare Subsidies through the
impacted households. Child Care and Development Fund
Many different geographic, income- Categorical Eligibility (CCDF) Program
based, or poverty-based presumptions Public Comment: Several commenters Æ Medicaid
could be used to designate suggested that the final rule permit Æ National Housing Trust Fund
disproportionately impacted recipients to rely on a beneficiary’s (HTF), for affordable housing programs
populations. The combination of eligibility for other federal benefits only
permitting recipients to use QCTs, low- programs as an easily administrable Æ Home Investment Partnerships
income households, and services proxy for identifying a group or Program (HOME), for affordable housing
provided by Tribal or territorial population that experienced a negative programs only
governments as presumptions balances economic impact as a result of the • Disproportionately impacted
these varying methods. Specifically, COVID–19 public health emergency households. Treasury will recognize a
QCTs are a commonly used designation (i.e., categorical eligibility). In other household as disproportionately
of geographic areas based on low words, a recipient would determine that impacted if it otherwise qualifies for any
incomes or high poverty rates of individuals or households are eligible of the following programs:
households in the community; for for an SLFRF-funded program based on Æ Temporary Assistance for Needy
recipients providing geographically the individual or household’s eligibility Families (TANF)
targeted services, QCTs may provide a in another program, typically another Æ Supplemental Nutrition Assistance
simple metric with readily available federal benefit program. Commenters Program (SNAP)
maps for use. However, Treasury noted that categorical eligibility is a Æ Free and Reduced-Price Lunch
recognizes that QCTs do not capture all common policy in program (NSLP) and/or School Breakfast (SBP)
underserved populations, including for programs
reasons noted by commenters. By 32 For instance, the American Community Survey
Æ Medicare Part D Low-income
allowing recipients to also presume that does not include all territories. U.S. Census Bureau,
Areas Published, https://www.census.gov/ Subsidies
low-income households were programs-surveys/acs/geography-acs/areas- Æ Supplemental Security Income
disproportionately impacted, the final published.html (last visited November 9, 2021). (SSI)
rule provides greater flexibility to serve 33 U.S. Department of Health and Human
Æ Head Start and/or Early Head Start
underserved households or Services, supra note 24.
34 For instance, data from the American Æ Special Supplemental Nutrition
communities. Data on household
Community Survey is based on geographical Program for Women, Infants, and
incomes is also readily available at
varying levels of geographic granularity
location rather than Tribal membership. U.S. Children (WIC)
Census Bureau, My Tribal Area, https://
lotter on DSK11XQN23PROD with RULES2
(e.g., Census Tracts, counties), again www.census.gov/Tribal/Tribal_glossary.php.
Æ Section 8 Vouchers
permitting flexibility to adapt to local 35 Lina Stoylar et. al., Challenges in the U.S. Æ Low-Income Home Energy
circumstances and needs. Finally, Territories: COVID–19 and the Medicaid Financing Assistance Program (LIHEAP)
Cliff, Kaiser Family Foundation (May 18, 2021), Æ Pell Grants
Treasury notes that, as discussed further https://www.kff.org/coronavirus-covid-19/issue-
below, recipients may also identify brief/challenges-in-the-u-s-territories-covid-19-and-
Æ For services to address educational
other households, populations, and the-medicaid-financing-cliff/. disparities, Treasury will recognize Title
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Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4349
I eligible schools 36 as likely to be responsive to the harms interpretive framework discussed above,
disproportionately impacted and identified. That is, as the group of including presumptions of groups
responsive services that support the entities being served by a program has disproportionately impacted, as well as
school generally or support the whole a wider set of fact patterns, or the type the ability to identify other
school as eligible of entities, their circumstances, or their disproportionately impacted
pandemic experiences differ more populations, households, or geographies
c. Standards for Identifying Other substantially, it may be more difficult to (referred to here as disproportionately
Eligible Populations determine that the class has actually impacted classes).
Standards: Designating Other Impacted experienced the same or similar As discussed in the interim final rule,
Classes negative economic impact and that the in identifying other disproportionately
response is appropriately tailored to impacted classes, recipients should be
Public Comment: Treasury received
address that impact. able to support their determination that
multiple comments requesting
the pandemic resulted in
additional clarification about how Standard: Designating Other disproportionate public health or
classes of impacted individuals may be Disproportionately Impacted Classes economic outcomes to the specific
designated, as well as questions asking Summary of Interim Final Rule: As populations, households, or geographic
whether recipients must demonstrate a noted above, the interim final rule areas to be served. For example, the
specific public health or negative provided a broad set of enumerated interim final rule considered data
economic impact to each entity served eligible uses of funds in regarding the rate of COVID–19
(e.g., each household receiving disproportionately impacted infections and deaths in low-income
assistance under a program). There were communities, including to address pre- and socially vulnerable communities,
several comments requesting that existing disparities that contributed to noting that these communities have
specific geographic designations, like a more severe pandemic impacts in these experienced the most severe health
county or Impact Zone, be eligible to communities. The interim final rule impacts, compared to national averages.
use as a determining boundary. presumed that these services are eligible Similarly, the interim final rule
Treasury Response: The interim final uses when provided in a QCT, to considered the high concentration of
rule allowed, and the final rule families and individuals living in QCTs, low-income workers performing
maintains, the ability for recipients to or when these services are provided by essential work, the reduced ability to
demonstrate a public health or negative Tribal governments. Recipients may also socially distance, and other pre-existing
economic impact on a class and to provide these services to ‘‘other public health challenges, all of which
provide assistance to beneficiaries that populations, households, or geographic correlate with more severe COVID–19
fall within that class. Consistent with areas disproportionately impacted by outcomes. The interim final rule also
the scope of beneficiaries included in the pandemic’’ and, in identifying these considered the disproportionate
sections 602(c)(1)(A) and 603(c)(1)(A) of disproportionately impacted economic impacts of the pandemic,
the Social Security Act, Treasury is communities, should be able to support citing, for example, the rate of job losses
clarifying that a recipient may identify their determination that the pandemic among low-income persons as compared
such impacts for a class of households, resulted in disproportionate public to the general population. The interim
small businesses, or nonprofits. In such health or economic outcomes to the final rule then identified QCTs, a
cases, the recipient need only group identified. common, readily accessible, and
demonstrate that the household, small Public Comment: A significant geographically granular method of
business, or nonprofit is within the number of commenters expressed identifying communities with a large
relevant class. For example, a recipient uncertainty regarding the process for proportion of low-income residents, as
could determine that restaurants in the determining eligibility for presumed to be disproportionately
downtown area had generally disproportionately impacted impacted by the pandemic.
experienced a negative economic impact communities beyond QCTs. A In other words, the interim final rule
and provide assistance to those small commenter noted that a clearer identified disproportionately impacted
businesses to respond. When providing definition of ‘‘disproportionately populations by assessing the impacts of
this assistance, the recipient would only impacted’’ should be delineated and the pandemic and finding that some
need to demonstrate that the small that any definition should include populations experienced meaningfully
businesses receiving assistance were communities of color and people of more severe impacts than the general
restaurants in the downtown area. The limited means. Some commenters public. Similarly, to identify
recipient would not need to suggested a template or checklist to see disproportionately impacted classes,
demonstrate that each restaurant served if an area meets the standard for recipients should compare the impacts
experienced its own negative economic disproportionately impacted experienced by that class to the typical
impact. communities outside of QCTs. Some or average impacts of the pandemic in
In identifying an impacted class and commenters stated that QCT and non- their local area, state, or nationally.
responsive program, service, or capital QCT beneficiaries should be treated the Recipients may identify classes of
expenditure, recipients should consider same. households, communities, small
the relationship between the definition Treasury Response: Under the interim businesses, nonprofits, or populations
of the class and proposed response. final rule, presuming eligibility for that have experienced a
Larger and less-specific classes are less services in QCTs, for populations living disproportionate impact based on
likely to have experienced similar in QCTs, and for Tribal governments academic research or government
harms and thus the responses are less was intended to ease administrative research publications, through analysis
lotter on DSK11XQN23PROD with RULES2
burden, providing a simple path for of their own data, or through analysis of
36 Title I eligible schools means schools eligible to recipients to offer services in other existing data sources. To augment
receive services under section 1113 of Title I, Part underserved communities, and is not an their analysis, or when quantitative data
A of the Elementary and Secondary Education Act
of 1965, as amended (20 U.S.C. 6313), including
exhaustive list of disproportionately is not readily available, recipients may
schools served under section 1113(b)(1)(C) of that impacted communities. To further also consider qualitative research and
Act. clarify, the final rule codifies the sources like resident interviews or
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4350 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations
feedback from relevant state and local In December 2020, the Food and Drug funds to support a vaccine incentive
agencies, such as public health Administration (FDA) authorized program, providing $100 gift cards to
departments or social services COVID–19 vaccines for emergency use, residents at community vaccination
departments. In both cases, recipients and soon thereafter, mass vaccination in clinics. The program aimed to target
should consider the quality of the the United States began. At the time of communities with high public health
research, data, and applicability of the interim final rule publication in May needs.43 Another recipient reported that
analysis to their determination. 2021, the number of daily new it is partnering with multiple agencies,
In designing a program or service that infections was steeply declining as organizations, and providers to
responds to a disproportionately rapid vaccination campaigns progressed distribute COVID–19 vaccinations to
impacted class, a recipient must first across the country. By summer 2021, homebound residents in assisted living
identify the impact and then identify an COVID–19 cases had fallen to their facilities.44
appropriate response. To assess lowest level since early months of the State, local, and Tribal governments
disproportionate impact, recipients pandemic, when testing was scarce. have also continued to execute other
should rely on data or research that However, throughout late summer and aspects of a wide-ranging public health
measures the public health or negative early fall, the Delta variant, a more response, including increasing access to
economic impact. An assessment of the infectious and transmittable variant of COVID–19 testing and rapid at-home
effects of a response (e.g., survey data on the SARS–CoV–2 virus, sparked yet tests, contact tracing, support for
levels of resident support for various another surge. From June to early individuals in isolation or quarantine,
potential responses) is not a substitute September, the seven-day moving enforcement of public health orders,
for an assessment of the impact average of reported cases rose from new public communication efforts,
experienced by a particular class. Data 12,000 to 165,000.39 public health surveillance (e.g.,
about the appropriateness or desirability As of December 2021, COVID–19 in monitoring case trends and genomic
of a response may be used to assess the total has infected over 50 million and sequencing for variants), enhancement
reasonableness of a response, once an killed over 800,000 Americans.40 to health care capacity through
impact or disproportionate impact has Preventing and mitigating the spread of alternative care facilities, and
been identified but should not be the COVID–19 continues to require a major enhancement of public health data
basis for assessing impact. public health response from federal, systems to meet new demands or scaling
state, local, and Tribal governments. needs.
2. Public Health State, local, and Tribal governments
First, state, local, and Tribal
Background governments across the country have have also supported major efforts to
On January 21, 2020, the Centers for mobilized to support the national prevent COVID–19 spread through
Disease Control and Prevention (CDC) vaccination campaign. As of December safety measures at key settings like
identified the first case of novel 2021, more than 80 percent of adults nursing homes, schools, congregate
coronavirus in the United States.37 have received at least one dose, with living settings, dense worksites,
Since that time, and through present more than 470 million total doses incarceration settings, and in other
day, the United States has faced administered.41 Additionally, more than public facilities. This has included, for
numerous waves of the virus that have 15 million children over the age of 12 example, implementing infection
brought acute strain on health care and have received at least one dose of the prevention measures or making
public health systems. At various points vaccine and over 47 million people have ventilation improvements.
in the pandemic, hospitals and received a booster dose.42 Vaccines for In particular, state, local, and Tribal
emergency medical services have seen younger children, ages 5 through 11, governments have mounted significant
significant influxes of patients; response have been approved and are reaching efforts to safely reopen schools. A key
personnel have faced shortages of communities and families across the factor in school reopening is the ability
personal protective equipment; testing country. As new variants continue to to implement COVID–19 mitigation
for the virus has been scarce; and emerge globally, the national effort to strategies such as providing masks and
congregate living facilities like nursing administer vaccinations and other other hygiene resources, improving air-
homes have seen rapid spread. COVID–19 mitigation strategies will be quality and ventilation, increasing
Since the initial wave of the COVID– a critical component of the public outdoor learning and eating spaces,
19 pandemic, the United States has health response. testing and contact tracing protocols,
faced several additional major waves In early reporting on uses of SLFRF and a number of other measures.45 For
that continued to impact communities funds, recipients have indicated that example, one recipient described plans
and stretch public health services. The they plan to put funds to immediate use to use SLFRF funds to further invest in
summer 2020 wave impacted to support continued vaccination school health resources that were
communities in the south and campaigns. For example, one recipient critical components of school reopening
southwest. As the weather turned colder has indicated that it plans to use SLFRF and reducing the spread of COVID–19 in
and people spent more time indoors, a schools. Those investments include the
wave throughout fall and winter 2020 19 Cases and Deaths in the US Reported to CDC, increasing school nurses and social
impacted communities in almost every by State/Territory, https://covid.cdc.gov/covid-data-
region of the country as the virus tracker/#trends_dailytrendscases (last visited 43 Columbus, Ohio Recovery Plan, https://
December 7, 2021). www.columbus.gov/recovery/.
reached a point of uncontrolled spread 39 Id. 44 Luzerne County, Pennsylvania Recovery Plan,
and over 3,000 people died per day due 40 Centers for Disease Control and Prevention,
https://www.luzernecounty.org/DocumentCenter/
to COVID–19.38 COVID Data Tracker, http://www.covid.cdc.gov/ View/26304/Final-Interim-Recovery-Plan-
covid-data-tracker/#datatracker-home (last visited Performance-Report-83121.
lotter on DSK11XQN23PROD with RULES2
37 Press Release, Centers for Disease Control and December 31, 2021). 45 This includes implementing mitigation
41 Centers for Disease Control and Prevention,
Prevention, First Travel-related Case of 2019 Novel strategies consistent with the Centers for Disease
Coronavirus Detected in United States (Jan. 21, COVID Data Tracker: COVID–19 Vaccinations in the Control and Prevention’s (CDC) Guidance for
2020), https://www.cdc.gov/media/releases/2020/ United States, https://covid.cdc.gov/covid-data- COVID–19 Prevention in K–12 Schools (November
p0121-novel-coronavirus-travel-case.html. tracker/#vaccinations (last visited December 7, 5, 2021), available at https://www.cdc.gov/
38 Centers for Disease Control and Prevention, 2021). coronavirus/2019-ncov/community/schools-
COVID Data Tracker: Trends in Number of COVID– 42 Id. childcare/k-12-guidance.html.
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Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4351
workers, improved ventilation systems, substance use to cope with stress related libraries, and other public spaces.57
and other health and safety measures. to COVID–19 and 26 percent reported Similarly, Los Angeles County will
The need for public health measures having symptoms of trauma- and further invest in its ‘‘Care First, Jails
to respond to COVID–19 will continue stressor-related disorder (TRSD) related Last’’ program which seeks to replace
moving forward. This includes the to the pandemic.50 ‘‘arrest and incarceration’’ responses
continuation of vaccination campaigns with health interventions.58
Another public health challenge
for the general public, booster doses, While the pandemic affected
exacerbated by the pandemic was
and children. This also includes communities across the country, it
monitoring the spread of COVID–19 violent crime and gun violence, which
disproportionately impacted some
variants, understanding the impact of increased during the pandemic and has
demographic groups and exacerbated
these variants, developing approaches to disproportionately impacted low-
health inequities along racial, ethnic,
respond, and monitoring global COVID– income communities.51 According to
and socioeconomic lines.59 The CDC
19 trends. Finally, the long-term health the Federal Bureau of Investigation
has found that racial and ethnic
impacts of COVID–19 will continue to (FBI), although the property crime rate
minorities are at increased risk for
require a public health response, fell 8 percent in 2020, the violent crime
infection, hospitalization, and death
including medical services for rate increased 6 percent in 2020
from COVID–19, with Hispanic or
individuals with ‘‘long COVID,’’ and compared to 2019 data.52 In particular,
Latino and Native American or Alaska
research to understand how COVID–19 the estimated number of aggravated Native patients at highest risk.60
impacts future health needs and raises assault offenses rose 12 percent, while Similarly, low-income and socially
risks for the tens of millions of murder and manslaughter increased 30 vulnerable communities have seen the
Americans who have been infected. percent from 2019 to 2020.53 The most severe health impacts. For
The COVID–19 pandemic also proportion of homicides committed example, counties with high poverty
negatively impacted other areas of with firearms rose from 73 percent in rates also have the highest rates of
public health, particularly mental health 2019 to 76 percent in 2020.54 Exposure infections and deaths, with 308 deaths
and substance use. In January 2021, over to violence can create serious short-term per 100,000 compared to the U.S.
40 percent of American adults reported and long-term harmful effects to health average of 238 deaths per 100,000, as of
symptoms of depression or anxiety, up and development, and repeated December 2021.61 Counties with high
from 11 percent in the first half of exposure to violence may be connected social vulnerability, as measured by
2019.46 The mental health impacts of to negative health outcomes.55 factors such as poverty and educational
the pandemic have been particularly Addressing community violence as a attainment, have also fared more poorly
acute for adults ages 18 to 24, racial and public health issue may help prevent than the national average, with 325
ethnic minorities, caregivers for adults, and even reduce additional harm to deaths per 100,000 as of December
and essential workers, with all reporting individuals, households, and 2021.62 Over the course of the
significantly higher rates of considering communities.56
suicide.47 The proportion of children’s 57 St. Louis, MO Recovery Plan, https://
Many communities are using SLFRF
emergency department visits related to www.stlouis-mo.gov/government/recovery/covid-19/
funds to invest in holistic approaches in
mental health has also risen arpa/plan/.
violence prevention that are rooted in 58 Los Angeles County, CA Recovery Plan, http://
noticeably.48 Similarly, rates of
targeted outreach and addressing root file.lacounty.gov/SDSInter/bos/supdocs/
substance use and overdose deaths have
causes. For example, the City of St. 160391.pdf.
spiked: Preliminary data from the CDC 59 Office of the White House, National Strategy for
show a nearly 30 percent increase in Louis is planning to invest in expanding
the COVID–19 Response and Pandemic
drug overdose mortality from April 2020 a ‘‘community responder’’ model Preparedness (Jan. 21, 2021), https://
to April 2021, bringing the estimated designed to provide clinical help and to www.whitehouse.gov/wp-content/uploads/2021/01/
overdose death toll for a 12-month divert non-violent calls away from the National-Strategy-for-the-COVID-19-Response-and-
police department. Additionally, the Pandemic-Preparedness.pdf.
period over 100,000 for the first time 60 In a study of 13 states from October to
ever.49 The CDC also found that 13 city will expand access to mental health December 2020, the CDC found that Hispanic or
percent of adults started or increased services, allowing residents to seek Latino and Native American or Alaska Native
support at city recreation centers, individuals were 1.7 times more likely to visit an
46 Nirmita Panchal et al., The Implications of
emergency room for COVID–19 than White
individuals, and Black individuals were 1.4 times
COVID–19 for Mental Health and Substance Abuse 50 Panchal, supra note 46; Mark É. Czeisler et al.,
more likely to do so than White individuals. See
(Feb. 10, 2021), https://www.kff.org/coronavirus supra note 46. Sebastian D. Romano et al., Trends in Racial and
covid-19/issue-brief/the-implications-of-covid-19- 51 The White House, FACT SHEET: More Details
Ethnic Disparities in COVID–19 Hospitalizations,
for-mental-health-and-substance-use/#:∼:text= on the Biden-Harris Administration’s Investments
Older%20adults%20are%20also%20 more, by Region—United States, March–December 2020,
in Community Violence Interventions (April 7, MMWR Morb Mortal Wkly Rep 2021, 70:560–565
prior%20to%20the%20current%20crisis; Mark É. 2021), https://www.whitehouse.gov/briefing-room/
Czeisler et al., Mental Health, Substance Abuse, and (Apr. 16, 2021), https://www.cdc.gov/mmwr/
statements-releases/2021/04/07/fact-sheet-more- volumes/70/wr/mm7015e2.htm?s_cid=mm7015e2_
Suicidal Ideation During COVID–19 Pandemic— details-on-the-biden-harris-administrations-
United States, June 24–30 2020, Morb. Mortal. w.
investments-in-community-violence-interventions/. 61 Centers for Disease Control and Prevention,
Wkly. Rep. 69(32):1049–57 (Aug. 14, 2020), https:// 52 Federal Bureau of Investigation, FBI Releases
www.cdc.gov/mmwr/volumes/69/wr/ COVID Data Tracker: Trends in COVID–19 Cases
mm6932a1.htm. 2020 Crime Statistics (September 27, 2021) https:// and Deaths in the United States, by County-level
47 Id. www.fbi.gov/news/pressrel/press-releases/fbi- Population Factors, https://covid.cdc.gov/covid-
48 Rebecca T. Leeb et al., Mental Health-Related
releases-2020-crime-statistics. data-tracker/#pop-factors_totaldeaths (last visited
53 Id.
Emergency Department Visits Among Children December 7, 2021).
54 Id. 62 The CDC’s Social Vulnerability Index includes
Aged <18 Years During the COVID Pandemic—
55 The Educational Fund to Stop Gun Violence, fifteen variables measuring social vulnerability,
United States, January 1–October 17, 2020, Morb.
Community Gun Violence, https://efsgv.org/learn/ including unemployment, poverty, education
lotter on DSK11XQN23PROD with RULES2
Mortal. Wkly. Rep. 69(45):1675–80 (Nov. 13, 2020),
https://www.cdc.gov/mmwr/volumes/69/wr/ type-of-gun-violence/community-gun-violence/ (last levels, single-parent households, disability status,
mm6945a3.htm. visited November 9, 2021). non-English speaking households, crowded
49 Centers for Disease Prevention and Control, 56 Giffords Law Center, Healing Communities in housing, and transportation access.
National Center for Health Statistics, Provisional Crisis: Lifesaving Solutions to the Urban Gun Centers for Disease Control and Prevention,
Drug Overdose Death Counts, https://www.cdc.gov/ Violence Epidemic (March 2016), https://giffords. COVID Data Tracker: Trends in COVID–19 Cases
nchs/nvss/vsrr/drug-overdose-data.htm (last visited org/wp-content/uploads/2019/01/Healing- and Deaths in the United States, by Social
May 8 December 6, 2021). Communities-in-Crisis.pdf. Continued
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4352 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations
pandemic, Native Americans have Summary of the Interim Final Rule proposing additional enumerated
experienced more than one and a half Approach to Public Health eligible uses.
times the rate of COVID–19 infections, Summary: As discussed above, the Reorganizations and Cross-
more than triple the rate of interim final rule provided flexibility for References: In some cases, enumerated
hospitalizations, and more than double recipients to pursue a wide range of eligible uses included in the interim
the death rate compared to White eligible uses to ‘‘respond to’’ the final rule under responding to the
Americans.63 Low-income and minority COVID–19 public health emergency. public health emergency have been re-
communities also exhibit higher rates of categorized in the organization of the
Uses of funds to ‘‘respond to’’ the public
pre-existing conditions that may final rule to enhance clarity. For
health emergency address the SARS-
contribute to an increased risk of discussion of eligible uses for public
CoV–2 virus itself, support efforts to
COVID–19 mortality.64 In addition, health and safety staff and to improve
prevent or decrease spread of the virus,
individuals living in low-income the design and execution of public
and address other impacts of the
communities may have had more health programs, please see section
pandemic on public health. The interim
limited ability to socially distance or to Public Sector Capacity and Workforce in
final rule implemented these provisions
self-isolate when ill, resulting in faster General Provisions: Other. For
by identifying a non-exhaustive list of
spread of the virus, and were over- discussion of eligible uses to address
programs or services that may be funded
represented among essential workers, disparities in public health outcomes,
as responding to COVID–19 please see section Assistance to
who face greater risk of exposure.65
Social distancing measures in (‘‘enumerated eligible uses’’), along with Households in Negative Economic
response to the pandemic may have also considerations for evaluating other Impacts.
exacerbated pre-existing public health potential uses of funds not explicitly Conversely, discussion of eligible
challenges. For example, for children listed. Enumerated eligible uses are assistance to small businesses and
living in homes with lead paint, discussed below. For guidance on how nonprofits to respond to public health
spending substantially more time at to determine whether a particular use is impacts has been moved from
home raises the risk of developing allowable, beyond those enumerated, Assistance to Small Businesses and
elevated blood lead levels, while see section Standards: Identifying a Assistance to Nonprofits in Negative
screenings for elevated blood lead levels Public Health Impact. Economic Impacts to this section. This
declined during the pandemic.66 The Enumerated eligible uses under this change is consistent with the interim
combination of these underlying social section built and expanded upon final rule, which provides that
and health vulnerabilities may have permissible expenditures under the appropriate responses to address the
contributed to more severe public health Coronavirus Relief Fund; for clarity, the public health impacts of COVID–19 may
outcomes of the pandemic within these interim final rule expressly listed as be provided to any type of entity.
communities, resulting in an eligible uses the uses permissible under
the Coronavirus Relief Fund, with a. COVID–19 Mitigation and Prevention
exacerbation of pre-existing disparities
in health outcomes.67 minor exceptions.68 The interim final COVID–19 public health response and
rule also recognized that the nature of mitigation tactics. Recognizing the
Vulnerability Index, https://covid.cdc.gov/covid- the COVID–19 public health emergency, broad range of services and
data-tracker/#pop-factors_totaldeaths (last visited and responsive policy measures, programming needed to contain
December 7, 2021). programs, and services, had changed COVID–19, the interim final rule
63 Centers for Disease Control and Prevention,
over time and is expected to continue provided an extensive list of
Risk for COVID–19 Infection, Hospitalization, and
Death By Race/Ethnicity, https://www.cdc.gov/
evolving. enumerated eligible uses to prevent and
coronavirus/2019-ncov/covid-data/investigations- The interim final rule categorized mitigate COVID–19 and made clear that
discovery/hospitalization-death-by-race- enumerated eligible uses to respond to the public health response to the virus
ethnicity.html (last visited December 7, 2021). the public health emergency into several is expected to continue to evolve over
64 See, e.g., Centers for Disease Control and
categories: (1) COVID–19 mitigation and time, necessitating different uses of
Prevention, Risk of Severe Illness or Death from
COVID–19 (Dec. 10, 2020), https://www.cdc.gov/ prevention, (2) medical expenses, (3) funds.
coronavirus/2019-ncov/community/health-equity/ behavioral health care, (4) public health Enumerated eligible uses of funds in
racial-ethnic-disparities/disparities-illness.html and safety staff, (5) expenses to improve this category included: Vaccination
(last visited December 7, 2021). the design and execution of health and programs; medical care; testing; contact
65 Milena Almagro et al., Racial Disparities in
Frontline Workers and Housing Crowding During
public health programs, and (6) eligible tracing; support for isolation or
COVID–19: Evidence from Geolocation Data (Sept. uses to address disparities in public quarantine; supports for vulnerable
22, 2020), NYU Stern School of Business health outcomes. For each category in populations to access medical or public
(forthcoming), available at https://papers.ssrn.com/ turn, this section describes public health services; public health
sol3/papers.cfm?abstract_id=3695249; Grace
McCormack et al., Economic Vulnerability of
comments received and Treasury’s surveillance (e.g., monitoring case
Households with Essential Workers, JAMA responses, as well as comments received trends, genomic sequencing for
324(4):388–90 (2020), available at https://jamanet variants); enforcement of public health
work.com/journals/jama/fullarticle/2767630. by Area-Level Deprivation—Utah, March 3–July 9, orders; public communication efforts;
66 See, e.g., Joseph G. Courtney et al., Decreases 2020, Morb. Mortal. Wkly. Rep. 69(38):1369–73 enhancement to health care capacity,
in Young Children Who Received Blood Lead Level (Sept. 25, 2020), https://www.cdc.gov/mmwr/
Testing During COVID–19—34 Jurisdictions, volumes/69/wr/mm6938a4.htm. including through alternative care
January–May 2020, Morb. Mort. Wkly. Rep. 68 Generally, funding uses eligible under CRF as facilities; purchases of personal
70(5):155–61 (Feb. 5, 2021), https://www.cdc.gov/ a response to the direct public health impacts of protective equipment; support for
mmwr/volumes/70/wr/mm7005a2.htm; Emily A. COVID–19 will continue to be eligible under the prevention, mitigation, or other services
Benfer & Lindsay F. Wiley, Health Justice Strategies ARPA, including those not explicitly listed in the
to Combat COVID–19: Protecting Vulnerable in congregate living facilities (e.g.,
lotter on DSK11XQN23PROD with RULES2
final rule, with the following two exceptions: (1)
Communities During a Pandemic, Health Affairs The standard for eligibility of public health and nursing homes, incarceration settings,
Blog (Mar. 19, 2020), https://www.healthaffairs.org/ safety payrolls has been updated (see section Public homeless shelters, group living
do/10.1377/hblog20200319.757883/full/. Sector Capacity and Workforce in General facilities) and other key settings like
67 See, e.g., Centers for Disease Control and Provisions: Other) and (2) expenses related to the
Prevention, supra note 62; Benfer & Wiley, supra issuance of tax-anticipation notes are no longer an
schools; ventilation improvements in
note 66; Nathaniel M. Lewis et al., Disparities in eligible funding use (see section Restrictions on congregate settings, health care settings,
COVID–19 Incidence, Hospitalizations, and Testing, Use: Debt Service). or other key locations; enhancement of
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Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4353
public health data systems; other public uses that can adapt to local needs, as in CDC guidance for stopping the spread
health responses; and capital well as evolving response needs and of COVID–19 is not a permissible use of
investments in public facilities to meet developments in understanding of funds. In other words, recipients may
pandemic operational needs, such as transmission of COVID–19. Treasury not use funds for a program that
physical plant improvements to public emphasizes how the enumerated undermines practices included in the
hospitals and health clinics or eligible uses can adapt to changing CDC’s guidelines and recommendations
adaptations to public buildings to circumstances. For example, when the for stopping the spread of COVID–19.
implement COVID–19 mitigation tactics. interim final rule was released, national This includes programs that impose a
These enumerated uses are consistent daily COVID–19 cases were at relatively condition to discourage compliance
with guidance from public health low levels and declining; 69 as the Delta with practices in line with CDC
authorities, including the CDC. variant spread and cases peaked in guidance (e.g., paying off fines to
Public Comment: Many commenters many areas of the country, particularly businesses incurred for violation of
were supportive of expansive those with low vaccination rates, COVID–19 vaccination or safety
enumerated eligible uses for mitigating government response needs and tactics requirements), as well as programs that
and preventing COVID–19, noting the evolved, and the SLFRF funds provided require households, businesses,
wide range of activities that the ability to quickly and nimbly adapt nonprofits, or other entities not to use
governments may undertake and the to new public health needs. Treasury practices in line with CDC guidance as
continued changing landscape of also notes that funds may be used to a condition of receiving funds (e.g.,
pandemic response. Some commenters support compliance with and requiring that businesses abstain from
requested that Treasury engage in implementation of COVID–19 safety requiring mask use or employee
ongoing consideration of and requirements, including vaccination vaccination as a condition of receiving
consultation on evolving public health requirements, testing programs, or other SLFRF funds).
needs and resulting eligible expenses. required practices. Vaccination programs and vaccine
Some commenters noted that their Recipient governments do not need to incentives. At the time of the interim
jurisdiction does not have an official have an official health or public health final rule release, many vaccination
public health program, for example program in order to utilize these eligible programs were using mass vaccination
smaller jurisdictions or those that do not uses; any recipient can pursue these tactics to rapidly reach Americans en
have a health department, and requested eligible uses, though Treasury masse for first vaccine doses.72 Since
clarification on whether their public recommends consulting with health and that time, the FDA has authorized
health expenses would still be eligible public health professionals to support booster vaccine doses for certain groups
in compliance with program rules. effective implementation. and certain vaccines and has also
Treasury Response: In the final rule, The CDC has provided authorized vaccines for youths 73 74 The
Treasury is maintaining an expansive recommendations and guidelines to inclusion of ‘‘vaccination programs’’ as
list of enumerated eligible uses to help mitigate and prevent COVID–19. an eligible use allows for adaptation as
mitigate and prevent COVID–19, given The interim final rule and final rule the needs of programs change or new
the wide-ranging activities that help support recipients in stopping the groups become eligible for different
governments may take to further these spread of COVID–19 through these types of vaccinations.
goals, including ‘‘other public health recommendations and guidelines.70 The Public Comment: Since the release of
responses.’’ Note that the final rule final rule reflects changing the interim final rule, many recipient
discusses several of these enumerated circumstances of COVID–19 and governments have also requested
uses in more detail below. provides a broad range of permissible clarification on whether vaccine
Treasury is further clarifying that uses for mitigating and preventing the incentives are a permissible use of
when providing COVID–19 prevention spread of the disease, in a manner funds.
and mitigation services, recipients can consistent with CDC guidelines and Treasury Response: Treasury issued
identify the impacted population as the recommendations. guidance clarifying that ‘‘[vaccine]
general public. Treasury presumes that The purpose of the SLFRF funds is to programs that provide incentives
all enumerated eligible uses for mitigate the fiscal effects stemming from reasonably expected to increase the
programs and services, including the COVID–19 public health emergency, number of people who choose to get
COVID–19 mitigation and prevention including by supporting efforts to stop vaccinated, or that motivate people to
programs and services, are reasonably the spread of the virus. The interim final get vaccinated sooner than they
proportional responses to the harm rule and final rule implement this otherwise would have, are an allowable
identified unless a response is grossly objective by, in part, providing that
disproportionate to the type or extent of recipients may use SLFRF funds for
72 Centers for Disease Control and Prevention,
harm experienced. Note that capital COVID Data Tracker: COVID–19 Vaccinations in the
COVID–19 mitigation and prevention.71 United States, https://covid.cdc.gov/covid-data-
expenditures are not considered A program or service that imposes tracker/#vaccinations (last visited October 18,
‘‘programs and services’’ and are not conditions on participation in or 2021).
presumed to be reasonably proportional acceptance of the service that would
73 U.S. Food and Drug Administration,
responses to an identified harm except Coronavirus (COVID–19) Update: FDA Takes
undermine efforts to stop the spread of Additional Actions on the Use of a Booster Dose for
as provided in section Capital COVID–19 or discourage compliance COVID–19 Vaccines, https://www.fda.gov/news-
Expenditures in General Provisions: with recommendations and guidelines events/press-announcements/fda-authorizes-pfizer-
Other. In other words, recipients can biontech-covid-19-vaccine-emergency-use-children-
provide any COVID–19 prevention or 5-through-11-years-age (last visited November 8,
69 See Centers for Disease Control and Prevention,
2021).
mitigation service to members of the COVID Data Tracker, https://covid.cdc.gov/covid-
lotter on DSK11XQN23PROD with RULES2
74 U.S. Food and Drug Administration, FDA
general public without any further data-tracker/#trends_dailycases (last visited Authorizes Pfizer-BioNTech COVID–19 Vaccine for
analysis of impacts of the pandemic on December 7, 2021). Emergency Use in Children 5 through 11 Years of
70 See Centers for Disease Control and Prevention,
those individuals and whether the Age, https://www.fda.gov/news-events/press-
COVID–19, https://www.cdc.gov/coronavirus/2019- announcements/fda-authorizes-pfizer-biontech-
service is responsive. ncov/index.html (last visited November 8, 2021). covid-19-vaccine-emergency-use-children-5-
This approach gives recipient 71 See § 35.6(b); Coronavirus State and Local through-11-years-age (last visited November 8,
governments an extensive set of eligible Fiscal Recovery Funds, 86 FR at 26786. 2021).
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4354 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations
use of funds so long as such costs are equipment (e.g., emergency response Treasury Response: These are
reasonably proportional to the expected radio systems); permissible uses of funds under the
public health benefit.’’ 75 This use of • Installation and improvements of interim final rule and remain eligible
funds remains permissible under the ventilation systems; under the final rule.
final rule. • Costs of establishing public health Assistance to Businesses and Nonprofits
Capital Expenditures data systems, including technology To Implement COVID–19 Mitigation
infrastructure; Strategies
Public Comment: Many commenters • Adaptations to congregate living
requested clarification around the types facilities, including skilled nursing Background: As detailed above,
and scope of permissible capital facilities, other long-term care facilities, Treasury received many public
investments in public facilities to meet incarceration settings, homeless comments describing uncertainty about
pandemic operational needs; ventilation shelters, residential foster care facilities, which eligible use category should be
improvements in congregate settings, residential behavioral health treatment, used to assess different potential uses of
health care settings, or other key and other group living facilities, as well funds. As a result, Treasury has re-
locations; and whether support for as public facilities and schools categorized some uses of funds in the
prevention and mitigation in congregate (excluding construction of new facilities final rule to provide greater clarity,
facilities could include facilities for the purpose of mitigating spread of consistent with the principle that uses
renovations, improvements, or COVID–19 in the facility); and of funds should be assessed based on
construction of new facilities, or if the their intended beneficiary. For example,
• Mitigation measures in small
facilities must solely be used for COVID–19 mitigation and prevention
businesses, nonprofits, and impacted
COVID–19 response. serves the general public or specific
industries (e.g., developing outdoor
Treasury Response: For clarity, populations within the public.
Treasury has addressed the eligibility spaces).
However, in the interim final rule,
standard for capital expenditures, or Other clarifications on COVID–19
assistance to small businesses,
investments in property, facilities, or mitigation: Medical care, supports for
nonprofits, and impacted industries to
equipment, in one section of this vulnerable populations, data systems,
implement COVID–19 mitigation and
Supplementary Information; see section carceral settings. Based on public prevention strategies was categorized in
Capital Expenditures in General comments and questions received from the respective sections within Negative
Provisions: Other. In recognition of the recipients following the interim final Economic Impacts. The final rule
importance of capital expenditures in rule, Treasury is making several further consolidates all COVID–19 mitigation
the COVID–19 public health response, clarifications on enumerated eligible and prevention within Public Health.
Treasury enumerates that the following uses in this category. Public Comment: Treasury has
projects are examples of eligible capital Public Comment: Several commenters received multiple comments and
expenditures, as long as they meet the requested clarification on eligible uses questions about which eligible use
standards for capital expenditures in of funds for medical care; Treasury permits the recipient to provide
section Capital Expenditures in General addresses those comments in the section assistance to businesses and nonprofits
Provisions: Other: Medical Expenses below. to address the public health impacts of
• Improvements or construction of Public Comment: Recipients posed COVID–19.
COVID–19 testing sites and laboratories, questions on the type and scope of Treasury Response: In the final rule,
and acquisition of related equipment; activities eligible as ‘‘supports for these services have been re-categorized
• Improvements or construction of vulnerable populations to access under COVID–19 mitigation and
COVID–19 vaccination sites; medical or public health services.’’ prevention to reflect the fact that this
• Improvements or construction of Treasury Response: Enumerated assistance responds to public health
medical facilities generally dedicated to eligible uses should be considered in impacts of the pandemic rather than the
COVID–19 treatment and mitigation the context of the eligible use category negative economic impacts to a small
(e.g., emergency rooms, intensive care or section where they appear; in this business, nonprofit, or impacted
units, telemedicine capabilities for case, ‘‘supports for vulnerable industry. When providing COVID–19
COVID–19 related treatment); populations to access medical or public mitigation and prevention services,
• Expenses of establishing temporary health services’’ appears in the section recipients can identify the impacted
medical facilities and other measures to COVID–19 Mitigation and Prevention. entity as small businesses, nonprofits, or
increase COVID–19 treatment capacity, As such, these eligible uses should help businesses in impacted industries in
including related construction costs; vulnerable or high-risk populations general. As with all enumerated eligible
• Acquisition of equipment for access services that mitigate COVID–19, uses, recipients may presume that all
COVID–19 prevention and treatment, for example, transportation assistance to COVID–19 mitigation and prevention
including ventilators, ambulances, and reach vaccination sites, mobile programs and services are reasonably
other medical or emergency services vaccination or testing programs, or on- proportional responses to the harm
equipment; site vaccination or testing services for identified unless a response is grossly
• Improvements to or construction of homebound individuals, those in group disproportionate to the type or extent of
emergency operations centers and homes, or similar settings. harm experienced. Note that capital
acquisition of emergency response Public Comment: Some commenters expenditures are not considered
asked whether ‘‘enhancement of public ‘‘programs and services’’ and are not
75 Coronavirus State and Local Fiscal Recovery
health data systems’’ could include presumed to be reasonably proportional
Funds, Frequently Asked Questions, as of July 19,
investments in software, databases, and responses to an identified harm except
lotter on DSK11XQN23PROD with RULES2
2021; https://home.treasury.gov/system/files/136/
SLFRPFAQ.pdf. Note that programs may provide other information technology resources as provided in section Capital
incentives to individuals who have already received that support responses to the COVID–19 Expenditures in General Provisions:
a vaccination if the incentive is reasonably expected public health emergency but also Other. In other words, recipients can
to increase the number of people who choose to get
vaccinated or motivate people to get vaccinated
provide benefits for other use cases and provide any COVID–19 prevention or
sooner and the costs are reasonably proportional to long-term capacity of public health mitigation service to small businesses,
the expected public health benefit. departments and systems. nonprofits, and businesses in impacted
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Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4355
industries without any further analysis eligible for services that mitigate or category of eligible uses they should
of impacts of the pandemic on those prevent COVID–19 spread. As such, a review to assess a potential use of funds.
entities and whether the service is small business, nonprofit, or impacted For discussion of eligibility for
responsive. industry receiving assistance to programs to expand health insurance
In some cases, this means that an implement COVID–19 mitigation coverage, see section Assistance to
entity not otherwise eligible to receive measures is a beneficiary of assistance Households.
assistance to respond to negative (e.g., granting funds to a small business
economic impacts of the pandemic, for c. Behavioral Health Care
to develop an outdoor patio to reduce
example an entity that did not transmission). In contrast, if a recipient Background: Recognizing that the
experience a negative economic impact, contracts with, or grants funds to, a public health emergency, necessary
may still be eligible to receive assistance small business, nonprofit, or impacted mitigation measures like social
under this category for COVID–19 industry to carry out an eligible use for distancing, and the economic downturn
mitigation and prevention services. COVID–19 mitigation on behalf of the have exacerbated mental health and
Uses of funds can include loans, recipient, the entity is a subrecipient substance use challenges for many
grants, or in-kind assistance to small (e.g., contracting with a small business Americans, the interim final rule
businesses, nonprofits, or other entities to operate COVID–19 vaccination sites). included an enumerated eligible use for
to implement COVID–19 prevention or For further information on mental health treatment, substance use
mitigation tactics, such as vaccination; distinguishing between beneficiaries treatment, and other behavioral health
testing; contact tracing programs; and subrecipients, as well as the services, including a non-exhaustive list
physical plant changes to enable greater impacts of the distinction on reporting of specific services that would be
use of outdoor spaces or ventilation and other requirements, see section eligible under this category.
improvements; enhanced cleaning Distinguishing Subrecipients versus Public Comment: Many commenters
efforts; and barriers or partitions. For Beneficiaries. expressed support for the interim final
example, this would include assistance rule’s recognition of behavioral health
to a restaurant to establish an outdoor b. Medical Expenses impacts of the pandemic and eligible
patio, given evidence showing much Background: The interim final rule uses under this category. Several
lower risk of COVID–19 transmission also included as an enumerated eligible commenters requested clarification on
outdoors.76 Uses of funds can also use medical expenses, including the types of eligible services under this
include aid to travel, tourism, medical care and services to address the category, specifically whether both
hospitality, and other impacted near-term and potential longer-term acute and chronic care are included as
industries to implement COVID–19 impacts of the disease on individuals well as services that often do not
mitigation and prevention measures to infected. directly accept insurance payments, like
enable safe reopening, for example, Public Comment: Some commenters peer support groups. Some commenters
vaccination or testing programs, sought clarification on the types of highlighted the importance of cultural
improvements to ventilation, physical medical expenses eligible and for competence in providing effective
barriers or partitions, signage to whom, including whether funds could behavioral health services. Some
facilitate social distancing, provision of be used under this category for commenters suggested that funding
masks or personal protective equipment, expanding health insurance coverage should be available broadly and quickly
or consultation with infection (e.g., subsidies for premiums, expanding for this purpose, recommending that
prevention professionals to develop safe a group health plan), improvements to funding available for behavioral health
reopening plans. healthcare facilities or establishment of not be tied to the amount of revenue
Recipients providing assistance to new medical facilities, direct costs of loss experienced by the recipient.
small businesses, nonprofits, or medical services, and costs to a self- Treasury Response: In the final rule,
impacted industries that includes funded health insurance plan (e.g., a Treasury is maintaining this enumerated
capital expenditures (i.e., expenditures county government health plan) for eligible use category and clarifying that
on property, facilities, or equipment) COVID–19 medical care. it covers an expansive array of services
should also review the section Capital Treasury Response: In the final rule, for prevention, treatment, recovery, and
Expenditures in General Provisions: Treasury is maintaining this enumerated harm reduction for mental health,
Other, which describes eligibility eligible use category and clarifying that substance use, and other behavioral
standards for these expenditures. it covers costs related to medical care health challenges caused or exacerbated
Recipients providing assistances in the provided directly to an individual due by the public health emergency. The
form of loans should review the section to COVID–19 infection (e.g., treatment) specific services listed in the interim
Treatment of Loans Made with SLFRF or a potential infection (e.g., testing). final rule also remain eligible.77
Funds in General Provisions: Other. This can include medical costs to Treasury is further clarifying that
Recipients should also be aware of the uninsured individuals; deductibles, co- when providing behavioral health
difference between beneficiaries of pays, or other costs not covered by services, recipients can identify the
assistance and subrecipients when insurance; costs for uncompensated care impacted population as the general
working with small businesses, at a health provider; emergency medical public and, as with all enumerated
nonprofits, or impacted industries. As response costs; and, for recipients with eligible uses, presume that all programs
noted above, Treasury presumes that the a self-funded health insurance plan, and services are reasonably proportional
general public, as well as small excess health insurance costs due to responses to the harm identified unless
businesses, nonprofits, and impacted COVID–19 medical care. These are a response is grossly disproportionate to
industries in general, has been impacted medical expenses due to COVID–19 and the type or extent of harm experienced.
lotter on DSK11XQN23PROD with RULES2
by the COVID–19 disease itself and is distinguish this category of eligible uses In contrast, capital expenditures are not
from other related eligible uses, like
76 See Centers for Disease Control and Prevention, 77 Hotlines or warmlines, crisis intervention,
COVID–19 mitigation and prevention
Participate in Outdoor and Indoor Activities, overdose prevention, infectious disease prevention,
https://www.cdc.gov/coronavirus/2019-ncov/daily-
and health insurance expenses to and services or outreach to promote access to
life-coping/outdoor-activities.html (last visited households, to provide greater clarity physical or behavioral health primary care and
November 8, 2021). for recipients in determining which preventative medicine.
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4356 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations
considered ‘‘programs and services’’ and eligible services under SLFRF are not violence, or gun violence in some
are not presumed to be reasonably limited to those eligible under existing communities during the pandemic.
proportional responses to an identified federal programs. Treasury released further guidance
harm except as provided in section Given the public health emergency’s identifying how enumerated eligible
Capital Expenditures in General exacerbation of the ongoing opioid and uses and eligible use categories under
Provisions: Other. overdose crisis, Treasury highlights the interim final rule could support
In other words, recipients can provide several ways that funds may be used to violence reduction efforts, including
behavioral health services to members respond to opioid use disorder and rehiring public sector staff, behavioral
of the general public without any prevent overdose mortality.79 health services, and services to address
further analysis of impacts of the Specifically, eligible uses of funds negative economic impacts of the
pandemic on those individuals and include programs to expand access to pandemic that may aid victims of crime.
whether the service is responsive. evidence-based treatment like The guidance also identified an
Recipients may also use this eligible use medications to treat opioid use disorder expanded set of enumerated eligible
category to respond to increased rates of (e.g., direct costs or incentives for uses to address increased gun violence.
behavioral health challenges at a emergency departments, prisons, jails, Public Comment: Several commenters
population level or, at an individual and outpatient providers to offer expressed support for this use of funds.
level, new behavioral health challenges medications and low-barrier treatment), Treasury Response: In the final rule,
or exacerbation of pre-existing naloxone distribution, syringe service Treasury is maintaining enumerated
challenges, including new barriers to programs, outreach to individuals in eligible uses in this area and clarifying
accessing treatment. active use, post-overdose follow up how to apply eligibility standards.
Services that respond to these impacts programs, programs for diversion from Throughout the final rule, enumerated
of the public health emergency may the criminal justice system, and eligible uses should respond to an
include services across the continuum contingency management interventions. identified impact of the COVID–19
of care, including both acute and Finally, for clarity, Treasury has public health emergency in a reasonably
chronic care, such as prevention, addressed the eligibility standard for proportional manner to the extent and
outpatient treatment, inpatient capital expenditures, or investments in type of harm experienced. Many of the
treatment, crisis care, diversion property, facilities, or equipment, in one enumerated eligible uses—like
programs (e.g., from emergency section of this Supplementary behavioral health services, services to
departments or criminal justice system Information; see section Capital improve employment opportunities, and
involvement), outreach to individuals Expenditures in General Provisions: services to address educational
not yet engaged in treatment, harm Other. Examples of capital expenditures disparities in disproportionately
reduction, and supports for long-term impacted communities—that respond to
related to behavioral health that
recovery (e.g., peer support or recovery the public health and negative economic
Treasury recognizes as eligible include
coaching, housing, transportation, impacts of the pandemic may also have
behavioral health facilities and
employment services). benefits for reducing crime or aiding
equipment (e.g., inpatient or outpatient
Recipients may also provide services victims of crime. For example, the
mental health or substance use
for special populations, for example, pandemic exacerbated the impact of
treatment facilities, crisis centers,
enhanced services in schools to address domestic violence, sexual assault, and
diversion centers), as long as they
increased rates of behavioral health human trafficking; enumerated eligible
adhere to the standards detailed in the
challenges for youths, mental health uses like emergency housing assistance,
Capital Expenditures section.
first responder or law enforcement- cash assistance, or assistance with food,
mental health co-responder programs to d. Preventing and Responding to childcare, and other needs could be
divert individuals experiencing mental Violence used to support survivors of domestic
illness from the criminal justice system, violence, sexual assault, or human
Background: The interim final rule
or services for pregnant women with trafficking who experienced public
highlighted that some types of violence
substance use disorders or infants born health or economic impacts due to the
had increased during the pandemic and
with neonatal abstinence syndrome. pandemic.
that the ability of victims to access Public Comment: Several commenters
Finally, recipients may use funds for services had decreased, noting as an
programs or services to support expressed support for community
example the challenges that individuals violence intervention programs or
equitable access to services and reduce affected by domestic violence face in
racial, ethnic, or socioeconomic argued that traditional public safety
accessing services. Accordingly, the approaches had negatively impacted the
disparities in access to high-quality interim final rule enumerated as an
treatment. social determinants of health in their
eligible use, in disproportionately communities. Several commenters
Eligible uses of funds may include impacted communities, evidence-based
services typically billable to recommended inclusion of approaches
community violence intervention like mental health or substance use
insurance 78 or services not typically programs. Following the release of the
billable to insurance, such as peer diversion programs.
interim final rule, Treasury received Treasury Response: Treasury
support groups, costs for residence in several recipient questions regarding recognizes the importance of
supportive housing or recovery housing, whether and how funds may be used to comprehensive approaches to
and the 988 National Suicide Prevention respond to an increase in crime, challenges like violence. The final rule
Lifeline or other hotline services.
includes an enumerated eligible use for
Recipients may also use funds in 79 In line with the Department of Health and
community violence intervention
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conjunction with other federal grants or Human Services, Overdose Prevention Strategy,
https://www.hhs.gov/overdose-prevention/, and the programs in all communities, not just
programs (see section Program
Office of National Drug Control Policy, the disproportionately impacted
Administration Provisions), though Administration’s Statement on Drug Policy communities eligible under the interim
Priorities for Year One (April 1, 2021), https://
78 However, SLFRF funds may not be used to www.whitehouse.gov/wp-content/uploads/2021/03/
final rule. Given the increased rate of
reimburse a service that was also billed to BidenHarris-Statement-of-Drug-Policy-Priorities- violence during the pandemic, Treasury
insurance. April-1.pdf. has determined that this enumerated
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Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4357
eligible use is responsive to the impacts precipitously, over 22 million jobs were progress, there is a continued need to
of the pandemic in all communities. lost in March and April 2020.80 One respond to the pandemic’s economic
The final rule incorporates guidance year later, in April 2021, the economy effects to ensure a full, broad-based, and
issued after the interim final rule on still remained over 8 million jobs below equitable recovery.
specifically types of services eligible, its pre-pandemic peak,81 and the Indeed, the pandemic’s economic
including: unemployment rate hovered around 6 impacts continue to affect some
• Evidence-based practices like percent.82 demographic groups more than others.
focused deterrence, street outreach, In the months since Treasury issued Rates of unemployment remain
violence interrupters, and hospital- the interim final rule in May 2021, the particularly severe among workers of
based violence intervention models, economy has made large strides in its color and workers with lower levels of
complete with wraparound services recovery. The economy gained over 4 educational attainment; for example, the
such as behavioral therapy, trauma million jobs in the seven months from overall unemployment rate in the
recovery, job training, education, May to November 2021; 83 the United States was 4.2 percent in
housing and relocation services, and unemployment rate fell more than 1.5 November 2021, but certain groups saw
financial assistance; and percentage points to 4.2 percent, which much higher rates: 6.7 percent for Black
• Capacity-building efforts at is the lowest rate since February 2020; 84 workers, 5.2 percent for Hispanic or
community violence intervention and the size of the nation’s economy Latino workers, and 5.7 percent for
programs like funding more surpassed the pre-pandemic peak in the workers without a high school
intervention workers, increasing their second quarter of 2021.85 diploma.90 Job losses have also been
pay, providing training and professional While the economy has made particularly steep among low-wage
development for intervention workers, immense progress in its recovery since workers, with these workers remaining
and hiring and training workers to May 2021, the economy has also faced furthest from recovery as of the end of
administer the programs. setbacks that illustrate the continued 2020.91 A severe recession, and its
Public Comment: Some commenters risks to the recovery. As the Delta concentrated impact among low-income
sought further clarification on whether variant spread across the country this workers, has amplified food and
some of the enumerated eligible uses are summer and fall, the United States faced housing insecurity, with an estimated
considered responsive to all crime, another severe wave of cases, deaths, nearly 20 million adults living in
violent crime, or gun violence. and strain on the healthcare system, households where there is sometimes or
Treasury Response: Enumerated which contributed to a slowdown in the often not enough food to eat and an
eligible uses that respond to an increase pace of recovery in the third quarter.86 estimated 12 million adults living in
in gun violence may be pursued in Supply chain disruptions have also households that were not current on
communities experiencing an increase demonstrated the difficulties of rent.92
in gun violence associated with the restarting a global economy.87 While economic effects have been
pandemic, specifically: (1) Hiring law Moreover, although many Americans seen across many communities, there
enforcement officials—even above pre- have returned to work as of November are additional disparities by race and
pandemic levels—or paying overtime 2021, the economy remains 3.9 million income. For example, approximately
where the funds are directly focused on jobs below its pre-pandemic peak,88 and
advancing community policing 2.4 million workers have dropped out of Federal Reserve Bank of St. Louis, https://fred.
strategies for gun violence, (2) the labor market altogether relative to stlouisfed.org/series/CLF16OV (last visited
December 7, 2021).
additional enforcement efforts to reduce February 2020.89 Thus, despite much 90 U.S. Bureau of Labor Statistics, Labor Force
gun violence exacerbated by the Statistics from the Current Population Survey:
80 U.S. Bureau of Labor Statistics, All Employees,
pandemic, including prosecuting gun Employment status of the civilian population by sex
Total Nonfarm [PAYEMS], retrieved from FRED, and age (December 6, 2021), https://www.bls.gov/
traffickers, dealers, and other parties Federal Reserve Bank of St. Louis; https:// news.release/empsit.t01.htm (last visited December
contributing to the supply of crime fred.stlouisfed.org/series/PAYEMS (last visited 7, 2021); U.S. Bureau of Labor Statistics, Labor
guns, as well as collaborative federal, December 7, 2021). Force Statistics from the Current Population
81 Id.
state, and local efforts to identify and Survey: Employment status of the civilian
82 U.S. Bureau of Labor Statistics, Unemployment
address gun trafficking channels, and (3) noninstitutional population by race, Hispanic or
Rate [UNRATE], retrieved from FRED, Federal Latino ethnicity, sex, and age (December 6, 2021),
investing in technology and equipment Reserve Bank of St. Louis; https://fred. https://www.bls.gov/web/empsit/cpseea04.htm (last
to allow law enforcement to more stlouisfed.org/series/UNRATE (last visited visited December 7, 2021); U.S. Bureau of Labor
efficiently and effectively respond to the December 7, 2021). Statistics, Labor Force Statistics from the Current
83 U.S. Bureau of Labor Statistics, supra note 80.
rise in gun violence resulting from the Population Survey: Employment status of the
84 U.S. Bureau of Labor Statistics, supra note 82. civilian noninstitutional population 25 years and
pandemic, for example technology to 85 U.S. Bureau of Economic Analysis, Real Gross over by educational attainment (December 6, 2021),
assist in the identification of guns Domestic Product [GDPC1], retrieved from FRED, https://www.bls.gov/web/empsit/cpseea05.htm (last
whose serial numbers have been Federal Reserve Bank of St. Louis, https://fred. visited December 7, 2021).
damaged. stlouisfed.org/series/GDPC1 (last visited December 91 Elise Gould & Jori Kandra, Wages grew in 2020
7, 2021). because the bottom fell out of the low-wage labor
3. Negative Economic Impacts 86 U.S. Department of the Treasury, Economy market, Economic Policy Institute (Feb. 24, 2021),
Statement by Catherine Wolfram, Acting Assistant https://files.epi.org/pdf/219418.pdf. See also,
a. Assistance to Households Secretary for Economy Policy, for the Treasury Michael Dalton et al., The K-Shaped Recovery:
Borrowing Advisory Committee (November 1, Examining the Diverging Fortunes of Workers in the
Background 2021), available at https://home.treasury.gov/news/ Recovery from the COVID–19 Pandemic using
While the U.S. economy is now on the press-releases/jy0453. Business and Household Survey Microdata, U.S.
87 Yuka Hayashi, IMF Cuts Global Growth Bureau of Labor Statistics Working Paper Series
path to a strong recovery, the public
Forecast Amid Supply-Chain Disruptions, (July 2021), https://www.bls.gov/osmr/research-
health emergency, including the Pandemic Pressures, Wall Street Journal (October papers/2021/pdf/ec210020.pdf.
lotter on DSK11XQN23PROD with RULES2
necessary measures taken to protect 12, 2021), available at https://www.wsj.com/ 92 Center on Budget and Policy Priorities,
public health, resulted in significant articles/imf-cuts-global-growth-forecast-amid- Tracking the COVID–19 Recession’s Effects on
supply-chain-disruptions-warns-of-inflation-risks- Food, Housing, and Employment Hardships,
economic and financial hardship for 11634043601. https://www.cbpp.org/research/poverty-and-
many Americans. As businesses closed, 88 U.S. Bureau of Labor Statistics, supra note 80.
inequality/tracking-the-covid-19-economys-effects-
consumers stayed home, schools shifted 89 U.S. Bureau of Labor Statistics, Civilian Labor on-food-housing-and (last visited December 17,
to remote education, and travel declined Force Level [CLF16OV], retrieved from FRED, 2021).
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4358 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations
half of low-income, Black, and Hispanic through, among other factors, damaged entire industry was impacted, 72
parents reported difficulty covering consumer credit scores 99 and reduced percent of the job losses occurred in the
costs related to food, housing, utility, or familial and childhood wellbeing.100 lowest wage service occupations
medical care.93 Over the course of the These potential long-term economic compared to only a 6 percent rate of job
pandemic, inequities also manifested consequences underscore the continued loss in the highest wage management
along gender lines, as schools closed to need for robust policy support. and finance jobs.106 Similar trends exist
in-person activities, leaving many Low- and moderate-income in other heavily impacted industries. In
working families without childcare households, those with income levels at public education, the lowest wage
during the day.94 Women of color have or below 300 percent of the federal occupations, service and transportation
been hit especially hard: The labor force poverty level (FPL), face particular jobs, saw a job loss rate of 20 and 26
participation rate for Black women has hardships and challenges. These percent, respectively.107 During that
fallen by 3.6 percentage points 95 during households report much higher rates of same time period, the highest wage
the pandemic as compared to 1.3 food insecurity and housing hardships occupations in public education,
percentage points for Black men 96 and than households with higher incomes. management, actually saw jobs increase
1.7 percentage points for White For example, households with incomes by 7 percent.108
women.97 at or below 300 percent FPL are several While many households suffered
As the economy recovers, the effects times more likely to have reported negative economic outcomes as a result
of the pandemic-related recession may struggling with food insecurity of the COVID–19 pandemic and
continue to impact households, compared to households with income economic recession, households with
including a risk of longer-term effects on above 300 percent FPL.101 Similarly, low incomes were impacted in
earnings and economic potential. For low- and moderate-income households disproportionate and exceptional ways.
example, unemployed workers, reported being housing insecure 102 at From January 2020 to March 2021, low-
especially those who have experienced rates more than twice as high as higher- wage workers experienced job loss at a
longer periods of unemployment, earn income households, and low- and rate five times higher than middle-wage
lower wages over the long term once moderate-income households reported workers, and high-wage workers
rehired.98 In addition to the labor housing quality hardship 103 at rates actually experienced an increase in job
market consequences for unemployed statistically significantly greater than opportunities.109 Because workers in
workers, recessions can also cause the rate for higher-income low-income households were more
longer-term economic challenges households.104 The economic crisis likely to lose their job or experience
caused by the pandemic worsened reductions in pay, those same
93 Michael Karpman, Dulce Gonzalez, Genevieve economic outcomes for workers in many households were also more likely to
M. Kenney, Parents Are Struggling to Provide for low- and moderate-income households. experience economic hardships like
Their Families during the Pandemic, Urban Industries that employed low-wage
Institute (May 2020), https://www.urban.org/
trouble paying utility bills, affording
research/publication/parents-are-struggling-
workers experienced a disproportionate rent or mortgage payments, purchasing
provide-their-families-during-pandemic?utm_ level of job loss. For example, from food, and paying for medical
source=urban_researcher&utm_ February 2020 to February 2021, the expenses.110 The disproportionate
medium=email&utm_campaign=covid_ hospitality and leisure industry lost
parents&utm_term=lhp.
negative impacts the pandemic has had
94 Women have carried a larger share of childcare
nearly 3.5 million jobs.105 While the on low-income families extend beyond
responsibilities than men during the COVID–19 financial insecurity. For example, low-
99 Chi Chi Wu, Solving the Credit Conundrum:
crisis. See, e.g., Gema Zamarro & Marı́a J. Prados, income families have reported higher
Gender differences in couples’ division of Helping Consumers’ Credit Records Impaired by the
Foreclosure Crisis and Great Recession, National levels of social isolation, stress, and
childcare, work and mental health during COVID–
19, Rev. Econ. Household 19:11–40 (2021), Consumer Law Center (Dec. 2013), https:// other negative mental health outcomes
available at https://link.springer.com/article/ www.nclc.org/images/pdf/credit_reports/report- during the pandemic. While over half of
10.1007/s11150-020-09534-7; Titan Alon et al., The credit-conundrum-2013.pdf. all U.S. adults report that their mental
100 Irwin Garfinkel, Sara McLanahan, Christopher
Impact of COVID–19 on Gender Equality, National health was negatively affected by the
Bureau of Economic Research Working Paper 26947 Wimer, eds., Children of the Great Recession,
(April 2020), available at https://www.nber.org/ Russell Sage Foundation (Aug. 2016), available at pandemic, adults with low incomes
papers/w26947. https://www.russellsage.org/publications/children- reported major negative mental health
95 U.S. Bureau of Labor Statistics, Labor Force great-recession. impacts at a rate nearly twice that of
101 Kyle J. Casewell and Stephen Zuckerman,
Participation Rate—20 Yrs. & Over, Black or African adults with high incomes.111
American Women [LNS11300032], retrieved from Food Insecurity, Housing Hardship, and Medical
FRED, Federal Reserve Bank of St. Louis; https:// Care Utilization, Urban Institute (June 2018),
fred.stlouisfed.org/series/LNS11300032 (last visited available at https://www.urban.org/sites/default/ 2021), available at https://www.epi.org/publication/
December 7, 2021). files/publication/98701/2001896_foodinsecurity_ swa-2020-employment-report/.
106 Id.
96 U.S. Bureau of Labor Statistics, Labor Force housinghardship_medicalcareutilization_
finalized.pdf. 107 Id.
Participation Rate—20 Yrs. & Over, Black or African
102 Housing insecurity is defined as not paying 108 Id.
American Men [LNS11300031], retrieved from
FRED, Federal Reserve Bank of St. Louis; https:// the full amount of rent or mortgage and/or utility 109 R. Chetty, J. Friedman, N. Hendren, M.
fred.stlouisfed.org/series/LNS11300031 (last visited bills (gas, oil, or electricity) sometime in the Stepner, & Team, T. O. I., The Economic Impacts
December 7, 2021). previous 12 months. of COVID–19: Evidence from a New Public Database
97 U.S. Bureau of Labor Statistics, Labor Force 103 Housing quality hardship is defined as an Built Using Private Sector Data (No. w27431; p.
Participation Rate—20 Yrs. & Over, White Women affirmative response to one or more questions w27431) (2020), National Bureau of Economic
[LNS11300029], retrieved from FRED, Federal related to problems with a respondent’s physical Research. https://doi.org/10.3386/w27431.
Reserve Bank of St. Louis; https://fred.stlouis dwelling: Pests and/or insects; leaking roof or 110 M. Despard, Michal Grinstein-Weiss, Yung
fed.org/series/LNS11300029 (last visited December ceiling; windows that are broken or cannot shut; Chun, and Stephen Roll, COVID–19 job and income
7, 2021). exposed electrical wires; broken plumbing (toilet, loss leading to more hunger and financial hardship,
hot water, other); holes in walls, ceiling, or floor; Brookings Institute (July 13, 2020), https://
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98 See, e.g., Michael Greenstone & Adam Looney,
Unemployment and Earnings Losses: A Look at no appliances (refrigerator or stove); and no phone www.brookings.edu/blog/upfront/2020/07/13/
Long-Term Impacts of the Great Recession on (of any kind). covid-19-job-and-income-loss-leading-to-more-
104 Id. hunger-and-financial-hardship/.
American Workers, Brookings Institution (Nov. 4,
2011), https://www.brookings.edu/blog/jobs/2011/ 105 Elise Gould and Melat Kassa. Low-wage, low- 111 N. Panchal, R. Kamal, C. Muñana, & P.
11/04/unemployment-and-earnings-losses-a-look- hours workers were hit hardest in the COVID–19 Chidambaram, The Implications of COVID–19 for
at-long-term-impacts-of-the-great-recession-on- recession: The State of Working America 2020 Mental Health and Substance Use, Kaiser Family
american-workers/. employment report, Economic Policy Institute (May Foundation (February 10, 2021), https://
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Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4359
Summary of Interim Final Rule and which households and communities are Enumerated Eligible Uses for Impacted
Final Rule Structure presumed eligible for services; and how Households
Summary: The interim final rule to identify eligible households and The interim final rule included
provided a non-exhaustive list of communities beyond those presumed several enumerated eligible uses to
enumerated eligible uses to respond to eligible, see section General Provisions: provide assistance to households or
the negative economic impacts of the Structure and Standards. populations facing negative economic
pandemic through assistance to Reorganizations and Cross- impacts due to COVID–19. Enumerated
households, as well as a standard for References: The final rule reorganizes eligible uses included: Food assistance;
assessing whether uses of funds beyond all enumerated eligible uses for rent, mortgage, or utility assistance;
those enumerated are eligible. impacted and disproportionately counseling and legal aid to prevent
The interim final rule described impacted households into the section eviction or homelessness; emergency
enumerated eligible uses for assistance Assistance to Households, with the assistance for burials, home repairs,
to households in several categories: (1) exception that expenses to improve the weatherization, or other needs; internet
Assistance to unemployed workers, (2) efficacy of economic relief has been re- access or digital literacy assistance; cash
state Unemployment Insurance Trust categorized into a different section of assistance; or job training to address
Funds, (3) assistance to households, and the final rule for increased clarity; for negative economic or public health
(4) expenses to improve the efficacy of discussion of that use category, see impacts experienced due to a worker’s
economic relief. Note that the interim section General Provisions: Other. occupation or level of training. It also
final rule posed several questions to the Note that in conducting this
posed a question as to what other types
public on enumerated eligible uses for reorganization, and based on further
of services or costs Treasury should
assistance to households; comments on analysis and in response to comments,
consider as eligible uses to respond to
these questions are addressed in the Treasury has determined that several
the negative economic impacts of
relevant subject matter section below. enumerated uses included in the
COVID–19.
In addition, in recognition that pre- interim final rule for disproportionately This section addresses each of these
existing health, economic, and social impacted communities are directly enumerated eligible uses in turn, with
disparities contributed to responsive to negative economic the exception of job training, which has
disproportionate pandemic impacts in impacts experienced by impacted been re-categorized for increased clarity
certain communities, the interim final households. In the final rule, these uses to the eligible use for ‘‘assistance to
rule also provided a broader list of have been moved from unemployed and underemployed
enumerated eligible uses to respond to ‘‘disproportionately impacted’’ to workers.’’ In general, commenters
the pandemic in disproportionately ‘‘impacted’’ households accordingly, supported inclusion of these
impacted communities, specifically: (1) making these services available to both enumerated eligible uses to address key
Building stronger communities through disproportionately impacted and economic needs among households due
investments in housing and impacted households. These uses to the pandemic, and Treasury is
neighborhoods, (2) addressing include assistance applying for public maintaining these eligible uses in the
educational disparities, and (3) benefits or services; programs or final rule, in line with commenters’
promoting healthy childhood services that address or mitigate the recommendations.
environments. In the interim final rule, impacts of the COVID–19 public health 1. Food assistance. The interim final
under the Public Health section, emergency on childhood health or rule included an enumerated eligible
recipients could also provide services to welfare, including childcare, early use for food assistance. Some
address health disparities and increase learning services, programs to provide commenters expressed support for this
access to health and social services; home visits, and services for families eligible use and emphasized the
these eligible uses have been re- involved in the child welfare system importance of aid to address food
organized into the Assistance to and foster youth; programs to address insecurity. Some commenters raised
Households section to consolidate the impacts of lost instructional time for questions as to whether food assistance
responses in disproportionately students; 112 and programs or services funds could be used to augment services
impacted communities and enhance that address housing insecurity, lack of provided through organizations like
clarity. affordable housing, or homelessness. food banks, churches, and other food
This section addresses enumerated The following activities remain delivery services, or generally be sub-
eligible uses in the final rule to respond enumerated eligible uses for awarded to these organizations.
to negative economic impacts to disproportionately impacted Treasury Response: Treasury is
households. As a reminder, recipients households: Remediation of lead paint maintaining this enumerated eligible
may presume that a household or or other lead hazards; housing vouchers use without change. Recipients may, as
population that experienced and assistance relocating to was the case under the interim final
unemployment, experienced increased neighborhoods with higher levels of rule, administer programs through a
food or housing insecurity, or is low or economic opportunity; and programs or wide range of entities, including
moderate income experienced negative services that address educational nonprofit and for-profit entities, to carry
economic impacts resulting from the disparities, including assistance to high- out eligible uses on behalf of the
pandemic, and recipients may provide poverty school districts to advance recipient government (see section
services to them that respond to these equitable funding across districts and Distinguishing Subrecipients versus
impacts, including these enumerated geographies and evidence-based Beneficiaries). Further, Treasury is
eligible uses. services to address the academic, social, clarifying that capital expenditures
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For guidance on how to determine emotional, and mental health needs of related to food banks and other facilities
whether a particular use, beyond those students. primarily dedicated to addressing food
enumerated, is eligible; further detail on
112 For which recipients may presume that any
insecurity are eligible; recipients
www.kff.org/coronavirus-covid-19/issue-brief/the- student who did not have access to in-person
seeking to use funds for capital
implications-of-covid-19-for-mental-health-and- instruction for a significant period of time was expenditures should refer to the section
substance-use/. impacted by the pandemic. Capital Expenditures in General
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4360 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations
Provisions: Other for additional non-exhaustive list of eligible services. housing and homeownership over the
eligibility standards that apply to uses For example, eligible services under this long term, see the eligible use for
of funds for capital expenditures. use category include: Rent, rental ‘‘promoting long-term housing security:
2. Emergency housing assistance. The arrears, utility costs or arrears (e.g., Affordable housing and homelessness.’’
interim final rule included an electricity, gas, water and sewer, trash 3. Emergency assistance for pressing
enumerated eligible use for rent, removal, and energy costs, such as fuel needs: Burials, home repairs,
mortgage, or utility assistance and oil), reasonable accrued late fees (if not weatherization, or other needs. The
counseling and legal aid to prevent included in rental or utility arrears), interim final rule included an
eviction or homelessness. mortgage payment assistance, financial enumerated eligible use for emergency
Public Comment: Several commenters assistance to allow a homeowner to assistance for burials, home repairs,
supported the inclusion of eviction reinstate a mortgage or to pay other weatherization, and other needs; these
prevention activities as an eligible use housing-related costs related to a period types of programs may provide
given the high number of households of forbearance, delinquency, or default, emergency assistance for pressing and
behind on rent and potentially at risk of mortgage principal reduction, unavoidable household needs. Treasury
eviction. Following release of the facilitating mortgage interest rate did not receive comments on this
interim final rule, Treasury had also reductions, counseling to prevent eligible use and is maintaining it in the
received requests for elaboration on the foreclosure or displacement, relocation final rule.
types of eligible services in this expenses following eviction or Background on Home Repairs and
category. Some commenters also foreclosure (e.g., rental security Weatherization: The economic
recommended including assistance to deposits, application or screening fees). downturn has meant fewer households
households for delinquent property Treasury is clarifying that assistance to had the resources needed to make
taxes, for example to prevent tax households for delinquent property necessary home repairs and
foreclosures on homes, as an taxes, for example to prevent tax improvements. In May 2021, 28 percent
enumerated eligible use. foreclosures on homes, was permissible of landlords reported deferring
Treasury Response: In response to under the interim final rule and maintenance and 27 percent of tenants
requests for elaboration on the types of continues to be so under the final rule. reported maintenance requests going
eligible services for eviction prevention, In addition, Treasury is also clarifying unanswered.114 While small and
Treasury has provided further guidance that recipients may administer utility cosmetic repairs can often wait,
that these services include ‘‘housing assistance or address arrears on behalf deferring major repairs, such as
stability services that enable eligible of households through direct or bulk plumbing needs, can result in unsafe
households to maintain or obtain payments to utility providers to and unhealthy living environments and,
housing, such as housing counseling, facilitate utility assistance to multiple eventually, the need for more expensive
fair housing counseling, case consumers at once, so long as the repairs and fixes.
management related to housing stability, payments offset customer balances and In addition to repairs, many homes
outreach to households at risk of therefore provide assistance to are in need of weatherization.
eviction or promotion of housing households. Weatherization assistance helps low-
support programs, housing related This eligible use category also and moderate-income Americans save
services for survivors of domestic abuse includes emergency assistance for energy, reduce their utility bills, and
or human trafficking, and specialized individuals experiencing homelessness, keeps them and their homes safe. One
services for individuals with disabilities either individual-level assistance (e.g., in three households is energy
or seniors that support their ability to rapid rehousing services) or assistance insecure,115 meaning they do not have
access or maintain housing,’’ as well as for groups of individuals (e.g., master the ability to meet their energy needs.116
‘‘legal aid such as legal services or leases of hotels, motels, or similar Weatherization efforts are particularly
attorney’s fees related to eviction facilities to expand available shelter). important for low- and moderate-
Further, Treasury is clarifying that income households. Households of
proceedings and maintaining housing
transitional shelters (e.g., temporary color, renters, and households with low
stability, court-based eviction
residences for people experiencing or moderate incomes are all more likely
prevention or eviction diversion
homelessness) are eligible capital to report energy insecurity.117 These
programs, and other legal services that
expenditures. Recipients seeking to use
help households maintain or obtain
funds for capital expenditures should 114 Jung Hyun Choi, Laurie Goodman, and Daniel
housing.’’ 113 Treasury also emphasized Pang, The Pandemic Is Making It Difficult for Mom-
refer to the section Capital Expenditures
that recipients may work with court and-Pop Landlords to Maintain Their Properties,
in General Provisions: Other for
systems, nonprofits, and a wide range of Urban Institute (July 23, 2021), https://
additional eligibility standards that www.urban.org/urban-wire/pandemic-making-it-
other organizations to implement apply to uses of funds for capital difficult-mom-and-pop-landlords-maintain-their-
strategies to support housing stability expenditures. properties.
and prevent evictions. Note that this enumerated eligible use 115 U.S. Energy Information Administration,
In the final rule, Treasury is describes ‘‘emergency housing Residential Energy Consumption Survey (2017),
maintaining these enumerated eligible Retrieved from https://www.eia.gov/consumption/
assistance,’’ or assistance for responses residential/data/2015/hc/php/hc11.1.php.
uses, including those described in the to the immediate or near-term negative D. Hernández, Understanding ‘energy insecurity’
interim final rule and later guidance, in economic impacts of the pandemic. The and why it matters to health, Social Science &
line with commenters’ final rule also clarifies and expands the Medicine, 167, 1–10 (2016), https://doi.org/
recommendations. To enhance clarity, ability of recipients to use SLFRF funds 10.1016/j.socscimed.2016.08.029.
116 Hernández, D. (2016). Understanding ‘energy
Treasury is also elaborating on some to address the general lack of affordable insecurity’ and why it matters to health. Social
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types of services included under this housing and housing challenges Science & Medicine, 167, 1–10. https://doi.org/
eligible use category; this remains a underscored by the pandemic. For 10.1016/j.socscimed.2016.08.029.
117 U.S. Energy Information Administration,
113 See FAQ 2.21. Coronavirus State and Local
discussion of affordable housing eligible
Residential Energy Consumption Survey (RECS)
Fiscal Recovery Funds, Frequently Asked
uses, including services that primarily https://www.eia.gov/consumption/residential/data/
Questions, as of July 19, 2021; https:// increase access to affordable, high- 2015/hc/php/hc11.1.php. (last visited November 9,
home.treasury.gov/system/files/136/SLFRPFAQ.pdf. quality housing and support stable 2021)
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Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4361
disparities are partially a result of technology for daily activities and the education, and argued that affordability
economic hardship but are also caused movement by many businesses and presents a major barrier to broadband
by inequitable access to housing with schools to operating remotely during the adoption by households; in other words,
proper insulation, up to date heating, pandemic, broadband has become even many households live in areas that have
cooling, and ventilation systems, and more critical for people across the broadband infrastructure and service
functioning and up to date lighting and country to carry out their daily lives. available but are unable to purchase
appliances.118 While programs that However, even in areas where service for their household due to the
address the effects of energy hardships, broadband infrastructure exists, high cost. These commenters argued
like the Low-Income Home Energy broadband access may be out of reach that broadband must be affordable to be
Assistance Program (LIHEAP), are for millions of Americans because it is accessible.
critical, weatherization attempts to unaffordable, as the United States has Commenters proposed several
address root causes by addressing issues some of the highest broadband prices in potential responses to affordability
that lead to energy insecurities. the Organisation for Economic Co- concerns. Some commenters
4. Internet access or digital literacy operation and Development (OECD).120 recommended that building ‘‘gap
assistance. The interim final rule According to a 2021 Pew Research networks,’’ or broadband networks built
included an enumerated eligible use for Center study, 20 percent of non- at low cost to provide affordable service
assistance to households for internet broadband users say that the monthly in areas where it is lacking, be eligible
access or digital literacy assistance. This cost of home broadband is the primary as assistance to households to respond
enumerated eligible use, which reason they do not have broadband at to the negative economic impacts of the
responds to the negative economic home, and 40 percent say that cost is pandemic, even if they do not meet the
impacts of the pandemic on a household one reason for their lack of home technical standards for eligibility under
by providing assistance that helps them broadband.121 Further, according to the eligible use category of broadband
secure internet access or increase their another survey, 22 percent of parents infrastructure investment, especially the
ability to use computers and the with homebound schoolchildren during required speed standards for new
internet, is separate from the eligible use the COVID–19 pandemic say that it is service. These commenters argued that
category for investments in broadband very or somewhat likely that their the networks have shown promise as a
infrastructure, under Sections children will have to rely on public wi- timely means to expand access to
602(c)(1)(D) and 603(c)(1)(D), which is fi to finish their schoolwork because affordable broadband internet during
used to build new broadband networks there is no reliable internet connection the pandemic, even if they may not
through infrastructure construction or at home; this percentage nearly doubles provide service speeds needed for more
modernization. For discussion of for lower-income parents, 40 percent of intensive internet uses. Another
broadband infrastructure investment in whom noted that their children will commenter requested eligible uses
the final rule, see section Broadband have to rely on public wi-fi.122 The include funding cellular towers to
Infrastructure in Infrastructure. same survey showed that 36 percent of decrease costs. One commenter
Background: The COVID–19 public lower-income parents with homebound recommended that affordability should
health emergency has underscored the children say their child will not be able be addressed through other programs
importance of universally available, to complete their schoolwork because but not SLFRF given that affordability
high-speed, reliable, and affordable they do not have access to a computer and availability may require nuanced
broadband coverage as millions of at home.123 solutions that would be complex to
Americans rely on the internet to Public Comment: Many commenters combine.
participate in, among other critical highlighted the importance of
Treasury Response: The interpretive
activities, school, healthcare, and work. broadband access during the pandemic,
framework and enumerated eligible uses
Recognizing the need for such including for remote work and
allow recipients flexibility to address
connectivity, SLFRF funds can be used identified pandemic impacts, including
to make necessary investments in American Households Used the Internet for Health-
Related Activities in 2019, NTIA Data Show through solutions that take into account
broadband infrastructure that increase (December 7, 2020), https://www.ntia.gov/blog/ the particularized issues in their
access over the long term, as well as the 2020/more-half-american-households-used- community. Given extensive commenter
necessary supports to purchase internet internet-health-related-activities-2019-ntia-data- feedback on the importance of
access or gain digital literacy skills show; Nation Telecommunications and Information
Administration, Nearly a Third of American affordability to achieving broadband
needed to complete activities of daily Employees Worked Remotely in 2019, NTIA Data access, and the centrality of broadband
living during the pandemic. Show (September 3, 2020) https://www.ntia.gov/ to participating in work, education,
The National Telecommunications blog/2020/nearly-third-american-employees- healthcare, and other activities during
and Information Administration (NTIA) worked-remotely-2019-ntia-data-show; and
generally, Nation Telecommunications and the pandemic, affordability programs
highlighted the growing necessity of Information Administration, Digital Nation Data are an appropriate eligible use to
broadband in daily lives through its Explorer (June 10, 2020), https://www.ntia.gov/ respond to the negative economic
analysis of NTIA internet Use Survey data/digital-nation-data-explorer. impacts of the pandemic and Treasury
data, noting that Americans turn to 120 BroadbandSearch Blog Post, How Do U.S.
is maintaining the enumerated eligible
broadband internet service for every Internet Costs Compare To The Rest Of The World?,
available at https://www.broadbandsearch.net/blog/ use for assistance to households for
facet of daily life including work, study, internet-costs-compared-worldwide. internet access and digital literacy
and healthcare.119 With increased use of 121 Pew Research Center, Mobile Technology and
programs in the final rule.
Home Broadband 2021 (June 3, 2021), https://
118 A. Drehobl, & L. Ross, Lifting the high energy www.pewresearch.org/internet/2021/06/03/mobile-
Building or constructing new
burden in America’s largest cities: How energy technology-and-home-broadband-2021/. broadband networks is an infrastructure
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efficiency can improve low income and 122 Pew Research Center, 53% of Americans Say investment and is governed by a
underserved communities, American Council for an the internet Has Been Essential During the COVID– separate clause in the statute. Treasury
Energy Efficient Economy (2016), https:// 19 Outbreak (April 30, 2020), https://www.pew has addressed comments on ‘‘gap
www.aceee.org/sites/default/files/publications/ research.org/internet/2020/04/30/53-of-americans-
researchreports/u1602.pdf. say-the-internet-has-been-essential-during-the- networks’’ that require infrastructure
119 See, e.g., Nation Telecommunications and covid-19-outbreak/. build-out in the section Broadband
Information Administration, More than Half of 123 Id. Infrastructure in Infrastructure.
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4362 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations
Public Comment: Some commenters for some governments to support the experienced; for example, it may not be
also use the term ‘‘gap networks’’ to well-being of households and reasonably proportional for a cash
refer to equipment installed as part of individuals in their communities. Some assistance program to provide assistance
wi-fi systems, such as routers, repeaters, commenters requested that Treasury set in a very small amount to a group that
and access points; this equipment a specific dollar amount for permissible experienced severe harm and in a much
provides consumer access to an existing cash transfers, and Treasury has also larger amount to a group that
broadband network and does not require received recipient questions on whether experienced relatively little harm.
new network build-out or construction. specific types of transfers, such as those 6. Survivor’s benefits. The interim
These commenters recommended that to a substantial share of the population final rule included an enumerated
Treasury permit, as assistance to in the jurisdiction, would be a eligible use for survivor’s benefits to
households for internet access, permissible use of funds. surviving family members of
investments in public wi-fi networks, Treasury Response: Treasury is individuals who have died from
free wi-fi in public housing maintaining this enumerated eligible COVID–19, including cash assistance to
communities, and other equipment that use in the final rule, in line with widows, widowers, or dependents.
offers internet access to end users by commenters’ recommendations. Because
the final rule is intended to provide Public Comment: Treasury did not
utilizing existing broadband networks.
Other commenters recommended that flexibility to recipients to respond to the receive any comments on the inclusion
eligible uses in this category include particularized pandemic impacts in of survivor’s benefits as an enumerated
providing devices and equipment their communities, which may vary in use for impacted households in the
necessary to access the internet, like type and intensity, setting a specific interim final rule.
computers and routers, directly to low- dollar threshold for eligible cash Treasury Response: This use of funds
income households. transfers would fail to recognize the remains eligible under the final rule.
Treasury Response: Treasury has particularized needs of communities Consistent with the general
determined that these services, which and limit recipients’ flexibility to tailor reorganization noted above, the final
expand internet access without their response to those needs. rule organizes survivor’s benefits under
constructing new networks, are an To provide greater clarity, Treasury is assistance to households to clarify that
appropriate enumerated eligible use as elaborating on the analysis that households are the intended
assistance to households to respond to recipients may undertake to assess the beneficiaries of survivor’s benefits.
a negative economic impact, and they eligibility of specific cash assistance 7. Assistance accessing or applying
are permitted under the final rule. programs or transfers. Cash transfers, for public benefits or services.
Treasury is clarifying that eligible uses like all eligible uses in this category, Recognizing that eligible households
under this category can also include a must respond to the negative economic often face barriers to accessing public
wide range of programs and services to impacts of the pandemic on a household benefits or services that improve health
expand internet access and digital or class of households. For the reasons and economic outcomes, the interim
literacy, such as subsidies for the cost of discussed above, recipients may final rule included as an enumerated
internet service, other programs that presume that low- and moderate-income eligible use in disproportionately
support adoption of internet service households (as defined in the final rule), impacted communities, public benefits
where available, digital literacy as well as households that experienced navigators to assist community members
programs, or programs that provide unemployment, food insecurity, or with navigating and applying for
devices and equipment to access the housing insecurity, experienced a available federal, state, and local public
internet (e.g., programs that provide negative economic impact due to the benefits or services. Treasury also
equipment like tablets, computers, or pandemic. clarified in subsequent guidance after
routers) to households. Recipients Recipients may also identify other the interim final rule that this eligible
seeking to use funds for equipment households or classes of households use category would include outreach
should refer to the section Capital that experienced a negative economic efforts to increase uptake of the Child
Expenditures in General Provisions: impact of the pandemic and provide Tax Credit.
Other for additional eligibility standards cash assistance that is reasonably
proportional to, and not grossly in Background: The under-enrollment of
that apply to uses of funds for capital
excess of, the amount needed to address eligible households in social assistance
expenditures (e.g., equipment, property,
the negative economic impact. For programs is a well-recognized and
and facilities).
5. Cash assistance. The interim final example, in the ARPA, Congress persistent challenge. There are many
rule included as an enumerated eligible authorized Economic Impact Payments reasons why a household may not be
use cash assistance and provided that to households at certain income levels, receiving a particular benefit even
cash transfers must be ‘‘reasonably identifying and responding to a negative though they are eligible. For many
proportional’’ to the negative economic economic impact of the pandemic on federal programs, enrollment processes
impact they address and may not be these households. vary from state-to-state. Sometimes,
‘‘grossly in excess of the amount needed Finally, Treasury has reiterated in the households are simply unaware that
to address’’ the impact. In assessing final rule that responses to negative they are eligible for a particular
whether a transfer is reasonably economic impacts should be reasonably benefit.124 For example, despite having
proportional, recipients may ‘‘consider proportional to the impact that they are one of the highest rates of participation
and take guidance from the per person intended to address. Uses that bear no of any benefits program, nearly 20
amounts previously provided by the relation or are grossly disproportionate percent of eligible individuals do not
Federal Government in response to the to the type or extent of harm participate in the Supplementary
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COVID–19 crisis,’’ and transfers experienced would not be eligible uses. Nutritional Assistance Program
‘‘grossly in excess of such amounts’’ are Reasonably proportional refers to the
124 Amy Finkelstein & Matthew J Notowidigdo,
not eligible. scale of the response compared to the
Take-Up and Targeting: Experimental Evidence
Public Comment: Several commenters scale of the harm. It also refers to the from SNAP, The Quarterly Journal of Economics,
expressed support for this eligible use, targeting of the response to beneficiaries vol 134(3), pages 1505–1556 (2019), https://
noting that this is a common policy tool compared to the amount of harm they www.nber.org/papers/w24652.
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Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4363
(SNAP).125 In other cases, policies like education on child development, Low-income households are also more
public charge and asset testing can positive parenting, coping skills, or likely to lose access to quality
discourage otherwise eligible recovery for mental health and childcare.131 The widespread closure of
households.126 While the gap between substance use. The interim final rule childcare centers combined with a lack
households that need assistance and the also included an enumerated eligible of access to paid family leave means
number of households participating in use for early learning services in parents in low-income households are
public benefit programs has always disproportionately impacted more likely to experience a reduction of
existed, narrowing that gap and communities, to address disparities in income or leave their jobs due to a lack
ensuring households receive the support education. of childcare options.132
they need is critical in mitigating the Public Comment: Childcare and Early Additionally, childcare providers
negative economic impacts of the Learning: Treasury received multiple serving primarily low-income families
pandemic. comments that were supportive of the were less likely to remain open during
Public Comment: Treasury has also provision of childcare. Treasury has also the pandemic because of tighter profit
received feedback from recipients and received multiple comments and margins and general community
stakeholders noting the need to increase questions indicating that recipients have financial insecurity, compared to
awareness and uptake of assistance identified a need for childcare for a childcare providers serving primarily
programs, including gaps that remain in broader range of households and high-income families.133 134
enrollment of eligible households in communities, for example those that In addition to disruptions to
programs to address the negative may need childcare in order to return to childcare, early learning services were
economic impacts of the pandemic.127 work, in addition to households and also significantly impacted by the
Treasury Response: Treasury has communities disproportionately pandemic, and the disruption of these
determined that this impact of the impacted by the pandemic. Several services had widespread ramifications
pandemic is widely experienced across commenters expressed uncertainty for learning loss, parental support, and
many jurisdictions and programs or about how childcare facilities should equity. Early learning centers have seen
services to increase awareness and interact with the boundaries of a QCT. declined enrollment across the board,
uptake of assistance programs would Finally, one commenter recommended though there was a larger dip in
respond to the pandemic’s negative that pre-K or early learning services enrollment for low-income
economic impact in all communities. As encompass care for infants and toddlers, households.135 This lower enrollment
such, in the final rule, this use is eligible arguing that these types of care are often coincides with a diminishing workforce,
for any impacted household or class of more expensive or challenging to access as similarly to childcare, early
households, not only in for families. childhood educators have been leaving
disproportionately impacted Background: Childcare and Early the profession due to long hours, low
communities. Learning: As daycares and schools pay,136 and health and safety
8. Promoting healthy childhood closed in-person activities during the concerns.137 As a result, children’s
environments. The interim final rule pandemic, many working families were school readiness has suffered, leading to
included programs and services that left without childcare during the day.128 potential long-term impacts on life
promote healthy childhood Although daycare centers and schools outcomes.138 The impact also extended
environments as an enumerated eligible have since reopened in many
use for disproportionately impacted communities, there remains a persistent 131 U.S. Census Bureau, Phase 3.2 Household
households. The interim final rule listed childcare shortage as childcare Pulse Survey: Table 2. Childcare Arrangements in
employment levels have not fully the Last 4 Weeks for Children Under 5 Years Old,
three programs or services included by Selected Characteristics, (Washington: 2021),
under this use: Childcare; programs to rebounded since the sharp decline in available at https://www.census.gov/programs-
provide home visits by health childcare employment at the beginning surveys/household-pulse-survey/data.html.
professionals, parent educators, and of the pandemic.129 As a result, working 132 Id.
social service professionals to parents in communities across the 133 N. Kalluri, C. Kelly, & A. Garg, Child Care
individuals with young children to country, and more specifically women, During the COVID–19 Pandemic: A Bad Situation
may face challenges entering or Made Worse. Pediatrics (2021), https://doi.org/
provide education and assistance for 10.1542/peds.2020-041525.
reentering the labor force.130
economic support, health needs, or 134 National Association for the Education of
child development; and services for Young Children, Am I Next? Sacrificing to Stay
128 Women have carried a larger share of
Open, Child Care Providers Face a Bleak Future
child welfare-involved families and childcare responsibilities than men during the Without Relief (December 2020), https://
foster youth to provide support and COVID–19 crisis. See, e.g., Gema Zamarro & Mar(´a www.naeyc.org/sites/default/files/globally-shared/
J. Prados, Gender differences in couples’ division of downloads/PDF.
125 United States Department of Agriculture, childcare, work and mental health during COVID– 135 G. G. Weisenfeld, Impacts of Covid-19 on
19, Rev. Econ. Household 19:11–40 (2021), Preschool Enrollment and Spending, New
Trends in Supplemental Nutrition Assistance
available at https://link.springer.com/article/ Brunswick, NJ: National Institute for Early
Program Participation Rates: Fiscal Year 2016 to 10.1007/s11150-020-09534-7; Titan Alon et al., The
Fiscal Year 2018 (May 2021), https://fns-prod. Education Research (2021), https://nieer.org/wp-
Impact of COVID–19 on Gender Equality, National
azureedge.net/sites/default/files/resource-files/ content/uploads/2021/03/NIEER_Policy_Brief_
Bureau of Economic Research Working Paper 26947
Trends2016-2018.pdf. Impacts-of-Covid-19on_Preschool_Enrollment_and_
(April 2020), available at https://www.nber.org/
126 Jeremy Barofsky et al., Spreading Fear: The Spending_3_16_21.pdf.
papers/w26947.
136 Heather Long, ‘The pay is absolute crap’:
Announcement Of The Public Charge Rule Reduced 129 See, e.g., Center For The Study Of Child Care
Enrollment In Child Safety-Net Programs, Health Employment (CSCCE), Child Care Sector Jobs: BLS Child-care workers are quitting rapidly, a red flag
Affairs (October 2020), https://www.health Analysis (November 8, 2021), https://cscce. for the economy, Washington Post (September 19,
affairs.org/doi/full/10.1377/hlthaff.2020.00763. berkeley.edu/child-care-sector-jobs-bls-analysis/; 2021), https://www.washingtonpost.com/business/
127 See, e.g., U.S. Department of the Treasury, By
Emma K. Lee, and Zachary Parolin. The Care 2021/09/19/childcare-workers-quit/.
137 Monash University, The emotional toll of
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ZIP Code: Number of Children under Age 18 with Burden during COVID–19: A National Database of
a Social Security Number Who Are Not Found on Child Care Closures in the United States, Socius COVID–19 among early childhood educators
a Tax Year 2019 or 2020 Tax Return but who (January 2021), doi:10.1177/23780231211032028. (August 5, 2020) https://lens.monash.edu/@
Appear on a Tax Year 2019 Form 1095 and 130 Jason Furman, Melissa Schettini Kearney, and education/2020/08/05/1381001/the-emotional-toll-
Associated Number of Policy Holders (June 2021), Wilson Powell, The Role of Childcare Challenges in of-covid-19-among-early-childhood-educators.
https://home.treasury.gov/system/files/131/ the US Jobs Market Recovery During the COVID– 138 Daphna Bassok and Anna Shapiro,
Estimated-Counts-of-Children-Unclaimed-for-CTC- 19 Pandemic, NBER Working Paper No. 28934 (June Understanding COVID–19-era enrollment drops
by-ZIP-Code-2019.pdf. 2021), https://www.nber.org/papers/w28934. Continued
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4364 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations
to parents. Parents, especially mothers, weeks).140 In addition to heightened COVID–19 on pregnant and recently
may face challenges reentering or health risks from COVID–19, pregnant pregnant individuals, Treasury is re-
remaining in the workforce if early individuals may have experienced categorizing home visiting services as an
learning services are unavailable. significant changes to their prenatal care eligible use for impacted communities,
Treasury Response: Childcare and during the pandemic 141 or may also not just disproportionately impacted
Early Learning Services: Treasury agrees have experienced increased mental communities. Under the final rule, these
with commenters’ analysis that health challenges, including high levels eligible uses are available to impacted
challenges accessing or affording of depression, anxiety, loneliness, and households or classes of households.
childcare have been widespread during post-traumatic stress during the Public Comment: Child Welfare:
the pandemic, affecting many pandemic.142 While the interim final rule noted that
jurisdictions and populations across the Home visiting services provided to certain types of assistance, particularly
country. Disruptions to early care and families, particularly new mothers and around child development and
learning services similarly have had newborns, feature regular home visits parenting, were eligible for child
broad impact and likely result in from trained nurses, social workers, welfare-involved families, Treasury has
negative impacts for young children and and/or counselors who provide health received some recipient questions
their parents. As such, these care, mental health resources, positive asking whether financial, educational,
enumerated eligible uses are generally parenting support, support in making housing, or other supports and services
responsive to the negative economic personal health decisions, and are eligible uses for foster youth,
impacts of the pandemic in all awareness of other potentially helpful including those aging out of the system,
communities, not just in services. These functions have become and child welfare-involved families.
disproportionately impacted even more essential at mitigating Other commenters asked about whether
communities. Under the final rule, negative factors associated with the funding for kinship care would be
childcare and early learning services are pandemic. Home visits give eligible.
available to impacted households or professionals a chance to flag potential
Background: Child Welfare: The
classes of households, not just those domestic violence, which has risen
COVID–19 pandemic placed meaningful
disproportionately impacted. These worldwide over the course of the
strain on the child welfare and foster
eligible uses can include new or pandemic.143 Racial health disparities
care system. Court hearings were
expanded services, increasing access to can also be driven down by home visits.
delayed,146 essential mental health care
services, efforts to bolster, support, or For example, Black women are more
was shifted to a virtual environment,
preserve existing providers and services, likely to avoid hospitals during the
and attendance and performance in
and similar activities. pandemic, and home visitors can help
school among foster children dropped
Further, Treasury is clarifying that either assuage concerns around
sharply.147 Additionally, there was a
improvements to or new construction of hospitals or give effective advice for
nationwide rise of new children
childcare, daycare, and early learning alternative methods of childbirth.144
entering the foster care system and
facilities are eligible capital Given the disproportionate effect of the
many states placed temporary moratoria
expenditures. Recipients seeking to use pandemic on people of color, home
on children aging out of the foster care
funds for capital expenditures should visits are an essential equity tool that
system.148 As these temporary moratoria
refer to the section Capital Expenditures tackle major negative effects of the
expire, additional support will be
in General Provisions: Other for pandemic. These are just a few
needed to assist children exiting the
additional eligibility standards that selections from the evidence that
system.
apply to uses of funds for capital suggests many home visiting models can
expenditures. have a positive effect on maternal Additionally, financial and material
Public Comment: Home Visiting: physical and mental health.145 hardship are causal factors in the
Treasury has also received questions Treasury Response: Home Visiting: increase of new children entering the
about whether the provision of home Given the widespread impact of foster care system, whether through loss
visiting services would be responsive to of a caregiver, domestic violence,149 or
the health and mental health needs of 140 Id. other associated costs of the pandemic.
impacted new mothers, citing the 141 Sarah Javaid, Sarah Barringer, Sarah D Therefore, support to decrease these
Compton, Elizabeth Kaselitz, Maria Muzik, Cheryl hardships will support families and
positive mental health impacts shown A. Moyer, The impact of COVID–19 on prenatal
on the mother as well as improved care in the United States: Qualitative analysis from
increase positive outcomes for youth
outcomes for children. a survey of 2519 pregnant women, Midwifery,
Background: Home Visiting: Pregnant Volume 98, 2021, 102991, ISSN 0266–6138, https:// 146 National Conference of State Legislatures,
doi.org/10.1016/j.midw.2021.102991. Criminal Justice System Responses to COVID–19
and recently pregnant individuals are at 142 A Basu, HH Kim, R Basaldua, KW Choi, L (November 16, 2020), https://www.ncsl.org/
an increased risk for serious illness from Charron, et al., A cross-national study of factors research/civil-and-criminal-justice/criminal-justice-
COVID–19.139 Furthermore, pregnant associated with women’s perinatal mental health and-covid-19.aspx.
individuals with COVID–19 are more and wellbeing during the COVID–19 pandemic, 147 John Burton Advocates for Youth, The
likely to experience preterm birth PLOS ONE 16(4): e0249780, (2021), https://doi.org/ Cumulative Impact of the Pandemic on Youth Who
10.1371/journal.pone.0249780. Have Been in Foster Care or Homeless (May 2020)
(delivering the baby earlier than 37 143 Amanda Taub, A New Covid-19 Crisis: https://jbay.org/wp-content/uploads/2021/04/JBAY-
Domestic Abuse Rises Worldwide, New York Times COVID-19-Impact.pdf.
among early-grade public school students, (April 6, 2020), https://www.nytimes.com/2020/04/ 148 John Kelly, Next Week, Thousands of Foster
Brookings Institution (February 22, 2021), https:// 06/world/coronavirus-domestic-violence.html. Youth Will Age Out on the Same Day (September
www.brookings.edu/blog/brown-center-chalkboard/ 144 Xenia Shih Bion, Efforts to Reduce Black 21, 2021), https://imprintnews.org/subscriber-
2021/02/22/understanding-covid-19-era- Maternal Mortality Complicated by COVID–19, content/thousands-of-foster-youth-will-age-out-on-
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enrollment-drops-among-early-grade-public-school- California Health Care Foundation (April 20, 2020), the-same-day/59006.
students/. https://www.chcf.org/blog/efforts-reduce-black- 149 Conrad-Hiebner, Aislinn, and Elizabeth
139 Centers for Disease Control and Prevention, maternal-mortality-complicated-covid-19/. Byram, The Temporal Impact of Economic
Pregnant and Recently Pregnant People, https:// 145 U.S. Department of Health and Human Insecurity on Child Maltreatment: A Systematic
www.cdc.gov/coronavirus/2019-ncov/need-extra- Services, Home Visiting Evidence of Effectiveness, Review. Trauma, Violence, & Abuse, vol. 21, no. 1,
precautions/pregnant-people.html (last visited https://homvee.acf.hhs.gov/outcomes/maternal%20 Jan. 2020, pp. 157–178, doi:10.1177/
November 9, 2021). health/In%20Brief. 1524838018756122.
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Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4365
and families that may otherwise become Interventions or services that address were responsive to the negative
involved in the child welfare system. the impact of lost instructional time economic impacts of the pandemic
Treasury Response: In the final rule, may include offering high-quality when provided to disproportionately
Treasury is clarifying that services to tutoring and other extended learning impacted households and communities.
foster youth, including those aging out opportunities, providing differentiated The enumerated uses included
of the system, and child welfare- instruction, implementing activities to supportive housing or other programs or
involved families may encompass a meet the comprehensive needs of services to improve access to stable,
wide array of financial, educational, students, expanding and improving affordable housing among individuals
child development, or health supports, language access for parents and families, who are homeless and development of
or other supports necessary, including providing information and assistance to affordable housing to increase supply of
supports for kinship care. parents and families on how they can affordable and high-quality living units.
9. Addressing the impacts of lost effectively support students, including Many recipients have already
instructional time. in a distance learning environment, announced plans to use SLFRF funds
Public Comment: The interim final improving student engagement in for affordable housing interventions in
rule included an enumerated eligible distance education, and administering all of these categories. Treasury received
use to address educational disparities in and using high-quality assessments to many comments asking for additional
disproportionately impacted assess students’ academic progress, clarity or flexibility in these uses.
communities, recognizing that among others. In designing services As detailed below, based on multiple
underserved students have been more under this eligible use, recipients may public comments and questions and
severely impacted by the pandemic and wish to reference guidance from the Treasury’s subsequent analysis,
including responsive services for early Department of Education on strategies Treasury has determined that
learning, enhance funding to high- for addressing lost instructional time.151 supportive housing or other programs or
poverty districts, and providing The final rule also maintains a services to improve access to stable,
evidence-based services to address the separate enumerated eligible use for affordable housing among individuals
academic, social, emotional, and mental addressing educational disparities in who are homeless, and the development
health needs of students. Some disproportionately impacted of affordable housing to increase supply
commenters expressed concerns that communities. This eligible use includes of affordable and high-quality living
learning loss or the negative impacts of services to address disparities in units are responsive to the needs of
lost instructional time due to school educational outcomes that predate the impacted populations, not only
closures or remote education during the pandemic and amplified its impact on disproportionately impacted
pandemic had affected a significant underserved students; these include, for populations. This final rule reflects this
share of students in grades kindergarten example, enhanced funding to high- clarification and builds on the
through twelve (K–12), including poverty districts and providing objectives stated in the interim final rule
students who may not fall within a evidence-based services to address the to improve access to stable, affordable
disproportionally impacted group. academic, social, emotional, and mental housing, including through
Background: The COVID–19 health needs of students. interventions that increase the supply of
pandemic resulted in the widespread Finally, as described in the section affordable and high-quality living units,
closure of schools across the nation. Public Health, recipients can provide a improve housing security, and support
While many schools and districts broad range of behavioral health durable and sustainable
reopened to in-person instruction or services, including services for children homeownership.
implemented remote learning, the shift and youth in schools, to respond to the Finally, note that ‘‘emergency housing
was not immediate or without impacts of the pandemic on mental assistance,’’ or assistance for responses
consequence. Children who received health and other behavioral health to the immediate negative economic
virtual only or combined remote and in- issues. When providing behavioral impacts of the pandemic through
person instruction were more likely to health services, recipients may presume services like financial assistance for
report experiencing negative mental- that the general public was impacted by rental arrears or mortgage payments, is
and physical health outcomes than the pandemic and provide behavioral also an eligible use category for
children who received in-person health services to members of the assistance to households under the final
instruction.150 general public, including children and rule; see the eligible use for ‘‘emergency
Treasury Response: Under the final youth in schools, without any further housing assistance’’ above. The
rule, addressing the impact of lost analysis of impacts of the pandemic on provision of housing vouchers and
instructional time and/or learning loss those individuals and whether the assistance relocating to neighborhoods
is an enumerated eligible use for service is responsive. with higher levels of economic
impacted households. When providing 10. Promoting long-term housing
opportunity remains an eligible use
services to address lost instructional security: affordable housing and
under assistance to disproportionately
time, recipients may presume that any homelessness. Under the interim final
impacted households; for discussion,
K–12 student who lost access to in- rule, recipients may use SLFRF funds to
provide a set of housing services to see the eligible use for ‘‘housing
person instruction for a significant vouchers and assistance relocating’’
period of time has been impacted by the communities that have been
disproportionately impacted by the below.
pandemic and is thus eligible for Background: Affordable Housing: It is
pandemic. Specifically, the interim final
responsive services. clear that the ongoing pandemic and
rule provided that programs or services
resulting economic crisis are having a
that address housing insecurity, lack of
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150 Verlenden JV, Pampati S, Rasberry CN, et al.
profound, long-term negative effect on
Association of Children’s Mode of School affordable housing, or homelessness,
the pre-existing affordable housing
Instruction with Child and Parent Experiences and
Well-Being During the COVID–19 Pandemic— 151 U.S. Department of Education, Strategies for crisis facing low-income households.152
COVID Experiences Survey, United States, October Using American Rescue Plan Funding to Address
8–November 13, 2020. MMWR Morb Mortal Wkly the Impact of Lost Instructional Time, August 2021. 152 Consumer Financial Protection Bureau,
Rep 2021;70:369–376. DOI: http://dx.doi.org/ Retrieved from https://www2.ed.gov/documents/ Housing insecurity and the COVID–19 pandemic
10.15585/mmwr.mm7011a1external icon. coronavirus/lost-instructional-time.pdf. Continued
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4366 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations
The combination of a large number of in higher-income neighborhoods that Treasury Response: Eligible Activities:
higher-income households who have would allow residents to live closer to The final rule clarifies eligibility of
weathered the pandemic without jobs and well-resourced schools. affordable housing development for
significant income losses, low interest Additionally, as noted above, recipients; these uses were eligible
rates, and housing supply constraints Treasury is finalizing the rule with some under the interim final rule, but
exacerbated by the pandemic, have changes to the treatment of affordable Treasury is providing further guidance
driven a sharp increase in the sale price housing development designed to to enhance clarity and respond to
of homes.153 Meanwhile, many low- clarify that permanent supportive recipient and commenter questions.
income renters and homeowners are housing or other programs or services to As with all interventions to address
struggling with lost employment and improve access to stable, affordable the negative economic impacts of the
income and are behind on their housing housing among individuals who are pandemic, affordable housing projects
payments.154 homeless, and the development of must be responsive and proportional to
Public Comment: Affordable Housing affordable housing to increase supply of the harm identified. This test may be
Outside of Low-Income Geographies: A affordable and high-quality living units, met by affordable housing development
major theme in comments was that are responsive to individuals and projects—which may involve large
affordable housing interventions, households that were impacted by the expenditures and capital investments—
especially development of affordable pandemic in addition to those that were if the developments increase the supply
housing, should be allowed outside of disproportionately impacted. This shift of long-term affordable housing for low-
QCTs, as concentrating the supply of is in line with commenters’ income households. While there may be
affordable housing in low-income recommendations and consistent with less costly (or non-capital) alternatives
geographies can have the effect of the facts described above, which to affordable housing development, a
increasing both concentrated poverty demonstrate that lack of supply of comprehensive response to the
and racial and economic segregation, affordable housing units contributed to widespread housing challenges
while locking lower-income households the pandemic’s impact on housing underscored by the pandemic will
in need of housing support out of high- insecurity and unsustainable housing require the production of additional
opportunity neighborhoods with access cost burdens and that these impacts affordable homes, and targeted
to employment and amenities. were experienced broadly across the affordable housing development is a
Treasury Response: Affordable country. cost-effective and proportional response
Housing Outside Low-Income Public Comment: Eligible Activities: to this need.
Geographies: As previously stated, Many commenters asked for clarity on For purposes of this test, Treasury
affordable housing is not confined to what types of activities (e.g., land will presume that any projects that
low-income geographies under the acquisition, construction, pre- would be eligible for funding under
interim final rule. As discussed construction costs, operating costs, etc.) either the National Housing Trust Fund
elsewhere, the interim final rule are eligible uses of SLFRF, and what (HTF) or the Home Investment
presumed that QCTs, as well as affordability criteria must be applied to Partnerships Program (HOME) are
communities served by Tribal affordable housing development. eligible uses of SLFRF funds. Note that
governments, were disproportionately Commenters encouraged Treasury to these programs use different income
impacted for administrative allow the full array of affordable limits than the definition of low- and
convenience, but recipients may housing activities, including particular moderate-income adopted by Treasury.
identify other populations, households, requests for broad flexibility for Tribal Given the severity of the affordable
or geographic areas with disparate communities, and to specify that housing shortage, and the ways in
impacts of COVID–19 and provide ‘‘development’’ should include which the pandemic has exacerbated
affordable housing services to them. For construction, preservation, the need for affordable, high-quality
example, under the interim final rule, a rehabilitation, and operation. Other dwelling units, Treasury has determined
city could determine that its low- commenters requested clarification that the households served by these
income residents faced disproportionate about permissible program federal housing programs have been
impacts of COVID–19 and develop administration approaches for impacted by the pandemic and its
affordable housing targeted to these affordable housing, such as contracting negative economic impacts and that
households. Such a scenario could methods and distribution of funds. development of affordable housing
include, for example, affordable projects Some commenters asked that consistent with these programs is a
Treasury require SLFRF funds to be related and reasonably proportional
(March 2020), https://files.consumerfinance.gov/f/ focused on the lowest-income response to those impacts. Additionally,
documents/cfpb_Housing_insecurity_and_the_ households, who suffer the most severe affordable housing projects provided by
COVID-19_pandemic.pdf.
153 Joint Center For Housing Studies Of Harvard
rent burdens and risks of housing a Tribal government are eligible uses of
University, The State of the Nation’s Housing (June instability, and whose housing situation SLFRF if they would be eligible for
2021), https://www.jchs.harvard.edu/sites/default/ has left them particularly vulnerable to funding under the Indian Housing Block
files/reports/files/Harvard_JCHS_State_Nations_ COVID–19. For example, one Grant program, the Indian Community
Housing_2021.pdf. commenter argued that SLFRF funds Development Block Grant program, or
154 Davin Reed and Eileen Divringi, Household
Rental Debt During COVID–19: Update for 2021,
should only be used to support the Bureau of Indian Affairs Housing
Federal Reserve Bank of Philadelphia (2020), affordable housing for households Improvement Program. Alignment with
available at: https://www.philadelphiafed.org/ making 50 percent of AMI or less and these programs, which define
community-development/housing-and- that recipients should be required to set ‘‘affordable housing’’ in a manner
neighborhoods/household-rental-debt-during-covid-
aside significant portions of any consistent with a proportionate
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19-update-for-2021. Further, some research suggests
that liquidity may be a more important predictor of developments for renters making 30 response to the affordable housing
default than other factors, including income or percent of AMI or less and persons with challenges faced by low- and moderate-
equity. See Trading Equity for Liquidity (June physical and sensory disabilities. Other income households as a result of the
2019), available at https://www.jpmorganchase.
com/content/dam/jpmc/jpmorgan-chase-and-co/
commenters requested a more flexible negative economic impacts of the
institute/pdf/institute-trading-equity-for- approach to affordable housing pandemic, is intended to give recipients
liquidity.pdf. definitions. comfort and clarity as they design a
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Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4367
wide variety of affordable housing maturities beyond the period of assistance to households and continue
interventions, including production, performance or revolving loan funds to be so under the final rule, as outlined
rehabilitation, and preservation of that revolve beyond the period of below.
affordable rental housing and, in some performance be eligible uses of SLFRF 11. Paid sick, medical, or family
cases, affordable homeownership units. funds if used for affordable housing. leave.
These programs allow the financing of Some commenters pointed out that for- Public Comment: Some commenters
a wide range of affordable housing profit developers of low-income housing argued that the pandemic increased the
activities and set clear eligibility criteria through the Low-Income Housing Tax need for paid sick or medical leave, as
that many recipients are already familiar Credit (LIHTC) may be deterred from staying home when ill is recommended
with. accepting grants to bridge funding gaps by the CDC to prevent spread of the
Finally, to further support sustainable in current LIHTC deals by the treatment virus but lack of access to paid sick
and durable homeownership, recipients of grants to for-profit entities in the leave often prevents workers from
may consider offering down payment calculation of eligible basis for the staying home. Other commenters
assistance, such as through LIHTC. recommended paid family leave as an
contributions to a homeowner’s equity Treasury Response: The final rule eligible use, arguing that shortages in
at origination or that establish a post- does not change the treatment of loans access to childcare or home health
closing, mortgage reserve account on from the interim final rule. For more assistance, as well as school closures,
behalf of the borrower that may be details see section Treatment of Loans may increase the need for family
utilized to make a missed or partial in Program Administration Provisions. members to serve as caretakers.
mortgage payment at any point during Similarly, the final rule does not change
the life of the loan (e.g., if the borrower the treatment of grants to support Background: The COVID–19
faces financial stress). Homeownership affordable housing development, pandemic highlighted the importance of
assistance that would be eligible under including developments supported by paid leave as well as the number of
the Community Development Block the LIHTC: such grants are an eligible workers who do not have access to paid
Grant (at 24 CFR 507.201(n)) is also an use of funds. sick and/or family leave. When workers
eligible use of SLFRF funds. Additional enumerated eligible uses have access to paid leave, they are less
Public Comment: Permanent for assistance to impacted households. likely to report to work sick, and
Supportive Housing: Treasury has As noted above, the interim final rule therefore less likely to spread illnesses
received comments encouraging the use posed a question on what other types of in the workplace: One study
of SLFRF funds for permanent services or costs Treasury should demonstrates that the emergency sick
supportive housing. This is an eligible consider as eligible uses to respond to leave provision of the Families First
use under the interim final rule: Both the negative economic impacts of Coronavirus Response Act (FFCRA)
the development of affordable housing COVID–19. In response, commenters reduced the spread of COVID–19.155
(including operating subsidies) and proposed a wide variety of additional The lack of paid leave exacerbates
wraparound services such as behavioral recommended enumerated eligible uses financial hardships experienced as a
health services, employment services, to assist households, ranging from result of the public health emergency. A
and other supportive services, are general categories of services (e.g., legal 2018 survey by the Department of Labor
eligible responses to the public health and social services) to services that found that two-thirds of employees that
crisis or its negative economic impacts. respond to needs widely experienced took unpaid or partial-paid leave
Treasury Response: The final rule across the country (e.g., access to and experienced financial hardship.156
maintains the eligibility of permanent affordability of health insurance) to Furthermore, because the Family and
supportive housing as an enumerated services that are most applicable to the Medical Leave Act (FMLA) excludes
use. Treasury is also clarifying that particularized needs of certain small employers, part-time workers, and
other affordable housing developments populations or geographic areas of the workers who have been with their
targeted to specialized populations are United States (e.g., senior citizens, employer for less than a year, 44 percent
also eligible, for example recovery SNAP recipients, immigrants, formerly- of workers do not have access to even
housing for individuals in recovery from incarcerated individuals, responding to unpaid leave.157 Workers of color and
substance use. environmental issues in certain workers with lower incomes are less
Public Comment: Operating Expenses: geographic regions). Other commenters likely to have access to paid leave.158 159
Commenters specifically asked that generally requested a high degree of
Treasury allow the use of SLFRF funds flexibility to respond to the particular 155 Stefan Pichler, Katherine Wen, and Nicolas R.
for operating expenses of affordable needs of their communities. Ziebarth, COVID–19 Emergency Sick Leave Has
Helped Flatten The Curve In The United States:
housing units, as operating subsidies are Treasury Response: Given the large Study examines the impact of emergency sick leave
typically required to reach extremely number and diversity of SLFRF on the spread of COVID–19, Health Affairs 39, no.
low-income households, whose recipients, Treasury’s approach to 12 (2020): 2197–2204, https://www.health
affordable rents may be lower than the assistance to households in the final affairs.org/doi/10.1377/hlthaff.2020.00863.
156 Scott Brown et al., Employee and Worksite
ongoing cost of operating their unit. rule aims to clarify additional
Perspectives of the Family and Medical Leave Act:
Treasury Response: Operating enumerated eligible uses that respond to Results from the 2018 Surveys, Abt Associates (July
expenses for eligible affordable housing negative economic impacts of the 2020), https://www.dol.gov/sites/dolgov/files/
were an eligible use of funds under the pandemic experienced widely in many OASP/evaluation/pdf/WHD_FMLA2018Survey
jurisdictions across the country, making Results_FinalReport_Aug2020.pdf.
interim final rule and the final rule 157 Id.
maintains this treatment. This may it clear and simple for recipients to 158 Ann P. Bartel et al., Racial and ethnic
include capitalized operating reserves. pursue these enumerated eligible uses
lotter on DSK11XQN23PROD with RULES2
disparities in access to and use of paid family and
Rehabilitation and repair of public under the final rule. In the final rule, medical leave: evidence from four nationally
housing will also be considered an Treasury is clarifying several additional representative datasets, U.S. Bureau of Labor
eligible use of SLFRF funds. uses, which generally respond to Statistics (BLS) (January 2019), https://www.bls.gov/
opub/mlr/2019/article/racial-and-ethnic-
Public Comment: Affordable Housing pandemic impacts experienced broadly disparities-in-access-to-and-use-of-paid-family-
Loans and Revolving Loan Funds: Some across jurisdictions and populations, are andmedical-leave.htm.
commenters requested that loans with eligible under the interim final rule as Continued
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4368 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations
For workers that are also caregivers illness or hospitalization due to COVID– Treasury Response: Treasury agrees
for children, seniors, or other family 19 had increased the negative economic that loss of health insurance, increased
members, there may be a similar need impacts of lacking health insurance. financial risk from lacking health
for—and benefits of—paid family leave. Background: In 2019, prior to the insurance, or excessive out-of-pocket
For example, some workers may have pandemic, it was estimated that 11 healthcare costs constitute negative
struggled during the pandemic to percent of nonelderly adults lacked economic impacts of the pandemic.
balance caring for children, as schools health insurance.166 By mid-2020, job Under the final rule, programs or
and daycares closed, and working. For loss had resulted in an estimated 3.3 services to expand access to health
new parents, paid parental leave results million people losing their employer insurance coverage are an enumerated
in fewer infant hospitalizations, sponsored insurance, resulting in an eligible use as assistance to households,
lowering parental stress, increasing additional 2 million uninsured for example, subsidies for health
parental involvement, and improving adults.167 Participation in Medicaid, the insurance premiums or expansion of a
the overall health of parent and child.160 Children’s Health Insurance Program recipient’s health insurance plan to
COVID–19 has also increased the levels (CHIP), and the Affordable Care Act cover additional employees who
of ‘‘caregiving intensity’’ 161 and (ACA) marketplace played an important currently lack coverage.
‘‘caregiving burden’’ 162 for those role in minimizing the number of 13. Services for the unbanked and
providing care to seniors or older family people who completely lost health underbanked.
members.163 164 When surveyed, more insurance during the early phases of the Public Comment: One commenter
than half of caregivers reported that pandemic; Medicaid and CHIP expressed support for the inclusion of
COVID–19 increased both the amount of enrollment increased by 9 percent from services to increase banking access as an
caregiving responsibilities they had as February to September 2020 168 and 8.3 allowable expense under SLFRF. The
well as the negative physical and mental million people enrolled in insurance commenter recommended that states be
impacts their caregiving responsibilities through the ACA marketplace.169 encouraged to offer opportunities for
had on themselves.165 Although the ACA, CHIP, and consumers to open safe and affordable
Treasury Response: Treasury agrees Medicaid have significantly reduced the accounts capable of receiving direct
that these constitute impacts of the number of uninsured Americans payments. The commenter emphasized
pandemic, and accordingly, under the through the pandemic and the economic that allowing unbanked and
final rule, creating, expanding, or downturn, adequate coverage and underbanked households to receive
financially supporting paid sick, affordability still remains an issue for funds securely through no-fee, direct
medical, or family leave programs is an many. In 2020, 21 percent of working- deposit will help connect or reconnect
enumerated eligible use of funds to age adults were inadequately insured, consumers to the mainstream financial
respond to the negative economic meaning even if they had insurance, system.
impacts of the pandemic. they incurred a significant amount of Background: Banking inequities can
12. Health insurance. out-of-pocket costs.170 Additionally, 37 make it difficult for unbanked or
Public Comment: Several commenters percent of adults reported struggling underbanked households to access
recommended that uses of funds to with medical bills or medical debt and housing, jobs, and other important
expand access to health insurance be 71 percent of adults who did not economic opportunities. Being
enumerated eligible uses; commenters purchase insurance cited affordability as unbanked or underbanked can also
believed that the heightened risk of the main factor.171 make it challenging for households to
159 U.S. Bureau of Labor Statistics, Employee 166 Jennifer Tolbert et al., Key Facts about the
apply for and receive financial
Benefits in the United States (March 2019), https:// Uninsured Population, Kaiser Family Foundation
assistance, including services like
www.bls.gov/ncs/ebs/benefits/2019/ownership/ (November 6, 2020), https://www.kff.org/uninsured/ pandemic emergency housing
civilian/table31a.pdf. issue-brief/key-facts-about-the-uninsured- assistance.
160 Maya Rossin-Slater et al., Local exposure to population/. Safe, affordable, and accessible
167 Joshua Aarons et. al., As the COVID–19
school shootings and youth antidepressant use, financial services play a critical role in
Proceedings of the National Academy of Sciences, Recession Extended into the Summer of 2020, More
vol 117(38), pages 23484–23489 (2020), https:// Than 3 Million Adults Lost Employer-Sponsored assisting households in the United
www.pnas.org/content/117/38/23484; Ariel Marek Health Insurance Coverage and 2 Million Became States in managing income volatility
Pihl and Gaetano Basso, Did California Paid Family Uninsured, Urban Institute (September 18, 2020), and cash flow shortages.172 Currently,
Leave Impact Infant Health?, Journal of Policy https://www.urban.org/research/publication/covid-
19-recession-extended-summer-2020-more-3- over 5 percent of families, or 7 million
Analysis and Management, https://onlinelibrary.
wiley.com/doi/abs/10.1002/pam.2210. million-adults-lost-employer-sponsored-health- households are ‘‘unbanked,’’ meaning
161 J.C. Jacobs, A. Laporte, C.H. Van Houtven, P.C. insurance-coverage-and-2-million-became- they do not have a bank account.173
uninsured. Low-income households, non-white
Coyte, Caregiving intensity and retirement status in 168 Centers for Medicare and Medicaid Services,
Canada. Social Science & Medicine, 102, 74–82 households, and households with
(2014), https://www.sciencedirect.com/science/ Medicaid and CHIP Enrollment Trends Snapshot
article/abs/pii/S0277953613006631. through September 2020 (Washington: 2021), individuals with disabilities were even
162 E. Lightfoot, R.P. Moone, Caregiving in times
available at https://www.medicaid.gov/sites/ more likely to be unbanked. In 2019, 16
default/files/2021-01/september-medicaid-chip- percent of Native American households,
of uncertainty: Helping adult children of aging enrollment-trend-snapshot.pdf.
parents find support during the COVID–19 169 Centers for Medicare and Medicaid Services, 14 percent of Black households, and 12
outbreak, Journal of Gerontological Social Work, percent of Hispanic households were
2021 Federal Health Insurance Exchange Weekly
63(6–7), 542–552 (2020), https://www.tandfon
line.com/doi/abs/10.1080/01634372.2020.1769793.
Enrollment Snapshot: Final Snapshot (January 12, unbanked, compared to 2.5 percent of
2021) available at https://www.cms.gov/newsroom/ white households. Additionally,
163 Note: ‘‘Caregiving intensity’’ is defined as the
fact-sheets/2021-federal-health-insurance-
amount and type of care provided by informal exchange-weekly-enrollment-snapshot-final-
caregivers; ‘‘Caregiving burden’’ is defined as the snapshot. 172 Federal Deposit Insurance Corporation, FDIC
impacts on physical and mental health, and health- National Survey of Unbanked and Underbanked
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170 Sara R. Collins, Munira Z. Gunja, and
related quality of life of informal caregivers. Gabriella N. Aboulafia, U.S. Health Insurance Households (2015), https://www.fdic.gov/household
164 SA Cohen, ZJ Kunicki, MM Drohan, ML survey/2015/2015execsumm.pdf.
Coverage in 2020: A Looming Crisis in Affordability
Greaney, Exploring Changes in Caregiver Burden (New York: Commonwealth Fund, 2020), available 173 Federal Deposit Insurance Corporation, How
and Caregiving Intensity due to COVID–19, at https://www.commonwealthfund.org/ America Banks: Household Use of Banking and
Gerontology and Geriatric Medicine (January 2021), publications/issue-briefs/2020/aug/looming-crisis- Financial Services 2019 FDIC Survey, https://
doi:10.1177/2333721421999279. health-coverage-2020-biennial. www.fdic.gov/analysis/household-survey/
165 Id. 171 Id. 2019report.pdf.
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Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4369
underbanked households—those that activities, and other community did not fully utilize their skillset or did
have a bank account but rely on engagement activities. not provide the hours, wages, or job
alternative financial services, such as quality desired. Treasury has also
Assistance to Unemployed and
money orders, payday loans, and check received recipient questions on whether
Underemployed Workers
cashing services— account for 16 job fairs or grants to businesses to hire
percent of all households in the United The interim final rule included underserved workers are eligible uses
States.174 As a result of the COVID–19 assistance to unemployed workers as an under this category. Another commenter
pandemic, new social distancing enumerated eligible use, including recommended flexibility in eligible
protocols have, in some instances, made ‘‘services like job training to accelerate workforce development programs,
it more difficult to perform financial rehiring of unemployed workers.’’ arguing that rural areas may face
transactions with paper instruments, Treasury provided further guidance, particular challenges.
like banknotes, coinage, paper checks, based on recipient questions after the Treasury Response: Treasury is
or money orders. Households interim final rule, that eligible uses maintaining this eligible use in the final
constrained to these payment methods under this section also include ‘‘other rule, including the enumerated eligible
may face challenges receiving efforts to accelerate rehiring and thus services in the interim final rule and
government assistance. Additionally, reduce unemployment, such as subsequent guidance. Treasury is also
businesses have transitioned to cashless childcare assistance, assistance with confirming that job fairs or grants to
payments systems to promote transportation to and from a jobsite or businesses to hire underserved workers
contactless payments.175 As a result, interview, and incentives for newly are eligible uses under this section.
unbanked individuals may face employed workers[,]’’ as well as Treasury is also enumerating that job
additional challenges conducting assistance to unemployed workers and workforce training centers are
financial transactions. seeking to start small businesses. eligible capital expenditures, so long as
Treasury Response: Recognizing these Finally, further guidance also provided they adhere to the standards and
challenges, Treasury is clarifying that that ‘‘public jobs programs, subsidized presumptions detailed in the section
recipients may use SLFRF funds to employment, combined education and Capital Expenditures in General
provide financial services that facilitate on-the-job training programs, or job Provisions: Other.
the delivery of federal, state, or local training to accelerate rehiring or address The final rule maintains the definition
benefits (e.g., Child Tax Credit, Earned negative economic or public health of eligible beneficiaries, which is
Income Tax Credit, tax refunds, or impacts experienced due to a worker’s aligned with the Bureau of Labor
emergency housing or food assistance occupation or level of training’’ are all Statistics’ definitions of unemployed
funds). The following includes a non- enumerated eligible uses as assistance to workers and other labor
exhaustive list of uses to provide unemployed or underemployed underutilization, using a common,
financial services to unbanked and workers. widely known definition that
underbanked households: The interim final rule defined eligible incorporates a broad group of
• Provide low or no cost financial beneficiaries of assistance as individuals both unemployed or whose
services, including in conjunction with ‘‘individuals who want and are skills are otherwise underutilized in the
administration of benefits, such as pre- available for work, including those who labor market.
paid debit cards, e.g., via Economic have looked for work sometime in the In addition, recognizing that the
Impact Payment or General Purpose past 12 months or who are employed pandemic has generated broad
Reloadable pre-paid cards or for the part time but who want and are workforce disruption, in the final rule,
development of public banking available for full-time work.’’ This Treasury is making clear that recipients
infrastructure that can support benefit definition is based on definitions used may provide job training or other
delivery. by the Bureau of Labor Statistics to enumerated types of assistance to
• Provide transitional services to define individuals currently individuals that are currently employed
facilitate long-term access to banking unemployed, as well as persons but are seeking to move to a job that
and financial services. marginally attached to the labor force provides better opportunities for
• Provide financial literacy programs and working part-time for economic economic advancement, such as higher
and conduct community outreach and reasons.176 The latter two classifications wages or more opportunities for career
deploy engagement resources to are types of labor underutilization, or advancement.
increase awareness about low-cost, no- ‘‘underemployed’’ workers.177 Finally,
overdraft fee accounts, pilot new the interim final rule specified that Recipient Unemployment Insurance
strategies and approaches that help assistance to unemployed workers Trust Funds and Related Expenses
overcome barriers to banking access and included both workers who lost their Under the interim final rule, a
support the gathering and sharing of job during the pandemic and resulting recipient may use funds to make
information in ways that improve recession and workers unemployed deposits into its account of the
equity, such as community meetings, when the pandemic began who saw Unemployment Trust Fund established
partnerships with community-based further deterioration of their economic under section 904 of the Social Security
organizations, online surveys, focus prospects due to the pandemic. Act (42 U.S.C. 1104) up to the level
groups, human-centered design Public Comment: Commenters needed to restore the pre-pandemic
generally supported the inclusion of this balance of such account as of January
174 Board of the Governors of the Federal Reserve enumerated eligible use. One 27, 2020 or to pay back advances
System, Report on the Economic Well-Being of U.S. commenter recommended including received under Title XII of the Social
Households in 2018–May 2019, https://www.federal
reserve.gov/publications/2019-economic-well-being-
assistance for underemployed workers Security Act (42 U.S.C. 1321) for the
lotter on DSK11XQN23PROD with RULES2
of-us-households-in-2018-banking-and-credit.htm. who took jobs due to the pandemic that payment of benefits between January 27,
175 Zaheer Allam, The Forceful Reevaluation of 2020 and May 17, 2021. These costs
Cash-Based Transactions by COVID–19 and Its 176 Bureau of Labor Statistics, Labor Force
support the solvency of the
Opportunities to Transition to Cashless Systems in Statistics from the Current Population Survey:
Digital Urban Networks. Surveying the Covid-19 Concepts and Definitions, https://www.bls.gov/cps/ unemployment insurance system and,
Pandemic and its Implications (2020): 107–117. definitions.htm (last visited November 9, 2021). ultimately, unemployment insurance
doi:10.1016/B978–0–12–824313–8.00008–5. 177 Id. benefits provided to unemployed
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4370 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations
workers during the pandemic.178 The the recipient concurrently expands toward making a trust fund deposit or
interim final rule also posed the benefits. Finally, one commenter repaying principal on Title XII advances
question of what, if any, conditions suggested a cap on the amount of funds under the interim final rule, such as the
should be considered to ensure that that can be used for this purpose. legislative appropriation of funds for
funds used under this eligible use Treasury Response: Inclusion as an this purpose, even if a formal obligation
category repair economic impacts of the Eligible Use and Conditions: In the final has not occurred, Treasury will exercise
pandemic and strengthen rule, Treasury is maintaining the enforcement discretion to not pursue
unemployment insurance systems. inclusion of this eligible use category. violations of this final rule provision
Public Comment: Inclusion as an Because unemployment insurance trust (i.e., the requirement not to reduce
Eligible Use and Conditions: funds directly fund benefits to benefits) for recipients that have
Commenters expressed mixed unemployed workers, maintaining the appropriated funds for this purpose
perspectives on this eligible use solvency of the trust fund is critical to prior to the date of adoption of the final
category. Some commenters supported the continued provision of assistance to rule consistent with the laws and
its inclusion, arguing that unemployed workers. Further, funds procedures in their jurisdiction.
unemployment insurance systems have deposited into the trust fund must be Recipients should refer to Treasury’s
faced significant costs to support used as assistance to unemployed Statement Regarding Compliance with
unemployed workers during the workers, an eligible use of SLFRF funds. the Coronavirus State and Local Fiscal
pandemic and that this constitutes a Finally, while, in the absence of the Recovery Funds Interim Final Rule and
negative economic impact that SLFRF SLFRF, trust fund deposits would likely Final Rule, which provides additional
funds should be able to address. Other be funded through increases on detail on these issues.
commenters opposed this eligible use employer payroll taxes, the eligibility of Public Comment and Treasury
category, arguing that funds used under uses of SLFRF funds does not depend Response: Technical Corrections and
this category may not ultimately support on how obligations would otherwise be Amendments: Following the interim
unemployed workers. Some satisfied if the SLFRF were not available final rule, Treasury received recipient
commenters noted that unemployment for this use. questions on whether paying interest on
insurance taxes on businesses While deposits to unemployment
advances received under Title XII of the
automatically increase when trust fund insurance trust funds generally serve as
Social Security Act (42 U.S.C. 1321) is
balances are low and suggested that assistance to unemployed workers,
an eligible use of SLFRF funds; Treasury
permitting the deposit of funds into recipients that make deposits but also
is clarifying that such use is
unemployment insurance trust funds cut unemployment insurance benefits to
permissible, consistent with Treasury’s
prevents a tax increase on businesses, workers substantially decrease the
treatment of the eligibility of interest on
some of which may not have faced likelihood that the deposited funds will
assist unemployed workers. In other Title XII advances under the
negative economic impacts from the
words, SLFRF funds deposited into an Coronavirus Relief Fund.
pandemic, rather than providing
assistance to unemployed workers. unemployment insurance trust fund Treasury is further clarifying that
Other comments suggested that deposits generally serve as assistance to recipients may only use SLFRF funds
are better thought of as savings for unemployed workers, unless recipients for contributions to unemployment
future needs than assistance to take policy actions that substantially insurance trust funds and repayment of
unemployed workers in the near term. decrease the extent to which SLFRF the principal amount due on advances
Responding to the interim final rule’s funds would flow to unemployed received under Title XII of the Social
question, several commenters suggested workers. As such, through December 31, Security Act up to an amount equal to
that, if Treasury maintains this eligible 2024, recipients that deposit SLFRF (i) the difference between the balance in
use, the final rule should require funds into an unemployment insurance the recipient’s unemployment insurance
detailed reporting on funds used under trust fund or use SLFRF funds to repay trust fund as of January 27, 2020 and the
this category or place conditions on this principal on Title XII advances, may not balance of such account as of May 17,
category to increase the likelihood that take action to reduce benefits available 2021, plus (ii) the principal amount
funds ultimately support unemployed to unemployed workers by changing the outstanding as of May 17, 2021 on any
workers. For example, some computation method governing regular advances received under Title XII of the
commenters suggested that recipients unemployment compensation in a way Social Security Act between January 27,
that deposit SLFRF funds into their trust that results in a reduction of average 2020 and May 17, 2021. Further,
fund should be barred from cutting weekly benefit amounts or the number recipients may use SLFRF funds for the
unemployment insurance benefits for of weeks of benefits payable (i.e., the payment of any interest due on such
workers during the period of maximum benefit entitlement). Title XII advances. In other words,
performance or from erecting new Finally, until the final rule becomes excluding interest due on Title XII
barriers to accessing benefits (e.g., effective on April 1, 2022, the interim advances, the magnitude of the decrease
through the application process and final rule remains binding and of the balance in the unemployment
ongoing requirements to receive effective.179 These requirements were insurance trust fund plus the principal
benefits). One commenter, noting that not in effect under the interim final rule outstanding on any Title XII borrowings
unemployment insurance benefits often and do not apply to funds used (i.e., made from the beginning of the public
provide low rates of wage replacement obligated or expended) under the health emergency to the date of
and do not cover some types of interim final rule while it is in effect. In publication of the SLFRF interim final
unemployed workers, argued that addition, recognizing that some rule sets a cap on the amount of SLFRF
recipients should not be permitted to recipients have taken significant steps funds a recipient may use for trust fund
lotter on DSK11XQN23PROD with RULES2
deposit funds into the trust fund unless contributions and repayment of
179 See, e.g., U.S. Department of the Treasury, principal on Title XII advances. Further,
178 Note that, while the economic harm being More Information on the Conclusion of the Public a recipient that deposits SLFRF funds
addressed accrued before March 3, 2021, the cost Comment Period and the Interim Final Rule on the
incurred to address the harm occurs after March 3, Coronavirus State and Local Fiscal Recovery Funds,
into its unemployment insurance trust
2021 and provides assistance to unemployed https://home.treasury.gov/system/files/136/IFR- fund to fully restore the pre-pandemic
workers, an eligible use of SLFRF funds. Explainer.pdf. balance may not draw down that
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Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4371
balance and deposit more SLFRF funds, household income of $6,100 (measured 12 schools into the category ‘‘assistance
back up to the pre-pandemic balance. in 2018 dollars).184 to impacted households,’’ recognizing
The impact pre-existing inequalities that these pandemic impacts were
Enumerated Eligible Uses for have on a household or community’s widely shared across the country.
Disproportionately Impacted ability to recover is intersectional. This section discusses enumerated
Households Research shows that pre-existing racial eligible uses to address health
Background and gender disparities exacerbated the disparities, to build stronger
disproportionate economic and health communities through investments in
The COVID–19 pandemic has had impact COVID–19 and the economic neighborhoods, to address educational
disproportionally negative impacts on downturn had on workers of color, and disparities, to provide rental assistance
many households and communities that specifically, women of color.185 Another vouchers or assistance relocating to
were already experiencing inequality study found that during the first six areas of greater economic opportunity,
related to race, gender, age, or income months of the pandemic counties that and additional eligible uses to respond
before the pandemic. People of color, were both high-poverty and majority to negative economic impacts in
low-income workers, and women non-white experienced COVID–19 disproportionately impacted
disproportionately lost their jobs during infection rates eight times higher than communities. While many of these
the COVID–19 pandemic and high-poverty, majority white services impact both health and
experienced disproportionate rates of counties.186 Many residents in these economic outcomes, Treasury has
negative health outcomes.180 181 communities are still coping with the consolidated them into a single section
negative health and economic impacts. for simplicity and clarity and to reflect
These disproportionate negative the intertwined nature of these issues.
impacts experienced by systemically Summary of the Interim Final Rule and As a reminder, recipients can
underserved communities are not novel Final Rule Structure presume these uses are eligible when
to the COVID–19 pandemic and the As described previously, the interim provided in a QCT, to families and
economic downturn. Research shows final rule provided a broader list of individuals living in QCTs, by Tribal or
that historically underserved enumerated eligible uses to respond to territorial governments, or to low-
communities that are experiencing the pandemic in disproportionately income households or communities. As
economic and social disparities impacted communities, in recognition provided in section Standards:
typically experience disproportionate that pre-existing health, economic, and Designating Other Disproportionately
impacts of economic downturns and social disparities contributed to Impacted Classes, recipients can also
natural disasters.182 This pattern held disproportionate pandemic impacts in provide these services to other
true for the effects of COVID–19 and the certain communities and that populations, households, or geographic
economic downturn: Historically addressing the root causes of those areas disproportionately impacted by
undeserved groups experienced disparities constitutes responding to the the pandemic. Recipients may also
amplified negative impacts, further public health and negative economic identify additional disproportionate
widening inequality.183 impacts of the pandemic. The interim impacts of the pandemic and design an
final rule described eligible uses in appropriate response to address that
Many communities facing systemic disproportionately impacted harm. For details on eligibility
barriers had not yet recovered from the communities in four categories, spread standards and presumed eligible
impact of the Great Recession before across public health and negative populations, see section General
experiencing the impacts of COVID–19 economic impacts: (1) Addressing Provisions: Structure and Standards.
and the economic downturn. For disparities in public health outcomes,
example, in 2009, at the end of the Great (2) building stronger communities Enumerated Eligible Uses for
Recession, households without a high through investments in housing and Disproportionately Impacted
school diploma had an average annual neighborhoods, (3) addressing Households
income of $32,300 (measured in 2018 educational disparities, and (4) 1. Addressing health disparities.
dollars). By 2018, nine years into the promoting healthy childhood Public Comment: General: In general,
economic recovery, those same environments. As described above, commenters supported eligible uses to
households saw their average income Treasury has moved eligible uses related address health disparities and support
increase by $600. During that same time to community violence intervention, health equity; several commenters
period, households with a bachelor’s assistance accessing or applying to highlighted the disparities faced by
degree saw an increase in their average public benefits and services, affordable communities of color and low-income
housing development, healthy populations, as well as the importance
180 U.S. Department of Health and Human childhood environments, and of community engagement in
Services, COVID–19 and Economic Opportunity: addressing lost instructional time in K– developing effective programs to serve
Inequities in the Employment Crisis, April 2021. disproportionately impacted
Retrieved from https://aspe.hhs.gov/sites/default/ 184 Jesse Bennet & Rakesh Kochhar, Two
files/migrated_legacy_files//199901/covid- communities. Many commenters
Recessions, Two Recoveries, Pew Research Center
economic-equity-brief.pdf. (December 13, 2019), https://www.pewresearch.org/
recommended additional enumerated
181 Adelle Simmons et al., Health disparities by
social-trends/2019/12/13/two-recessions-two- eligible uses to address health
race and ethnicity during the COVID–19 pandemic: recoveries-2/. disparities; these are discussed further
Current evidence and policy approaches. U.S. 185 Darrick Hamilton et al., Building an Equitable
Department of Health and Human Services https://
below in this section.
Recovery: The role of Race, Labor Markets, and Treasury Response: In line with
aspe.hhs.gov/sites/default/files/migrated_legacy_ Education, The New School’s Institute on Race and
files//199516/covid-equity-issue-brief.pdf. commenters’ recommendations, the
lotter on DSK11XQN23PROD with RULES2
Political Economy (February 2021).
182 Perry, Brea L., Brian Aronson, and Bernice A. 186 Adhikari S, Pantaleo NP, Feldman JM, final rule maintains several enumerated
Pescosolido, Pandemic precarity: COVID–19 is Ogedegbe O, Thorpe L, Troxel AB. Assessment of eligible uses to address health
exposing and exacerbating inequalities in the Community-Level Disparities in Coronavirus
American heartland, National Academy of Sciences
disparities, specifically:
Disease 2019 (COVID–19) Infections and Deaths in
(Febuary 2021), https://www.pnas.org/content/118/ Large US Metropolitan Areas. JAMA Netw Open.
a. Community health workers.
8/e2020685118. 2020;3(7):e2016938. doi:10.1001/ Treasury received few comments on
183 Id. jamanetworkopen.2020.16938. community health workers, though one
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4372 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations
requested further clarification on their include construction of new facilities further guidance clarifying that
role.187 Treasury is maintaining this for the purpose of lead remediation. ‘‘investments in parks, public plazas,
eligible use in the final rule. Recipients should make sure that all and other public outdoor recreation
b. Remediation of lead paint or other capital expenditures adhere to the spaces may be responsive to the needs
lead hazards. The interim final rule standards and presumptions detailed in of disproportionately impacted
included remediation of lead paint or section Capital Expenditures in General communities by promoting healthier
other lead hazards as an enumerated Provisions: Other. living environments.’’
eligible use to address health c. Medical facilities. Treasury Public Comment: General: A
disparities. received a few comments from significant theme across many public
Public Comment: Treasury received recipients seeking to use SLFRF funds comments was the importance of
several comments asking for to build new medical facilities, such as neighborhood environment to health
clarification on the eligibility of a hospitals or public health clinics, to and economic outcomes and the
particular use that would indirectly serve disproportionately impacted potential connections between
address lead pollution. For example, a communities. Given the central role of residence in an underserved
commenter requested the ability to fund access to high-quality medical care in neighborhood and disproportionate
remedial actions, such as filtration and reducing health disparities and impacts from the pandemic. Many
plumbing procedures to help address addressing the root causes that led to commenters highlighted the connection
lead pollution. One commenter disproportionate impact COVID–19 between neighborhoods and health
requested that private wells be eligible health impacts in certain communities, outcomes, including citing public health
for funding to address contamination the final rule recognizes that medical research linking neighborhood traits to
with substances such as lead. Other equipment and facilities designed to health outcomes. For example, the CDC
commenters requested that Treasury address disparities in public health states that ‘‘neighborhoods people live
allow replacement of lead pipes as an outcomes are eligible capital in have a major impact on their health
eligible use of funds. expenditures. This includes primary and well-being.’’ 190 As such, CDC
Treasury Response: Recipients may care clinics, hospitals, or integrations of identifies ‘‘neighborhoods and built
make a broad range of water health services into other settings. environment’’ as one of five key social
infrastructure investments under section Recipients should make sure that all determinants of health 191 and includes
602(c)(1)(d) and 603(c)(1)(d), which can capital expenditures adhere to the ‘‘creat[ing] neighborhoods and
include lead service line replacement standards and presumptions detailed in environments that promote health and
and other activities to identify and section Capital Expenditures in General safety’’ as one of the agency’s goals for
remediate lead in water. These uses are Provisions: Other. social determinants of health outcomes.
discussed in greater detail in section 2. Housing vouchers and assistance a. Neighborhood features that
Water and Sewer Infrastructure of this relocating. In addition to other housing promote improved health and safety
Supplemental Information. services, the interim final rule permitted outcomes.
Treasury has further determined that a variety of rental assistance approaches Public Comment: Commenters argued
several of the services identified by to support low-income households in that neighborhoods impact physical
commenters are appropriate responses securing stable, long-term housing, health outcomes in several ways. First,
to address health disparities in including housing vouchers, residential some commenters reasoned that the
disproportionately impacted counseling, or housing navigation physical environment and amenities in
households. These services were eligible assistance to facilitate household moves a community 192 influence a person’s
under the interim final rule and to neighborhoods with high levels of level of physical activity, with features
continue to be so under the final rule. economic opportunity and mobility for like parks, recreation facilities, and safe
These services include remediation to low-income residents. Examples could sidewalks promoting increased physical
address lead-based public health risk include SLFRF-funded analogues to activity that improves health outcomes.
factors, outside of lead in water, Conversely, commenters argued that a
Section 8 Housing Choice vouchers;
including evaluation and remediation of lack of these features in a neighborhood
other kinds of rent subsidies, including
lead paint, dust, or soil hazards; testing could dampen physical activity and
shallow subsidies; and programs to help
for blood lead levels; public outreach contribute to health conditions like
residents move to areas with higher
and education; and emergency obesity that are risk factors for more
levels of economic mobility.189 Treasury
protection measures, like bottled water severe COVID–19 health outcomes.
did not receive public comments on Second, some commenters also
and water filters, in areas with an action these enumerated eligible uses.
level exceedance for lead in water in suggested that access to healthy food in
Treasury Response: Treasury
accordance with the Environmental a neighborhood impacts health
maintains the eligibility of vouchers and
Protection Agency’s Lead and Copper outcomes. These commenters reasoned
relocation assistance in the final rule.
Rule.188 3. Building strong, healthy 190 U.S. Department of Health and Human
Further, Treasury had determined that communities through investments in Services, Neighborhood and Built Environment,
certain capital expenditures, including neighborhoods. While the interim final https://health.gov/healthypeople/objectives-and-
improvements to existing facilities to rule included a category of enumerated data/browse-objectives/neighborhood-and-built-
remediate lead contaminants (e.g., eligible uses for ‘‘building stronger environment#cit1 (last visited November 9, 2021).
191 Social determinants of health are ‘‘the
removal of lead paint), are eligible communities through investments in conditions in the places where people live, learn,
responses, although this does not housing and neighborhoods,’’ the work, and play that affect a wide range of health
examples of services provided generally risks and outcomes.’’ Centers for Disease Control
187 See, e.g., Centers for Disease Control and and Prevention, About Social Determinants of
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focused on housing uses. In response to
Prevention, Community Health Worker (CHW) Health (SDOH), https://www.cdc.gov/social
Toolkit, https://www.cdc.gov/dhdsp/pubs/toolkits/
questions following release of the determinants/about.html (last visited November 9,
chw-toolkit.htm (last visited November 9, 2021). interim final rule, Treasury issued 2021).
188 Environmental Protection Agency, 40 CFR 192 In public health, this is referred to as ‘‘built
141.80(c)(1), https://www.ecfr.gov/current/title-40/ 189 See, e.g., Opportunity Insights, Creating Moves environment,’’ or the man-made physical aspects of
chapter-I/subchapter-D/part-141/subpart-I/section- To Opportunity (August 2019), https:// a community (e.g., homes, buildings, streets, open
141.80. opportunityinsights.org/policy/cmto/. spaces, and infrastructure).
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Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4373
that lacking adequate access to mortality and illness and increased The final rule includes enumerated
affordable, healthy food or living in a well-being.197 Urban park use during eligible uses in disproportionately
‘‘food desert’’ may contribute to the COVID–19 pandemic may have impacted communities for developing
disparities in diet that influence health declined among lower-income neighborhood features that promote
outcomes, including contributing to pre- individuals.198 Encouraging physical improved health and safety outcomes,
existing conditions that increased risk activity can also play a role in health such as parks, green spaces, recreational
for severe COVID–19 outcomes. These outcomes, as a sedentary lifestyle is a facilities, sidewalks, pedestrian safety
commenters cited public health research risk factor for chronic diseases and more features like crosswalks,201 projects that
finding ‘‘clear evidence for disparities in severe COVID–19 outcomes.199 Parks, increase access to healthy foods,
food access in the United States by recreation facilities, and sidewalks can streetlights, neighborhood cleanup, and
income and race.’’ 193 promote healthier living environments other projects to revitalize public
Some commenters also suggested that by allowing for safe and socially spaces. Recipients seeking to use funds
neighborhood environment is connected distanced recreation during the COVID– for capital expenditures should refer to
to other public health outcomes, like 19 pandemic. the section Capital Expenditures in
mental health and public safety. For Additionally, food insecurity rates, General Provisions: Other, which
example, some research suggests that which are higher among lower-income describes additional eligibility
living in neighborhoods with green households and households of color, standards that apply to uses of funds for
space and tree cover correlates with doubled among all households and capital expenditures.
improved mental health outcomes.194 tripled among households with children b. Vacant or abandoned properties.
Finally, some commenters argued that during the onset of COVID–19 from As discussed above, the interim final
activities like installing streetlights, February 2020 to May 2020.200 rule included enumerated eligible uses
greening or cleanup of public spaces or Improving healthy food access supports for building stronger communities
land, and other efforts to revitalize public health, particularly among lower- through investments in housing and
public spaces would support improved income households and households of neighborhoods in disproportionately
public safety.195 196 color that face disproportionate impacted communities. The interim
These commenters recommended that outcomes. final rule also posed a question of
Treasury include as an enumerated Treasury Response: Treasury whether other potential uses in this
eligible use in disproportionately recognizes the connection between category, specifically ‘‘rehabilitation of
impacted communities projects to neighborhood built environment and blighted properties or demolition of
develop neighborhood features that physical health outcomes as discussed abandoned or vacant properties,’’
promote improved health and safety in the research and analysis provided by address the public health or economic
outcomes, such as parks, green spaces, commenters, including risk factors that impacts of the pandemic.
recreational facilities, sidewalks, Public Comment: Several commenters
may have contributed to
pedestrian safety features like argued that programs or services to
disproportionate COVID–19 health
crosswalks, projects that increase access address vacant or abandoned property
impacts in low-income communities.
to healthy foods, streetlights, would respond to the public health and
The final rule also recognizes that the
neighborhood cleanup, and other negative economic impacts of the
public health impacts of the pandemic
projects to revitalize public spaces. pandemic in disproportionately
Background: Investments in are broader than just the COVID–19
impacted communities. Some
neighborhood features, including parks, disease itself and include substantial
commenters cited research suggesting
recreation facilities, sidewalks, and impacts on mental health and public
that living near such property is
healthy food access, can work to safety challenges like rates of violent
correlated with worse physical health
improve physical and mental health crime, which are correlated with a and mental health outcomes, noted that
outcomes. Allowing people access to neighborhood’s built environment and such properties pose an environmental
nature, including parks, has been features. As such, neighborhood features hazard, or argued that such properties
connected to decreased levels of that promote improved health and present a barrier to economic recovery.
safety outcomes respond to the pre- These commenters suggested that
193 J Beaulac, E Kristjansson, S Cummins, A existing disparities that contributed to renovation or demolition of vacant or
systematic review of food deserts, 1966–2007, Prev COVID–19’s disproportionate impacts abandoned property could benefit
Chronic Dis 2009;6(3):A105, http://www.cdc.gov/ on low-income communities. community health and raise property
pcd/issues/2009/jul/08_0163.htm.
194 See, e.g., Yijun Zhang et al. The Association values. Other commenters
197 See, e.g., American Public Health Association,
between Green Space and Adolescents’ Mental recommended that Treasury include an
Well-Being: A Systematic Review. International Improving Health and Wellness through Access to
Nature (November 5, 2013), https://www.apha.org/
enumerated eligible use for the
journal of environmental research and public health
vol. 17,18 6640 (Sep. 11 2020), doi:10.3390/ policies-and-advocacy/public-health-policy- operation of land banks that redevelop
ijerph17186640; EC South, BC Hohl, MC Kondo, JM statements/policy-database/2014/07/08/09/18/ or renew vacant properties and land.
MacDonald, CC Branas, Effect of Greening Vacant improving-health-and-wellness-through-access-to- Treasury Response: As noted
Land on Mental Health of Community-Dwelling nature.
198 LR Larson et al., Urban Park Use During the
throughout the final rule, the pandemic
Adults: A Cluster Randomized Trial, JAMA Netw
Open. 2018;1(3):e180298 (2018), available at: COVID–19 Pandemic: Are Socially Vulnerable underscored the importance of safe,
doi:10.1001/jamanetworkopen.2018.0298. Communities Disproportionately Impacted?, Front. affordable housing and healthy
195 See, e.g., Yanqing Xu, Cong Fu, Eugene Sustain. Cities 3:710243 (2021), https://doi.org/
Kennedy, Shanhe Jiang, Samuel Owusu-Agyemang, 10.3389/frsc.2021.710243. 201 However, Treasury cautions recipients that
The impact of street lights on spatial-temporal 199 JP Després, Severe COVID–19 outcomes—the
general infrastructure development, including street
patterns of crime in Detroit, Michigan, Cities, role of physical activity. Nat Rev Endocrinol 17, or road construction, remains a generally ineligible
Volume 79, Pages 45–52, ISSN 0264–2751 (2018), 451–452 (2021). https://doi.org/10.1038/s41574-
lotter on DSK11XQN23PROD with RULES2
use of funds under the final rule. Sidewalks and
https://doi.org/10.1016/j.cities.2018.02.021. 021-00521-1. pedestrian safety should be the predominant
196 A. Chalfin, B. Hansen, J. Lerner et al., 200 Caroline George and Adie Tomer, Beyond component of uses of funds in this category. While
Reducing Crime Through Environmental Design: ‘food deserts’: America needs a new approach to projects may include ancillary construction needed
Evidence from a Randomized Experiment of Street mapping food, Brookings Institution (August 17, to execute the predominant component, a project
Lighting in New York City, Journal of Quantitative 2021), https://www.brookings.edu/research/beyond- that predominantly involves street construction or
Criminology (2021), https://doi.org/10.1007/s10940- food-deserts-america-needs-a-new-approach-to- repair to benefit vehicular traffic would be
020-09490-6. mapping-food-insecurity/. ineligible.
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4374 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations
neighborhood environments to public properties may be in significant Treasury presumes that demolition of
health and economic outcomes. disrepair (e.g., major structural defects; vacant or abandoned residential
Treasury agrees with commenters that lack of weather tight conditions; or lack properties that results in a net reduction
high rates of vacant or abandoned of useable plumbing, kitchen facilities, in occupiable housing units for low- and
properties in a neighborhood may electricity, or heating infrastructure (not moderate-income individuals in an area
exacerbate public health disparities, for to include utilities currently out of where the availability of such housing is
example through environmental service or disconnected but able to be lower than the need for such housing
contaminants that contribute to poor reconnected and used)), or may be would exacerbate the impacts of the
health outcomes or by contributing to declared unfit for inhabitants by a pandemic on disproportionately
higher rates of crime. As such, certain government authority. impacted communities and that use of
services for vacant or abandoned As noted above, demolition and SLFRF funds for such activities would
properties are eligible to address the greening (or other structure or lot therefore be ineligible. This includes
public health and negative economic remediation) of vacant or abandoned activities that convert occupiable
impacts of the pandemic on properties, including residential, housing units for low- and moderate-
disproportionately impacted households commercial, or industrial buildings, is income individuals into housing units
or communities. Eligible activities an eligible use of funds. Treasury unaffordable to current residents in the
include: encourages recipients to undertake these community. Recipients may assess
• Rehabilitation, renovation, activities as part of a strategy for whether units are ‘‘occupiable’’ and
maintenance, or costs to secure vacant neighborhood revitalization and to what the housing need is for a given
or abandoned properties to reduce their consider how the cleared property will area taking into account vacancy rates
negative impact be used to benefit the disproportionately (as described above), local housing
• Costs associated with acquiring and impacted community. Activities under market conditions (including conditions
securing legal title of vacant or this eligible use should benefit current for different types of housing like multi-
abandoned properties and other costs to residents and businesses, who family or single-family), and applicable
position the property for current or experienced the pandemic’s impact on law and housing codes as to what units
future productive use the community. are occupiable. Recipients should also
• Removal and remediation of Treasury encourages recipients to be take all reasonable steps to minimize the
environmental contaminants or hazards aware of potential impacts of demolition displacement of persons due to
from vacant or abandoned properties, of vacant or abandoned residential activities under this eligible use
when conducted in compliance with properties. Demolition activities that category, especially the displacement of
applicable environmental laws or exacerbate the pandemic’s impact on low-income households or longtime
regulations housing insecurity or lack of affordable residents.
• Demolition or deconstruction of housing are not eligible uses of funds.
Recipients engaging in these activities
vacant or abandoned buildings This risk is generally more acute in
and other construction activities with
(including residential, commercial, or jurisdictions with low or reasonable
SLFRF funds should be mindful of the
industrial buildings) paired with vacancy rates and less acute in
provisions of the Uniform Relocation
greening or other lot improvement as jurisdictions with high or hyper-
Assistance and Real Property
part of a strategy for neighborhood vacancy.203
Acquisition Policies Act of 1970, as
revitalization amended, 42 U.S.C. 4601, and the
• Greening or cleanup of vacant lots, overview/#overview-of-the-ura (last visited
November 9, 2021) and other state and local Department of Transportation’s
as well as other efforts to make vacant
requirements like condemnation and code implementing regulations, 49 CFR part
lots safer for the surrounding enforcement. U.S. Department of Housing and 24, that apply to projects funded with
community Urban Development, What is the definition of
federal financial assistance, such as
• Conversion of vacant or abandoned vacant properties as referenced in NSP Eligible Use
E—Redevelop Demolished or Vacant Properties? SLFRF funds. Recipients should also be
properties to affordable housing
• Inspection fees and other (October 2012), https://www.hudexchange.info/ aware of federal, state, and local laws
faqs/programs/neighborhood-stabilization-program- and regulations, outside of SLFRF
administrative costs incurred to ensure nsp/redevelopment/what-is-the-definition-of-
compliance with applicable vacant-properties-as-referenced-in-nsp-eligible/. program requirements, that apply to this
environmental laws and regulations for U.S. Department of Housing and Urban activity. Recipients must comply with
demolition, greening, or other
Development, What are the definitions of the applicable requirements of the
abandoned and foreclosed? (October 2012), https:// Uniform Guidance regarding
remediation activities www.hudexchange.info/faqs/programs/
Vacant or abandoned properties are neighborhood-stabilization-program-nsp/program- procurement, contracting, and conflicts
generally those that have been requirements/eligible-activitiesuses/what-are-the- of interest and must follow the
unoccupied for an extended period of definitions-of-abandoned-and-foreclosed/. applicable laws and regulations in their
203 For analysis of vacancy rates considered low
time or have no active owner.202 Such jurisdictions. Recipients must also
or high, see, e.g., page 12 of Alan Mallach, The
Empty House Next Door, Lincoln Institute (May
comply with all federal, state, and local
202 A state or locality may use its existing 2018), https://www.lincolninst.edu/publications/ public health and environmental laws
classifications of what is considered vacant or policy-focus-reports/empty-house-next-door# or regulations that apply to activities
abandoned property under state law and local :∼:text=%E2%80%9CAlan%20Mallach%20is%20 under this eligible use category,204 for
ordinances, as well as any corresponding processes the%20sage,through%20data%20and%20
for demolition, for these eligible uses. A recipient model%20 practices. Recipients may determine the
example, requirements around the
without a definition of vacant or abandoned appropriate geographic unit for which to analyze
property may refer to definitions used in the vacancy rates (e.g., county, census tract) based on based on United States Postal Service Vacancy Data.
Department of Housing and Urban Development’s their circumstances. As needed, recipients may See, respectively, https://data.census.gov/cedsci/
table?q=DP04&tid=ACSDP5Y2019.DP04&
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Neighborhood Stabilization Program (available at refer to the Current Population Survey/Housing
the citations below); however, recipients should be Vacancy Survey data series on Housing Vacancies hidePreview=true or https://www.huduser.gov/
aware that other federal, state, or local requirements and Homeownership as one data source to assess portal/datasets/usps.html.
may apply such as compliance with the Uniform vacancy rates. See https://www.census.gov/housing/ 204 See U.S. Environmental Protection Agency,
Relocation Act (see U.S. Department of Housing and hvs/index.html. Other data sources include the Large-Scale Residential Demolition, https://
Urban Development, Real Estate Acquisition and American Community Survey five-year estimates, www.epa.gov/large-scale-residential-demolition
Relocation Overview in HUD Programs, https:// for smaller geographic areas, or tabulations by the (last visited November 9, 2021) for a primer on
www.hudexchange.info/programs/relocation/ Department of Housing and Urban Development requirements that may apply.
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Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4375
handling and disposal of asbestos- behavioral health in a school setting or disproportionate public health or
containing materials, lead paint, and cultural language classes. negative economic impacts of COVID–
other harmful materials may apply, as Treasury Response: Treasury is 19 on low-income populations and
well as environmental standards for any maintaining these enumerated eligible communities.
backfill materials used at demolition uses in the final rule, which are now In response, commenters proposed a
sites. Treasury encourages recipients to organized under the heading of wide variety of additional
consult and apply best practices from ‘‘services to address educational recommended enumerated eligible uses
the Environmental Protection Agency as disparities.’’ Treasury reiterates that to assist disproportionately impacted
well. these uses include addressing households, ranging from general
Recipients must evaluate each educational disparities exacerbated by categories of services (e.g., long-term
subrecipient’s risk of noncompliance COVID–19, including but not limited to: investments to remediate long-term
with federal statutes, regulations, and increasing resources for high-poverty disparities) to highly specific examples
the terms and conditions of the school districts, educational services of services (e.g., a specific type of
subaward related to safely and properly like tutoring or afterschool programs, healthcare equipment). As discussed
conducting activities under this eligible summer education and enrichment above, Treasury is including several
use. This may include checking for any programs, and supports for students’ additional categories of enumerated
past violations recorded by state or local social, emotional, and mental health eligible uses in the final rule in response
environmental, workplace safety, needs. This also includes responses to public comments.
licensing, and procurement agencies, as aimed at addressing the many Given the large number and diversity
well as regular reviews for suspensions, dimensions of resource equity— of SLFRF recipients, Treasury’s
debarments, or stop work orders. including equitable and adequate school approach to assistance to households in
Recipients must establish rigorous funding; access to a well-rounded disproportionately impacted
oversight and internal controls education; well-prepared, effective, and communities in the final rule aims to
processes to monitor compliance with diverse educators and staff; and provide enumerated eligible uses that
any applicable requirements, including integrated support services—in order to respond to disproportionate impacts of
compliance by subrecipients. close long-standing gaps in educational the pandemic experienced widely in
4. Addressing educational disparities. opportunity. many jurisdictions across the country
The interim final rule included an Further, Treasury is clarifying that and are intended to simplify and clarify
enumerated eligible use for addressing improvements or new construction of these enumerated eligible uses. At the
educational disparities in schools and other educational facilities same time, Treasury recognizes that the
disproportionately impacted or equipment are eligible capital impacts of the pandemic vary over time,
communities and outlined some expenditures for disproportionately by jurisdiction, and by population; as
enumerated eligible services under this impacted communities. Recipients such, the final rule provides flexibility
use. These enumerated uses included seeking to use funds for capital for recipients to identify additional
early learning services, assistance to expenditures should refer to the section disproportionate impacts to additional
high-poverty school districts to advance Capital Expenditures in General households or classes of households and
equitable funding across districts and Provisions: Other for additional pursue programs and services that
geographies, and educational and eligibility standards that apply to uses respond to those disproportionate
evidence-based services to address the of funds for capital expenditures. impacts.
academic, social, emotional, and mental Treasury notes that services to In the final rule, Treasury has not
health needs of students. Addressing the promote healthy childhood chosen to include as enumerated uses
many dimensions of resource equity— environments, including childcare, all uses proposed by commenters; given
including equitable and adequate school early learning services, and home the significant range, and in some cases
funding; access to a well-rounded visiting programs that serve infants and highly specific nature, of the proposed
education; well-prepared, effective, and toddlers, is a separate category of uses Treasury was not able to assess that
diverse educators and staff; and enumerated eligible uses for households the proposed uses would respond to
integrated support services—can also impacted by the pandemic (see eligible disproportionate impacts experienced in
begin to mitigate the impact of COVID– uses for ‘‘promoting healthy childhood many jurisdictions across the country,
19 on schools and students and can environments’’). Similarly, education supporting an enumerated eligible use
close long-standing gaps in educational services to address the impact of lost available to all recipients
opportunity. As discussed above, in the instructional time during the pandemic presumptively. However, the final rule
final rule, early learning services and are a separate eligible use category for continues to provide a framework to
addressing the impacts of lost households impacted by the pandemic; allow recipients to identify and respond
instructional time for K–12 students are when providing these services, to additional disproportionate impacts
enumerated eligible uses for impacted recipients may presume that any K–12 (for details, see section General
communities, not just student who lost access to in-person Provisions: Structure and Standards).
disproportionately impacted instruction for a significant period of Some types of proposed additional
communities. time has been impacted by the enumerated eligible uses for assistance
Public Comment: Treasury received pandemic and is thus eligible for to households in disproportionately
some comments in this category. responsive services (see eligible uses for impacted communities were
Generally, commenters expressed ‘‘addressing the impact of lost recommended by several commenters:
agreement with the elements of the instructional time’’). • Capital expenditures. Many
interim final rule regarding use of funds commenters recommended that capital
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for addressing educational disparities. Proposed Additional Enumerated expenditures on many different types of
Some commenters had questions about Eligible Uses Not Incorporated public and private facilities be
whether a few specific uses of funds The interim final rule posed a enumerated eligible uses. For clarity,
qualified under this category. For question on what other types of services Treasury has addressed all comments on
example, commenters inquired about or costs Treasury should consider as the eligibility of capital expenditures on
whether the funds could be used for eligible uses to respond to the property, facilities, or equipment in one
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4376 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations
section (see section Capital employment.208 The negative outlook the pandemic are rooted in systemic
Expenditures in General Provisions: for small businesses has continued: As issues present even before the
Other). of November 2021, approximately 66 pandemic. For example, before the
• Equity funds. Several commenters percent of small businesses reported economic downturn, only 12 percent of
recommended that Treasury permit that the pandemic has had a moderate Black-owned businesses and 19 percent
SLFRF funds to be deposited into an or large negative effect on their of Hispanic-owned businesses had
equity fund to support long-term racial business, and over a third expect that it annual earnings of over $1 million
and economic equity investments. The will take over 6 months for their compared to 31 percent of white-owned
eligibility of such use would depend on business to return to their normal level businesses.216 Minority-owned
the specific structure and uses of funds. of operations.209 businesses were also overrepresented in
Under the statute, SLFRF funds can This negative outlook is likely the industries hit hardest by the economic
only support costs incurred until result of many small businesses having downturn (e.g., services, transportation
December 31, 2024; see section faced periods of closure and having seen and warehousing, healthcare and social
Timeline for Use of SLFRF Funds in declining revenues as customers stayed assistance, administrative and support
Program Administration Provisions. home.210 In general, small businesses and waste management, and
Further, recipients may calculate the can face greater hurdles in accessing accommodation and food services).217
cost incurred with respect to credit,211 and many small businesses Approximately 22 percent of all
investments in revolving loan funds were already financially fragile at the minority-owned business fell into the
based on the methodology described in outset of the pandemic.212 hardest hit industries compared to 13
section Treatment of Loans in Program While businesses everywhere faced percent of nonminority-owned
Administration Provisions. Projects significant challenges during the businesses.218
funded by a revolving loan fund using pandemic, minority-owned and very Although disparities in annual
SLFRF funds would also need to be small businesses have faced additional revenue are not a direct indication of a
eligible uses of SLFRF funds. obstacles. Between February and April business’s ability to weather an
• Environmental quality and climate 2020, the number of actively self- economic downturn, they do highlight
resilience. Several commenters employed Black business owners other disparities that make it more
recommended eligible uses to enhance decreased by 41 percent.213 During that challenging for these businesses to
environmental quality, remediate same time period, Asian and Latino survive the effects of the pandemic.
pollution, promote recycling or business owners decreased by 26 and 32 Black-owned startups, for example, face
composting, or increase energy percent, respectively, compared to a 17 larger challenges in raising capital,
efficiency or electrical grid resilience. percent decrease in white business including securing business loans.219
Whether these projects respond to the owners.214 Female business owners also
saw significant impacts, with businesses Summary of the Interim Final Rule and
disproportionate impacts of the Final Rule Structure
pandemic on certain communities owned by women falling by 25
would depend on the specific issue they percent.215 Summary of Interim Final Rule: As
address and its nexus to the public Many of the disparities in how discussed above, small businesses faced
health and economic impacts of the minority business owners experienced significant challenges in covering
pandemic. payroll, mortgages or rent, and other
208 Daniel Wilmoth, U.S. Small Business
operating costs as a result of the public
b. Assistance to Small Businesses Administration Office of Advocacy, The Effects of health emergency and measures taken to
the COVID–19 Pandemic on Small Businesses, Issue
Background Brief No. 16 (Mar. 2021), available at https:// contain the spread of the virus. Under
cdn.advocacy.sba.gov/wp-content/uploads/2021/ Sections 602(c)(1)(A) and 603(c)(1)(A),
The pandemic has severely impacted 03/02112318/COVID-19-Impact-On-Small- recipients may ‘‘respond to the public
many businesses, with small businesses Business.pdf. health emergency or its negative
hit especially hard. Small businesses 209 U.S. Census Bureau, Small Business Pulse
economic impacts,’’ by, among other
make up nearly half of U.S. private- Survey, https://portal.census.gov/pulse/data/ (last
visited December 7, 2021). things, providing ‘‘assistance to . . .
sector employment 205 and play a key 210 Olivia S. Kim et al., Revenue Collapses and small businesses.’’ Accordingly, the
role in supporting the overall economic the Consumption of Small Business Owners in the interim final rule allowed recipients to
recovery as they are responsible for two- Early Stages of the COVID–19 Pandemic (Nov. provide assistance to small businesses
thirds of net new jobs.206 Since the 2020), https://www.nber.org/papers/w28151.
211 See, e.g., Board of Governors of the Federal
to address the negative economic
beginning of the pandemic, however, impacts faced by those businesses. A
Reserve System, Report to Congress on the
400,000 small businesses have closed, Availability of Credit to Small Businesses (Sept.
with many more at risk.207 Sectors with 2017), available at https://www.federalreserve.gov/ 216 Federal Reserve Bank of Atlanta. 2019. Small
a large share of small business publications/2017-september-availability-of-credit- Business Credit Survey 2019 Report on Minority-
employment have been among those to-small-businesses.htm. Owned Firms. December. fedsmallbusiness.org/
212 Alexander W. Bartik et al., The Impact of survey/2019/report-on-minority-owned-firms.
with the most drastic drops in COVID–19 on small business outcomes and 217 Ding, Lei, and Alvaro Sanchez. 2020. What
expectations, PNAS 117(30): 17656–66 (July 28, Small Businesses Will Be Impacted by COVID–19?
205 Board of Governors of the Federal Reserve 2020), available at https://www.pnas.org/content/ Federal Reserve Bank of Philadelphia.
System, Monetary Policy Report (June 12, 2020), 117/30/17656. philadelphiafed.org/covid-19/covid-19-equity-in-
https://www.federalreserve.gov/monetarypolicy/ 213 Robert Fairlie, The impact of COVID–19 on recovery/what-small-businesses-will-be-impacted.
2020-06-mpr-summary.htm. small business owners: Evidence from the first 218 Lucas Misera, An Uphill Battle: COVID–19’s
206 U.S. Small Business Administration, Office of 3 months after widespread social-distancing Outsized Toll on Minority-Owned Firms, Federal
Advocacy, Small Businesses Generate 44 Percent of restrictions, Journal of economics & management Reserve Bank of Cleveland (October 8, 2020),
U.S. Economic Activity (Jan. 30, 2019), https:// strategy (August 27, 2020), https://doi.org/10.1111/ https://www.clevelandfed.org/newsroom-and-
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advocacy.sba.gov/2019/01/30/small-businesses- jems.12400. events/publications/community-development-
generate-44-percent-of-u-s-economic-activity/. 214 U.S. Small Business Administration, The briefs/db-20201008-misera-report.aspx.
207 Joseph R. Biden, Remarks by President Biden Effects of the COVID–19 Pandemic on Small 219 Robert Fairlie, A. Robb, D. Robinson, Black
on Helping Small Businesses (Feb. 22, 2021), Businesses (March 2021), https://cdn.advocacy. and White: Access to Capital among Minority-
https://www.whitehouse.gov/briefing-room/ sba.gov/wp-content/uploads/2021/03/02112318/ Owned Startups, NBER Working Paper 28154
speechesremarks/2021/02/22/remarks-by-president- COVID-19-Impact-On-Small-Business.pdf. (November 2020), https://www.nber.org/papers/
bidenon-helping-small-businesses/. 215 Robert Fairlie, supra note 213. w28154.
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Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4377
‘‘small business’’ is defined as a rule, according to the standard definition of small business. Comments
business concern or other organization described in the section Standards: also suggested that self-employed
that: Identifying a Negative Economic Impact. individuals and Tribal enterprises be
(1) Has no more than 500 employees A recipient may also identify small classified as small businesses,
or, if applicable, the size standard in businesses that have been respectively. Commenters argued that
number of employees established by the disproportionately impacted by the these types of small businesses are more
Administrator of the Small Business public health emergency and design and common among low-income and
Administration for the industry in implement a program that responds to minority businessowners and serve as
which the business concern or the source of that disproportionate important institutions in underserved
organization operates; and impact. communities.
(2) Is a small business concern as Consistent with other eligible use Finally, some commenters suggested
defined in section 3 of the Small categories to respond to the public that Treasury permit broader
Business Act (15 U.S.C. 632). health and economic impacts of the enumerated eligible uses to assist small
Specifically, the interim final rule pandemic, recipients may identify and businesses in disproportionately
provided that recipients may provide serve small businesses that experienced impacted communities and generally
assistance to small businesses to adopt a negative economic impact or strengthen economic growth in these
safer operating procedures, weather disproportionate impact due to the communities. These commenters
periods of closure, or mitigate financial pandemic, as described in the section recommended that Treasury presume
hardship resulting from the COVID–19 Standards for Identifying Other Eligible small businesses operating in QCTs are
public health emergency, including: Populations. For example, to identify disproportionately impacted and
• Loans or grants to mitigate financial impacted small businesses, a recipient eligible for broader enumerated uses.
hardship such as declines in revenues may consider whether the small Treasury Response: As discussed in
or impacts of periods of business businesses faced challenges in covering the section Designating a Negative
closure; payroll, mortgage or rent, or other Economic Impact, in the final rule,
• Loans, grants, or in-kind assistance operating costs as a result of the public recipients must identify an economic
to implement COVID–19 prevention or health emergency and measures taken to harm caused or exacerbated by the
mitigation tactics; and contain the spread of the virus. In order pandemic on a small business or class
• Technical assistance, counseling, or to ease administrative burden, the final of small businesses to provide services
other services to assist with business rule presumes that small businesses that respond.
planning needs. operating in QCTs, small businesses As discussed above, programs or
The interim final rule further operated by Tribal governments or on services in this category must respond
provided that recipients may consider Tribal Lands, and small businesses to a harm experienced by a small
additional criteria to target assistance to operating in the U.S. territories were business or class of small businesses as
businesses in need, including small disproportionately impacted by the a result of the public health emergency.
businesses. Such criteria may include pandemic. To identify impacted small businesses
businesses facing financial insecurity, Reorganizations and Cross- and necessary response measures,
substantial declines in gross receipts References: As detailed above, Treasury recipients may consider impacts such as
(e.g., comparable to measures used to has re-categorized some uses of funds in lost revenue or increased costs,
assess eligibility for the Paycheck the final rule to provide greater clarity. challenges covering payroll, rent or
Protection Program), or other economic For discussion of assistance to small mortgage, or other operating costs, the
harm due to the pandemic, as well as businesses and impacted industries to capacity of a small business to weather
businesses with less capacity to weather implement COVID–19 mitigation and financial hardships, and general
financial hardship, such as the smallest prevention strategies, see section financial insecurity resulting from the
businesses, those with less access to COVID–19 Mitigation and Prevention in public health emergency.
credit, or those serving underserved Public Health. Recognizing the difficulties faced by
communities. The interim final rule also small businesses in certain
indicated that recipients should Small Businesses Eligible for Assistance communities, the final rule presumes
consider local economic conditions and Public Comment: Treasury received that small businesses operating in QCTs,
business data when establishing such many comments about the general small businesses operated by Tribal
criteria. Finally, the interim final rule benefits or drawbacks of use of SLFRF governments or on Tribal Lands, and
posed a question on whether there are funds to provide assistance to small small businesses operating in the U.S.
other services or costs that Treasury businesses. Some commenters suggested territories were disproportionately
should consider as eligible uses to that SLFRF funds should be available to impacted by the pandemic. This
respond to the disproportionate impacts assist all small businesses, rather than presumption parallels the final rule’s
of COVID–19 on low-income only businesses that experienced direct approach to assistance to households,
populations and communities. negative economic impacts due to the reflecting the more severe pandemic
Final Rule Structure: Consistent with public health emergency. Other impacts in underserved communities
the interim final rule approach, the final commenters argued that aid to small and creating a parallel structure across
rule provides a non-exhaustive list of businesses should be narrowed in the different categories of eligible uses to
enumerated eligible uses for assistance final rule, asserting that SLFRF funds make the structure simpler for
to small businesses that are impacted or should instead focus on assistance to recipients to understand and navigate.
disproportionately impacted by the households or building public sector Treasury notes that recipients may
pandemic. Further, within Assistance to capacity. also designate a class of small
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Small Business, a recipient may also Treasury also received comments businesses that experienced a negative
identify a negative economic impact requesting clarification of the types of economic impact or disproportionate
experienced by small businesses and small businesses eligible for assistance. negative economic impact (e.g.,
design and implement a response to that For example, some commenters microbusinesses, small businesses in
negative economic impact, beyond the requested clarification about whether certain economic sectors), design an
uses specifically enumerated in the final microbusinesses were included in the intervention to fit the impact, and
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4378 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations
document that the individual entity is a negatively impacted by COVID–19. for unemployed individuals. These
member of the class. Additional Several commenters also argued that initiatives also may support small
information about this framework is funds should be available to support business start-ups, microbusinesses, and
included in the section General and grow microbusinesses, or individuals seeking to start small or
Provisions: Structure and Standards. businesses with five or fewer microbusinesses.
Further, Treasury is maintaining the employees, which are more likely to be Disproportionately impacted small
interim final rule definition of ‘‘small owned by women and people of color. businesses. Additionally, Treasury
business,’’ which used the Small Treasury Response: In the final rule, agrees with commenters that
Business Administration’s (SBA) Treasury is maintaining and clarifying disproportionately impacted small
definition of fewer than 500 employees, the enumerated eligible uses of funds businesses may benefit from additional
or per the standard for that industry, as for assistance to small businesses that assistance to address the sources of that
defined by SBA. This definition are impacted or disproportionately disparate impact.
includes businesses with very few impacted by the pandemic. As such, the final rule provides a
employees, self-employed individuals, Impacted small businesses. broader set of enumerated eligible uses
and Tribally owned businesses.220 Specifically, Treasury is maintaining for disproportionately impacted small
Finally, Treasury notes that recipients enumerated eligible uses from the businesses and/or small businesses in
may award SLFRF funds to many interim final rule for assistance to disproportionately impacted business
different types of organizations, impacted small businesses. These districts. Recipients may use SLFRF
including small businesses, to function include but are not limited to: funds to assist these businesses with
as a subrecipient in carrying out eligible • Loans or grants to mitigate financial certain capital investments, such as
uses of funds on behalf of a recipient hardship such as declines in revenues rehabilitation of commercial properties,
government. In this case, a small or impacts of periods of business storefront improvements, and façade
business need not have experienced a closure, for example by supporting improvements. Recipients may also
negative economic impact in order to payroll and benefits costs, costs to retain provide disproportionately impacted
serve as a subrecipient. See section employees, mortgage, rent, or utilities microbusinesses additional support to
Distinguishing Subrecipients versus costs, and other operating costs; operate the business, including
Beneficiaries for more detailed • Loans, grants, or in-kind assistance financial, childcare, and transportation
discussion of interactions with to implement COVID–19 prevention or supports.
subrecipients, in contrast to mitigation tactics (see section Public Recipients could also provide
beneficiaries of assistance. Health for details on these eligible uses); technical assistance, business
and incubators, and grants for start-ups or
Enumerated Eligible Uses for Assistance • Technical assistance, counseling, or expansion costs for disproportionately
to Small Businesses other services to assist with business impacted small businesses. Note that
Public Comment: Treasury received planning needs. some of these types of assistance are
comments requesting clarification of the Treasury acknowledges a range of similar to those eligible to respond to
types of assistance available to small potential circumstances in which small businesses that experienced a
businesses. For example, one assisting small businesses could be negative economic impact (‘‘impacted’’
commenter suggested that outdoor responsive to the negative economic small businesses). However, because the
dining be an eligible use for SLFRF impacts of COVID–19, including for final rule presumes that some small
funds as assistance to small businesses. small businesses startups and businesses were disproportionately
Other commenters asked for microbusinesses and individuals impacted, these enumerated eligible
clarification about how SLFRF funds seeking to start small or uses can be provided to those
could be used to support new microbusinesses. For example: businesses without any specific
businesses and start-ups. • As noted above, a recipient could assessment of whether they individually
Several commenters requested assist small business startups or experienced negative economic impacts
clarification of whether and how microbusinesses with additional costs or disproportionate impacts due to the
recipients may provide services to associated with COVID–19 mitigation pandemic.
business districts or downtown areas, tactics; see section Public Health for Cross-References: Recipients
particularly those that exist in whole or details on these eligible uses. providing assistance to small businesses
in part within a QCT, and requested • A recipient could identify and for capital expenditures (i.e.,
reduced documentation of the specific respond to a negative economic impact expenditures on property, facilities, or
negative economic impact for the of COVID–19 on new small business equipment) should also review the
businesses operating within those areas. startups or microbusinesses; for section Capital Expenditures in General
These commenters argued in favor of example, if small business startups or Provisions: Other, which describes
allowing redevelopment or other microbusinesses in a locality faced eligibility standards that apply to capital
support, including capital investments, greater difficulty accessing credit than expenditures. Recipients should also
in business districts that were prior to the pandemic or faced increased note that services to address vacant or
costs to starting the business due to the abandoned commercial or industrial
220 In regard to counting employees, businesses pandemic or if particular small properties are addressed in section
owned and controlled by a Tribal government are businesses or microbusinesses had lost Vacant or Abandoned Properties in
not considered affiliates of the Tribal government expected startup capital due to the Assistance to Households.
and are not considered affiliates of other businesses pandemic.
owned by the Tribal government because of their
• The interim final rule also Loans to Small Businesses
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common ownership by the Tribal government or
common management, as described in 13 CFR discussed, and the final rule maintains, Public Comment: Treasury received
121.103(b)(2). This definition is consistent with the eligible uses that provide support for many comments requesting clarification
Small Business Administration (SBA) HUBZone individuals who have experienced a on using SLFRF funds to establish funds
definition of a ‘‘small business concern’’ relating to
Tribal governments as well as how Tribal
negative economic impact from the that provide loans to small businesses.
enterprises are defined for the State Small Business COVID–19 public health emergency, For example, commenters sought
Credit Initiative (SSBCI). including uses that provide job training clarification of how eligible use
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Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4379
requirements and applicable dates for the sector remained 485,000 jobs below and Negative Economic Impacts eligible
SLFRF funds would apply to third party its pre-pandemic level.226 In addition, use category.229
organizations (like economic some nonprofits may have experienced Reorganization and Cross-References:
development organizations) who receive declines in volunteer staffing during the Under the interim final rule, assistance
SLFRF funds in order to establish a loan pandemic.227 to disproportionately impacted
fund. In addition, commenters At the same time, nonprofits provide communities was a separate, stand-
requested clarification on what a host of services for their communities, alone category. The final rule
requirements apply to loan programs including helping Americans weather reorganizes the disproportionate impact
with available funds remaining after the multitude of challenges presented analysis within the sections Assistance
December 31, 2024. by the pandemic. The ARPA and the to Households, Assistance to Small
Treasury Response: SLFRF funds may interim final rule recognized this Business, and Assistance to Nonprofits
be used to make loans, including to dichotomy—nonprofits as entities that to better articulate how recipients can
small businesses, provided that the loan have themselves been negatively serve disproportionately impacted
is an eligible use, and the cost of the impacted by the pandemic and as beneficiaries in each of those categories.
loan is tracked and reported in entities that provide services that
accordance with Treasury’s Compliance As detailed above in the Public Health
respond to the public health and subsection, in response to public
and Reporting Guidance. Funds that are
negative economic impacts of the comments describing uncertainty on
unobligated after December 31, 2024
pandemic on households and others which eligible use category should be
must be returned to Treasury. See
—by creating two roles for nonprofits. used to assess different potential uses of
section Treatment of Loans for more
information about using SLFRF funds First, under Sections 602(c)(1)(A) and funds, Treasury has re-categorized some
for loan programs. 603(c)(1)(A), recipients may ‘‘respond to uses of funds in the final rule to provide
the public health emergency or its greater clarity. For discussion of
c. Assistance to Nonprofits negative economic impacts,’’ by, among assistance to nonprofits to implement
Background: Nonprofits have faced other activities, providing ‘‘assistance to COVID–19 mitigation and prevention
significant challenges because of the . . . nonprofits.’’ The interim final rule strategies, see section COVID–19
pandemic, including increased demand defined assistance to nonprofits to Mitigation and Prevention in Public
for services and changing operational include ‘‘loans, grants, in-kind Health.
needs.221 Prior to the pandemic, the assistance, technical assistance or other Recipients providing assistance via
median U.S. nonprofit reported that it services, that responds to the negative nonprofits involving capital
had six months of cash on hand.222 This economic impacts of the COVID–19 expenditures (i.e., expenditures on
varied by sector, however, with some public health emergency,’’ and property, facilities, or equipment)
sectors like disaster relief organizations ‘‘nonprofit’’ to mean a tax-exempt should also review the section Capital
reporting a median of 17 months cash organization under Section 501(c)(3) of Expenditures in General Provisions:
on hand, and others, like mental health the U.S. Internal Revenue Code.228 Other, which describes eligibility
and crisis intervention organizations Second, as discussed above, ARPA standards for these expenditures.
reporting only three months.223 and the interim final rule provided that Recipients providing assistances in the
Evidence suggests that the pandemic nonprofit organizations may also receive form of loans should review the section
has damaged the financial health of funds as subrecipients of a recipient Treatment of Loans.
nonprofits, with small nonprofits, government (i.e., a government that
which tend to rely more heavily on Public Comment: Eligible Assistance
received SLFRF funds); subrecipients to Impacted and Disproportionately
donations than large nonprofits, carry out an eligible use of SLFRF funds
reporting relatively larger declines in Impacted Nonprofits: A few
on behalf of a recipient government commenters asked Treasury to be more
donations — 42 percent versus 29 (e.g., a recipient government that would
percent, respectively.224 Among explicit in the final rule that recipients
like to provide food assistance to may use funds to provide relief directly
nonprofits that collect fees for services, impacted households may grant funds
the median revenue amount collected to nonprofit organizations and to
to a nonprofit organization to carry out explain how nonprofits might qualify
from such fees fell by 30 percent from that eligible use). Recipients generally
2019 to 2020, with arts organization themselves for assistance and what
have wide latitude to award funds to expenses SLFRF funds may be used to
experiencing a 50 percent decline.225 many types of organizations, including
Nonprofits also experienced significant cover.230 Commenters requested that
nonprofit or for-profit organizations, as Treasury note that the pandemic is
job losses. While employment in the subrecipients to carry out eligible uses
nonprofit sector has recovered from its of funds on their behalf. For further 229 The ARPA also states under ‘‘Transfer
low point in 2020, as of November 2021, information on distinguishing between Authority’’ that a Recipient may transfer funds to
221 See, e.g., Federal Reserve Bank of San
beneficiaries and subrecipients, as well a private nonprofit organization such as those
as the impacts of the distinction on defined in paragraph (17) of section 401 of the
Francisco, Impacts of COVID–19 on Nonprofits in McKinney-Vento Homeless Assistance Act (42
the Western United States (May 2020), https:// reporting and other requirements, see U.S.C. 11360(17). See 602 & 603(c)(3) of the Social
www.frbsf.org/community-development/files/ section Transfers of Funds and section Security Act. See section Transfers of Funds for
impact-of-covid. Distinguishing Subrecipients versus additional information on other types of entities,
222 Philanthropy and COVID–19: Measuring one
Beneficiaries under the Public Health including other forms of nonprofits, that may
year of giving, Candid and the Center for Disaster receive transfers.
Philanthropy. (2021), https://www.issuelab.org/ 230 While not stated specifically in the interim
resources/38039/38039.pdf. 226 Chelsea Newhouse, COVID–19 JOBS UPDATE,
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final rule, the Department does not require or have
223 Id. NOVEMBER 2021: Nonprofits add just 5,000 jobs in a preference as to the payment structure for
224 Elizabeth T. Boris et al., Nonprofit Trends and November, Center for Civil Society Studies at Johns recipients that transfer funds to subrecipients (e.g.,
Impacts 2021, Urban Institute (October 7, 2021), Hopkins University (December 10, 2021), http:// advance payments, reimbursement basis, etc.).
https://www.urban.org/research/publication/ ccss.jhu.edu/november-2021-jobs/. Ultimately, recipients must comply with the
nonprofit-trends-and-impacts-2021/view/full_ 227 Elizabeth T. Boris et al. supra note 224 at p.
eligible use requirements and any other applicable
report. 38. laws or requirements and are responsible for the
225 Id. 228 § 35.3 Definitions. actions of their subrecipients or beneficiaries.
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4380 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations
leading to a changing financial operating in QCTs, operated by Tribal beneficiaries, the organization becomes
landscape for nonprofits. governments or on Tribal Lands, or a subrecipient. In this case, a nonprofit
Treasury Response: Eligible operating in the U.S. territories were need not have experienced a negative
Assistance to Impacted and disproportionately impacted by the economic impact in order to serve as a
Disproportionately Impacted pandemic. subrecipient.
Nonprofits: The interim final rule To summarize, a recipient may In the context of SLFRF, nonprofits of
provided for, and the final rule determine that certain nonprofits were all types may be subrecipients. Treasury
maintains, the ability for recipients to impacted by the pandemic or were is not restricting the types of nonprofits
provide direct assistance to nonprofits disproportionately impacted by the that can operate as subrecipients, rather
that experienced public health or pandemic and provide responsive allowing recipients to decide what form
negative economic impacts of the services. best meets the needs of their
pandemic. Specifically, recipients may Public Comment: Beneficiaries and community. Therefore, a ‘‘nonprofit’’
provide direct assistance to nonprofits if Subrecipients: As noted elsewhere in that is acting as subrecipient could
the nonprofit has experienced a public this final rule, Treasury received include, but is not limited to, a
health or negative economic impact as multiple comments expressing nonprofit as that term is defined in
a result of the pandemic. For example, uncertainty on how to categorize a paragraph (17) of section 401 of the
if a nonprofit organization experienced particular activity in the eligible use McKinney-Vento Homeless
impacts like decreased revenues or categories. For instance, some Assistance.232 See section
increased costs (e.g., through reduced commenters requested that recipients be Distinguishing Subrecipients versus
contributions or uncompensated able to use SLFRF funds for certain Beneficiaries for further information.
increases in service need), and a expenses incurred by nonprofits (e.g., Additional guidance on determining
recipient provides funds to address that unemployment charges) as a response to subrecipient status may be found in the
impact, then it is providing direct a public health or negative economic Uniform Guidance.233
assistance to the nonprofit as a impact to that nonprofit; others asked if Recipients may transfer funds to
beneficiary under Subsection (c)(1) of nonprofits providing certain services subrecipients in several ways, including
Sections 602 and 603. Direct assistance (e.g., social services) made them eligible advance payments and on a
may take the form of loans, grants, in- for direct assistance. Commenters also reimbursement basis. Ultimately,
kind assistance, technical assistance, or requested that Treasury acknowledge recipients must comply with the eligible
other services that respond to the that engagement directly with nonprofit use requirements and any other
negative economic impacts of the organizations in low-income applicable laws or requirements and are
COVID–19 public health emergency. communities and communities of color responsible for the actions of their
A recipient may identify a negative may allow the recipient to better assess
subrecipients or beneficiaries.
economic impact experienced by a economic harms in these areas.
As part of accepting the Award Terms
nonprofit, or class of nonprofits, and Treasury Response: Beneficiaries and
Subrecipients: Treasury recognizes that and Conditions for SLFRF, each
design and implement a response to that
many nonprofits play important roles in recipient agreed to maintain a conflict-
negative economic impact, see section
their communities, and some may have of-interest policy consistent with 2 CFR
Standards: Designating a Negative
experienced public health or negative 200.318(c) that is applicable to all
Economic Impact. The final rule
economic impacts during the pandemic. activities funded with the SLFRF award.
provides a non-exhaustive list of
As such, under the interim final rule Pursuant to this requirement, decisions
enumerated eligible uses for assistance
and the final rule, nonprofits may be concerning SLFRF funds must be free of
to nonprofits that are impacted or
impacted by the pandemic and receive undisclosed personal or organizational
disproportionately impacted by the
pandemic. assistance as a beneficiary, as described conflicts of interest, both in fact and in
A recipient may also identify a class above, and/or be a subrecipient appearance. Recipients may avoid
of nonprofits that have been providing services on behalf of a conflicts of interest in providing
disproportionately impacted by the recipient.231 assistance to nonprofits or making
public health emergency and design and Specifically, the interim final rule subrecipient awards by, inter alia,
implement a program that responds to also allowed for, and the final rule making aid available to nonprofits on
the source of that disproportionate maintains, the ability for the recipient to generally applicable terms or utilizing a
impact. For example, a recipient may transfer, e.g., via grant or contract, funds competitive grant process, respectively.
determine that nonprofits offering after- to nonprofit entities to carry out an A recipient may not use control over
school programs within its jurisdiction eligible use on behalf of the recipient. SLFRF funds for their own private gain.
were disproportionately impacted by Treasury notes that recipients may Furthermore, no employee, officer, or
the pandemic due to the previous in- award SLFRF funds to many different agent may participate in the selection,
person, indoors nature of the work and types of organizations to carry out award, or administration of a contract
the nonprofits’ reliance on fees received eligible uses of funds and serve supported by a federal award if he or
for services (e.g., attendance fees). The beneficiaries on behalf of a recipient she has a real or apparent conflict of
recipient might then design an government (e.g., assisting in a interest.
intervention to assist those nonprofits in vaccination campaign, operating a job Public Comment: Definition of
adapting their programming (e.g., to training program, developing affordable Nonprofit: Treasury also received
outdoor or online venues), their revenue housing). When a recipient provides several requests to expand the definition
structure (e.g., adapting the fee for funds to an organization to carry out of nonprofits so that other tax-exempt
service structure or developing expertise eligible uses of funds and serve entities (e.g., 501(c)(7)s, 501(c)(9)s,
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in digital donation campaigns), or both. 501(c)(19)s, nonprofits with ‘‘historical
Additional information about this 231 Note, this response is meant to clarify the
difference between nonprofits as beneficiaries and 232 See sections 602(c)(3) and 603(c)(3) of the
framework is included in General
nonprofits as subrecipients. It is not meant to limit Social Security Act. See also Section 401 of the
Provisions: Structure and Standards. In the types of relationships that a recipient may enter McKinney-Vento Homeless Assistance Act (42
order to ease administrative burden, the into with a nonprofit as permitted under the U.S.C. 11360(17), which defines a ‘‘private
final rule presumes that nonprofits Uniform Guidance. nonprofit organization.’’
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Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4381
significance’’) could be eligible for information from their subrecipients to of assistance and subrecipients when
direct assistance as beneficiaries. complete required reporting. working with impacted industries; for
Treasury Response: Definition of further information, see section
d. Aid to Impacted Industries
Nonprofit: The final rule expands the Distinguishing Subrecipients versus
definition of nonprofits to mean The interim final rule allowed for Beneficiaries.
501(c)(3) organizations and 501(c)(19) ‘‘aid to tourism, travel, and hospitality,
and other impacted industries’’ that Designating an Impacted Industry
organizations.234 The 501(c)(3)
classification includes a wide range of responds to the negative economic Public Comment: Many commenters
organizations with varying charitable or impacts of the COVID–19 public health requested greater clarity on how to
public service-oriented goals (e.g., emergency. In designating other designate ‘‘other impacted industries’’
housing, food assistance, job training). impacted industries, Treasury specified within their jurisdiction. Commenters
As discussed above, these nonprofit that recipients should consider the requested greater specificity as to the
organizations often experienced ‘‘extent of the economic impact as metrics used to measure impact, with
hardship due to increased needs for compared to tourism, travel, and some suggesting metrics such as the
services combined with decreased hospitality’’ and ‘‘whether impacts were change in the size of an industry’s
donations and other sources of funding. due to the COVID–19 pandemic, as workforce due to the pandemic, as well
In response to comments, Treasury has opposed to longer-term economic or as consideration of whether and why
expanded the definition of nonprofit to industrial trends unrelated to the employees are choosing to return to
include 501(c)(19) organizations, which pandemic.’’ 236 Treasury identified work at slower rates in certain
includes veterans’ organizations, to declines in employment and revenue as industries. One commenter asked if this
provide recipients more flexibility and possible metrics to compare the meant nearly every industry was
in alignment with the definition of economic impact on a particular ‘‘disproportionately impacted.’’ Some
nonprofit adopted by the CARES Act, industry relative to the tourism, travel, commenters encouraged Treasury to
wherein 501(c)(3)s and 501(c)(19)s were and hospitality industries. focus on industries most negatively
eligible for assistance.235 Treasury further provided that aid impacted by the pandemic, including
Public Comment: Reporting should be limited to businesses, disallowing across-the-board business
Requirements: One commenter asked attractions, business districts, and Tribal subsidies to businesses that were not
Treasury to clarify if nonprofits that development districts 237 that were negatively impacted by the pandemic
receive direct assistance as beneficiaries operating prior to the pandemic and and saw revenue or profit growth. Other
are required to comply with guidelines affected by required closures and other commenters asked for flexibility for
and reporting requirements. efforts to contain the pandemic. recipients to determine impacted
Treasury Response: Reporting Examples of eligible aid include industries based on their local
Requirements: Nonprofits that receive assistance to implement COVID–19 knowledge of the economic landscape.
direct assistance as beneficiaries are not mitigation and infection prevention Treasury Response: The final rule
subrecipients under SLFRF and are measures, aid to support safe reopening maintains the interim final rule’s
therefore not required to comply with of businesses in these industries, as well approach of allowing recipients to
SLFRF reporting requirements. as aid for a planned expansion or designate impacted industries outside
However, the recipient must comply upgrade of tourism, travel, and the travel, tourism, and hospitality
with SLFRF reporting requirements, hospitality facilities delayed due to the industries, and, in response to
which would require reporting pandemic. The interim final rule and comments, provides greater clarity as to
obligations and expenditures for Treasury’s subsequent Compliance and how recipients may designate such
assistance to nonprofits. The recipient Reporting Guidance also required impacted industries.
may also choose to establish other forms governments to publicly report
Sections 602(c)(1)(A) and 603(c)(1)(A)
of reporting or accountability as a part assistance provided to private-sector
recognize that the tourism, travel, and
of the recipient’s direct assistance businesses under this eligible use and
hospitality industries are severely
program. maintain records of their assessments to
negatively impacted by the pandemic.
A nonprofit entity that receives a facilitate transparency and
Under the final rule, recipients may
transfer from a recipient is a accountability.
Reorganization and Cross-References: provide eligible aid (described in further
subrecipient. Per the Uniform Guidance, detail herein) to the tourism, travel, and
subrecipients must adhere to the same As detailed above, Treasury has re-
categorized some uses of funds in the hospitality industries. Treasury
requirements as recipients. Therefore, a considers Tribal development districts,
nonprofit subrecipient may only receive final rule to provide greater clarity. In
the interim final rule, aid to impacted which are commercial centers for Tribal
funds to carry out an eligible use of hospitality, gaming, tourism, and
SLFRF funds and must comply with any industries to implement COVID–19
mitigation and prevention strategies was entertainment and can include Tribal
reporting and compliance requirements. enterprises, as part of the tourism,
Note that recipients are ultimately categorized under Aid to Impacted
Industries; the final rule addresses these travel, and hospitality industries that
responsible for reporting information to have been severely hit by the pandemic.
Treasury and must collect any necessary items under the section COVID–19
Mitigation and Prevention in Public Therefore, Treasury reaffirms that Tribal
Health. Recipients should also be aware development districts are considered
234 § 35.3 Definitions.
of the difference between beneficiaries impacted industries and recipients may
235 Treasury considered expanding the definition
provide eligible aid to them.
of nonprofit to include 501(c)(6) organizations, as
236 Coronavirus State and Local Fiscal Recovery To identify other industries
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Congress later did in the Coronavirus Response and
Consolidated Appropriations Act of 2021, but Funds, 86 FR at 26795. comparably impacted to the tourism,
ultimately decided to retain the original CARES Act 237 For a definition of ‘‘Tribal development travel, and hospitality industries,
definition. To the extent impacted by the pandemic, districts,’’ please see FAQ 2.9 at the following: recipients should undertake a two-step
501(c)(6) organizations may be eligible to receive Coronavirus State and Local Fiscal Recovery Funds,
funds to support eligible uses that align with their Frequently Asked Questions, as of July 19, 2021;
process: Identifying an industry and
overall purpose (e.g., tourism promotion in aid of https://home.treasury.gov/system/files/136/ determining whether that industry is
an impacted industry). SLFRPFAQ.pdf. comparably impacted.
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4382 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations
First, recipients should identify an number of employees of the recipient’s publications, research from academic
industry to be assessed. In identifying identified industry and the national sources, and other quantitative sources
this industry, the final rule provides Leisure & Hospitality sector in the three for this determination.
recipients the flexibility to define its months before the pandemic’s most If quantitative data is unavailable, the
substantive or geographic scope.238 severe impacts began (a straight three- recipient can rely on qualitative data to
Recipients may identify a broad sector month average of seasonally-adjusted show that the industry is experiencing
that encompasses a number of sub- employment data from December 2019, comparable or worse economic impacts
industries, or they may identify a January 2020, and February 2020) with as the national tourism, travel, and
specific sub-industry to be assessed. For the latest data as of the final rule release hospitality industries, and the impacts
example, a recipient may identify (a straight three-month average of were generally due to the COVID–19
‘‘personal care services’’ as an industry, seasonally-adjusted employment data public health emergency. Recipients
or they may identify a more specific from September 2021, October 2021, may rely on sources like community
category within the ‘‘personal care and November 2021).239 The national interviews, surveys, and research from
services’’ industry (e.g., barber shops) as Leisure & Hospitality sector largely relevant state and local government
an industry. In defining the industry, represents the national travel, tourism, agencies.
Treasury encourages recipients to define and hospitality industries enumerated As the public health emergency and
narrow and discrete industries eligible in the statute. According to the Bureau economic recovery evolves, recipients
for aid. Recipients are not required to of Labor Statistics, employment has should assess how industry impacts
follow, but may consider following, fallen by approximately 8 percent for shift over time. Impacted industries may
industry classifications under the North the national Leisure & Hospitality sector recover in a short period of time and no
American Industry Classification when comparing the most recent three- longer face a negative economic impact;
System (NAICS). Treasury notes that the month period available as of the date of in those circumstances, the recipient
larger and more diverse the sector, the adoption of the final rule to the three- should ensure that the extent and length
more difficult it may be to demonstrate month period immediately before the of aid is reasonably proportional to the
that the larger and less specific sector is public health emergency. Therefore, if negative economic impact that is
negatively impacted in the same way the identified industry has suffered an experienced, as detailed further below
given the scale and diversity of employment loss of at least 8 percent,
and in section General Provisions:
businesses within it. the final rule presumes the industry to
Structure and Standards. Recipients
State or territory recipients may also be an ‘‘impacted industry.’’
For parity and simplicity, smaller may add to their list of impacted
define a constituent industry with industries by showing that the negative
greater geographic precision than state recipients without employment data
that measure industries in their specific economic impacts to the industry at the
or territory-wide. For example, a state time of the designation are comparable
may identify a particular industry in a jurisdiction may use data available for a
broader unit of government for this to the negative economic impacts to the
certain region of the state that was national tourism, travel, and hospitality
negatively impacted by the pandemic, calculation (e.g., a county may use data
from the state in which it is located; a sectors as of the date of the final rule
even if the same industry in the rest of adoption, as detailed herein.
the state did not see a meaningful city may use data for the county, if
negative economic impact from the available, or state in which it is located) Eligible Aid
pandemic. State recipients oversee large solely for purposes of determining
whether a particular industry is an Public Comment: Commenters asked
and diverse industries, sometimes with for further clarification as to the
differences in economic activity impacted industry.
2. If simplified test is not met. If an definition of eligible aid to an impacted
between geographic regions. Allowing industry, with many requesting that a
industry does not satisfy the test above
greater geographic precision allows broad range of aid be eligible. Examples
or data are unavailable, the recipient
recipients to target aid to those that of aid that recipients asked to be
may still designate the industry as
need it most, ensuring that state considered eligible include aid to
impacted by demonstrating the
averages do not conceal hard-hit areas following: businesses to cover COVID–19
in their state. a. The recipient can show that the mitigation costs and planned
Second, to determine whether the totality of relevant major economic renovations or improvements to
industry is ‘‘impacted,’’ recipients indicators demonstrate that the industry tourism, travel, and hospitality
should compare the negative economic is experiencing comparable or worse facilities, as well as marketing and in-
impacts of the public health emergency economic impacts as the national kind incentives to attract visitors.
on the identified industry to the impacts tourism, travel, and hospitality Commenters also asked about the
observed on the travel, tourism, and industries at the time of the publication eligibility of aid to broadly cover losses
hospitality industries. of the final rule, and that the impacts incurred by facilities such as convention
1. Simplified test. An industry is were generally due to the COVID–19 centers and hotels due to the
presumed to be impacted if the industry public health emergency. Example pandemic’s economic impact.
experienced employment loss of at least economic indicators include gross Commenters also asked for further
8 percent. output, GDP, net profits, employment clarification about the requirements
Specifically, a recipient should levels, and projected time to restore related to private-sector reporting.
compare the percent change in the employment back to pre-pandemic Further, some commenters asked for
238 Once an industry is designated as impacted,
levels. Recipients may rely on available clarification about eligible aid to
economic data, government research impacted industries owned and
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aid should be generally broadly available to
businesses in the industry that qualify. Recipients operated by Tribal governments,
should document how they defined the scope of 239 National Leisure & Hospitality supersector including for Tribal construction
their industry and how they determined that the employment data can be found on the U.S. Bureau projects that have been delayed due to
industry was impacted. For states and territories, of Labor Statistics website: U.S. Bureau of Labor
this includes documenting their justification for Statistics, Leisure and Hospitality, https://
the pandemic’s economic impacts, and
defining a constituent industry with greater www.bls.gov/iag/tgs/iag70.htm (last visited for deference to Tribal determinations of
geographic precision than state or territory-wide. December 7, 2021). negative economic impacts.
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Treasury Response: In response to conflicts of interest.240 Treasury Loans in Program Administration
commenters’ requests for clarification encourages recipients to design aid Provisions.
on eligible aid, the final rule requires programs such that funds are first used
4. General Provisions: Other
that aid to impacted industries, for operational expenses that are
including to Tribal development generally recognized as ordinary and As noted above, the final rule
districts, be designed to address the necessary for the recipient’s operation, consolidates into a General Provisions
harm experienced by the impacted such as payroll, before being used on section several types of uses of funds; in
industry. other types of costs. As noted in the the interim final rule, the eligibility of
section General Standards: Structure these uses of funds was discussed
First, recipients should identify a within specific categories of eligible
negative economic impact, i.e., an and Standards, uses of funds that do not
respond to the negative economic uses for public health and negative
economic harm, that is experienced by economic impacts. Treasury anticipates
businesses in the impacted industry. impacts of the pandemic, such as
excessive compensation to employees, that this re-organization will enhance
Second, recipients should select a recipient clarity in assessing eligible
response that is designed to address the is ineligible.
The final rule maintains the interim uses of funds. These General Provisions
identified economic harm resulting from apply across all uses of funds under
final rule’s requirement that aid may
or exacerbated by the public health public health and negative economic
only be considered responsive to the
emergency. Responses must also be impacts.
negative economic impacts of the
related and reasonably proportional to Specifically, this section considers
pandemic if it supports businesses,
the extent and type of harm eligible uses for:
attractions, and Tribal development
experienced; uses that bear no relation
districts operating prior to the pandemic • Public Sector Capacity and
or are grossly disproportionate to the Workforce, which includes several
and affected by required closures and
type or extent of harm experienced separate and non-mutually exclusive
other efforts to contain the pandemic.
would not be eligible uses. Recipients categories articulated in the interim
Further, to facilitate transparency and
should consider the further discussion final rule: public health and safety staff;
accountability, the final rule maintains
of this standard provided in the sections rehiring state, local, and Tribal
the interim final rule’s requirement that
Standards: Designating a Public Health government staff; expenses for
recipients publicly report assistance
Impact and Standards: Designating a administering COVID–19 response
provided to private-sector businesses
Negative Economic Impact. programs; expenses to improve the
under this eligible use, including
These responses may take the form of efficacy of public health or economic
tourism, travel, hospitality, and other
direct spending by recipients to promote relief programs; and administrative
impacted industries, and its connection
an industry or support for businesses expenses caused or exacerbated by the
to negative economic impacts of the
within an ‘‘impacted’’ industry that pandemic. Treasury recognizes that
public health emergency. Recipients
experienced a negative economic impact these are closely related and frequently
also should maintain records to support
(e.g., through a grant program). overlapping categories. The final rule
their assessment of how businesses
Examples of eligible responses include: treats them as a single purpose,
receiving assistance were affected by the
supporting public sector capacity, and
• Aid to mitigate financial hardship negative economic impacts of the public
provides coordinated guidance on the
due to declines in revenue or profits by health emergency and how the aid
standards and presumptions that apply
supporting payroll costs and provided responds to these impacts.
Recipients providing aid to impacted to them.
compensation of returning employees • Capital Expenditures, which was
for lost pay and benefits during the industries for capital expenditures (i.e.,
addressed only under Public Health in
COVID–19 pandemic, as well as support expenditures on property, facilities, or
the interim final rule. The final rule
of operations and maintenance of equipment), including Tribal
moves this expense to General
existing equipment and facilities, such governments providing aid to Tribal
Provisions and provides more clarity on
as rent, leases, and utilities; development districts, should also
the eligibility of capital expenditures
review the section Capital Expenditures
• Aid for technical assistance, across all aspects of the public health
in General Provisions: Other, which
counseling, and other services to assist and negative economic impacts eligible
describes eligibility standards that are
with business planning needs; and use category.
applicable to these expenditures, • Distinguishing Subrecipients versus
• Aid to implement COVID–19 depending on the type of aid. Recipients
mitigation and infection prevention Beneficiaries, which describes the
providing assistance in the form of loans differences between these two
measures, such as vaccination or testing should review the section Treatment of
programs, is broadly eligible for many categories. Recipient governments
types of entities, including travel, 240 As part of accepting the Award Terms and
responding to the public health and
tourism, hospitality, and other impacted Conditions for SLFRF, each recipient agreed to negative economic impacts of the
industries. Recipients providing aid to maintain a conflict-of-interest policy consistent pandemic may provide assistance to
impacted industries for COVID–19
with 2 CFR 200.318(c) that is applicable to all beneficiaries or execute an eligible use
activities funded with the SLFRF award. Pursuant of funds through a subrecipient; some
public health measures should review to this policy, decisions concerning SLFRF must be
the section Assistance to Businesses to free of undisclosed personal or organizational types of entities (e.g., nonprofits) could
Implement COVID–19 Strategies in conflicts of interest, both in fact and in appearance. fit into either category depending on the
Public Health, which describes types of
Recipients may avoid conflicts of interest in specific purpose of the use of funds.
awarding aid to impacted industries by, inter alia, • Uses Outside the Scope of this
eligible uses of funds in this category. making aid available to businesses in the industry
Category, which addresses uses of funds
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on generally applicable terms or utilizing a
To address the identified harms, competitive grant process. A recipient may not use that are ineligible or generally ineligible
responses (e.g., aid through a grant control over SLFRF for their own private gain. under this eligible use category in the
program) should be generally broadly Furthermore, no employee, officer, or agent may interim final rule. These uses of funds
available to all businesses within the participate in the selection, award, or
administration of a contract supported by a federal
remain ineligible under the final rule,
impacted industry to avoid the risk of award if he or she has a real or apparent conflict but Treasury has re-categorized where
self-dealing, preferential treatment, and of interest. they are addressed, as described below.
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4384 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations
This section also addresses enumerated correspondence; recipients need not response, given the disproportionate
eligible uses proposed by commenters track staff hours. The interim final rule impacts of the pandemic in those
that Treasury has not incorporated into also posed a question on how long communities. Similarly, Tribal
the final rule. recipients should be able to use funds communities recommended that their
Recipients should also note that the for staff responding to COVID–19 and public health staff be presumed eligible
Office of Management and Budget’s what other measures or presumptions due to the disproportionate impact of
(OMB) Uniform Administrative might Treasury consider to assess the the pandemic on their communities.
Requirements, Cost Principles, and extent to which public sector staff are Some commenters proposed that they be
Audit Requirements for Federal Awards engaged in COVID–19 response in an able to use the administrative
(commonly called the ‘‘Uniform easily administrable manner. convenience for staff outside of public
Guidance’’) generally applies to SLFRF. Treasury also provided further health and safety that are responding to
a. Public Sector Capacity and Workforce guidance on the types of employees COVID–19 (i.e., to be able to pay the full
covered by this category of eligible use, payroll and covered benefits for any
Public Safety, Public Health, and specifically: ‘‘Public safety employees staff ‘‘primarily dedicated’’ to COVID–
Human Services Staff would include police officers (including 19 response).
Summary of Interim Final Rule: state police officers), sheriffs and deputy Treasury Response: In the final rule,
Under the interim final rule, funds may sheriffs, firefighters, emergency medical Treasury is maintaining the approach in
be used for payroll and covered responders, correctional and detention the interim final rule, including
benefits 241 for public safety, public officers, and those who directly support elaborations issued in further guidance,
health, health care, human services, and such employees such as dispatchers and but providing additional clarification on
similar employees 242 of a recipient supervisory personnel. Public health its application, including methods to
government, for the portion of the employees 243 would include employees apply the approach to minimize
employee’s time that is spent involved in providing medical and other administrative burden. Treasury notes
responding to COVID–19. For health services to patients and that recipients may assess the extent to
administrative convenience, the supervisory personnel, including which staff are dedicated to responding
recipient may consider public health medical staff assigned to schools, to COVID–19 through a variety of
and safety employees to be entirely prisons, and other such institutions, and means, including establishing
devoted to responding to COVID–19, other support services essential for presumptions or assessing public health
and therefore their full payroll and patient care (e.g., laboratory technicians, and safety staff at the division or
covered benefits eligible to be covered, medical examiner, or morgue staff) as operating unit level. For example, a
if the employee, or his or her operating well as employees of public health recipient could consider the amount of
unit or division, is ‘‘primarily departments directly engaged in matters time spent by employees in its public
dedicated’’ to responding to COVID–19, related to public health and related health department’s epidemiology
meaning that more than half of the supervisory personnel. Human services division in responding to COVID–19
employee, unit, or division’s time is staff include employees providing or and, if a majority of its employees are
dedicated to responding to COVID–19. administering social services; public dedicated to responding to COVID–19,
Recipients may consider other benefits; child welfare services; and determine that the entire division is
presumptions for assessing the extent to child, elder, or family care, as well as primarily dedicated to responding to
which an employee, division, or others.’’ COVID–19. Treasury also clarifies that
operating unit is responding to COVID– Public Comment: Measuring Time recipients may use reasonable estimates
19. Recipients must periodically Spent on COVID–19 Response: Treasury to establish administrable
reassess their determination and received public comments on several presumptions; for example, a recipient
maintain records to support their components of this eligible use category. could estimate, based on discussions
assessment, such as payroll records, Many commenters argued that it poses with staff, the general share of time that
attestations from supervisors or staff, or an administrative burden to identify the employees in a specific role or type of
regular work product or extent to which staff are responding to position spend on COVID–19 related
COVID–19 and to maintain records to tasks and apply that share of time to all
241 In general, if an employee’s wages and salaries
support that assessment. Largely citing employees in that position.
are an eligible use of SLFRF funds, recipients may Recipients are generally required to be
treat the employee’s covered benefits as an eligible
administrative burden in assessing
able to support uses of SLFRF funds as
use of SLFRF funds. For purposes of SLFRF funds, eligibility, several commenters
eligible, including, in this instance,
covered benefits include costs of all types of leave recommended revisions to the
(vacation, family-related, sick, military, maintenance of records to support an
administrative convenience that the full
bereavement, sabbatical, jury duty), employee assessment that public health and safety
insurance (health, life, dental, vision), retirement payroll and covered benefits for public
staff are primarily dedicated to
(pensions, 401(k)), unemployment benefit plans health and safety staff ‘‘primarily
(federal and state), workers compensation responding to COVID–19. As noted
dedicated’’ to responding to COVID–19
insurance, and Federal Insurance Contributions Act above, recipients may use reasonable
(FICA) taxes (which includes Social Security and
may be paid with SLFRF funds. Some estimates to implement this provision.
Medicare taxes). As described further in the section commenters recommended presuming Recipients should maintain records on
Deposits into Pension Funds in Restrictions on Use, that all public health and safety staff are
that limitation on use does not apply to pension how they developed these estimates and
primarily dedicated to COVID–19 need not track staff hours. Treasury
contributions that are part of regular payroll
contributions for employees whose wages and response, while others proposed that notes that records retained can include
salaries are an eligible use of SLFRF funds. public health and safety workers who payroll records (e.g., the number and
242 Note that the interim final rule adapted prior primarily serve QCTs or low- and type of staff in various positions),
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guidance issued for CRF that described these four moderate-income areas be presumed to
categories of employees; however, when listing the attestations from supervisors or staff
specific occupations or types of employees in each
be primarily dedicated to COVID–19 (e.g., self-attestation of share of time
of these categories, the guidance collapses health spent on COVID–19), or regular work
care and public health into one category titled 243 Note that this category encompasses both
‘‘public health.’’ Therefore, the presumption public health and health care employees; both are
product or correspondence (e.g.,
described around public health employees also treated as public health employees for the purposes calendars, email correspondence,
covers health care employees. of this eligible use category. documents, and other electronic
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Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4385
records). Treasury anticipates that these example, responding to COVID–19 for a administrative convenience that SLFRF
types of records are generally retained public safety worker may entail working funds may be used for the full payroll
in many government settings; recipients in an emergency operations center to and covered benefits of public health
should also consult the Award Terms coordinate pandemic-related supply and safety staff primarily dedicated to
and Conditions for SLFRF funds for distribution, responding to an increased COVID–19 response. Several
requirements on length of record volume of 911 calls, or implementing commenters recommended that
retention. For example, a recipient COVID–19 prevention and mitigation Treasury maintain this approach
could establish a reasonable protocols in a carceral setting. throughout the program or through
presumption about the share of time Public Comment: Eligible Employees: December 31, 2024. Other commenters
that an employee, division, or operating Some commenters requested requested clarification on whether
unit is responding to COVID–19 and clarification on the types of eligible eligibility for this use of funds was tied
simply retain those employees’ employees or expansion of eligible to the length of the state of emergency
electronic records as a record to support employees to include additional types or whether a jurisdiction has an active
their assessment. of staff, including in behavioral health; state of emergency.
Public Comment: Public Health and administrative, management, or Treasury Response: In the final rule,
Safety Staff Primarily Dedicated to financial management positions; social Treasury is clarifying that recipients
COVID–19 Response: Some commenters services; morgue staff; and nonprofit will be permitted to fund the full
recommended expanding the staff supporting projects to undertake payroll and covered benefits of public
administrative convenience for public eligible uses of funds under SLFRF. health and safety staff primarily
health and safety staff primarily Treasury Response: Treasury dedicated to COVID–19 response
dedicated to COVID–19 response to provided further guidance on eligible throughout the period of performance
further types of staff, to all public health types of employees following the for the SLFRF program, though
and safety staff, or to public health and interim final rule, which expressly recipients should periodically reassess
safety staff serving underserved areas. included social services and morgue their determination of primarily
Treasury Response: The interim final staff, and incorporates that guidance dedicated staff, including as the public
rule recognized that COVID–19 response into the final rule. In addition, Treasury health emergency and response evolves.
continues to require substantial staff is clarifying that public health
resources and provides an ‘‘employees involved in providing Government Employment and Rehiring
administrative convenience to make it medical and other health services to Public Sector Staff
relatively simpler to identify the patients and supervisory personnel’’ The interim final rule permitted use
eligibility of the types of workers— includes behavioral health services as of funds for costs associated with
public health and safety workers— well as physical health services. rehiring state, local, and Tribal
generally most involved in COVID–19 Treasury also is clarifying that this government staff in order to bolster the
response. At the same time, many provision only addresses employees of government’s ability to effectively
public health and safety workers the recipient government responding to administer services. Specifically,
perform roles unrelated to COVID–19; COVID–19. For discussion of eligible recipients may pay for payroll, covered
coverage of all roles would be overbroad expenses to administer SLFRF, benefits, and other costs associated with
compared to the workers responding to including eligible costs for subrecipients the recipient increasing the number of
COVID–19 in actuality. For this reason, performing eligible activities on behalf its employees up to the pre-pandemic
the final rule maintains the interim final of a recipient government, see section baseline, or the number of employees
rule’s approach to permitting SLFRF Administrative Expenses in Program that the recipient government employed
funds to be used for public health and Administration Provisions. on January 27, 2020.
safety staff primarily dedicated to Finally, Treasury is clarifying that Public Comment: Many commenters
responding to COVID–19. Finally, to the indirect costs for administrative, requested greater flexibility and
extent that a greater proportion of public management, and financial management additional clarification on the
health and safety staff time is needed to personnel to support public health and provision’s requirements, including the
respond to COVID–19 in safety staff responding to COVID–19 are pre-pandemic baseline and re-hiring
disproportionately impacted not permissible under this provision, process. Some commenters requested
communities, the ‘‘primarily dedicated’’ given the relatively greater challenge of that the final rule allow for hiring above
approach recognizes this increased differentiating the marginal increase in the pre-pandemic baseline given
need. staff time and workload due to historic underinvestment in the public
Public Comment: Eligible Types of pandemic response for indirect versus sector workforce. Commenters suggested
COVID–19 Response: Some public direct costs. a number of adjustments to the pre-
commenters also sought further Public Comment: Time Period: pandemic baseline, including adjusting
clarification on how to identify eligible Finally, some commenters made based on population or revenue growth,
types of ‘‘COVID–19 response.’’ For recommendations on the time period while some recommended allowing
example, commenters requested during which this eligible use should be recipients to set their own hiring levels.
clarification on delineating COVID–19 available. Some commenters Others requested clarification on the
response from general public health recommended eligibility begin before definition of the baseline and the re-
response and defining COVID–19 March 3, 2021, the period when hiring process, including whether the
response for public safety employees. Treasury’s interim final rule permitted pre-pandemic baseline referred to
Treasury Response: Treasury is recipients to begin to incur costs using budgeted or filled positions and
clarifying that ‘‘responding to’’ COVID– SLFRF funds; for discussion of this whether new hires had to fill the same
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19 entails work needed to respond to topic, see section Timeline for Use of roles as the previous hires. Commenters
the public health or negative economic SLFRF Funds in Program also asked whether recipients need to
impacts of the pandemic, apart from the Administration Provisions. As noted show if the reduction in number of
typical pre-pandemic job duties or above, Treasury also posed a question in employees was due to the pandemic in
workload of an employee in a the interim final rule asking for how order to qualify for funding and
comparable role, if one existed. For long Treasury should maintain the requested that workers dedicated to
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4386 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations
COVID–19 response be exempted from these employees, recipients may use • Step Four: Subtract the actual
the calculation of number of employees. SLFRF funds for payroll and covered number of FTEs from the adjusted pre-
Many commenters also requested an benefit costs that are obligated by pandemic baseline to calculate the
expanded set of eligible uses beyond December 31, 2024 and expended by number of FTEs that can be hired and
restoring their workforce up to the pre- December 31, 2026, consistent with the covered by SLFRF funds.
pandemic baseline. Commenters Uniform Guidance’s Cost Principles at 2 Recipients may use SLFRF funds to
requested that funding be able to be CFR part 200 Subpart E. This option cover payroll and covered benefit costs
used to avoid layoffs, provide back pay, provides administrative simplicity for obligated by December 31, 2024, and
retain employees through pay increases recipients that would simply like to expended by December 31, 2026, up to
and other retention programs, or restore pre-pandemic positions and the number of FTEs calculated in Step
reimburse salaries and benefits already would not like to hire above the pre- Four, consistent with the Uniform
paid. Some commenters also requested pandemic baseline. Guidance’s Cost Principles at 2 CFR part
clarification as to whether recipients To pursue the second option, 200 Subpart E. Recipients may only use
can fund re-hired positions through the recipients should undergo the analysis SLFRF funds for additional FTEs hired
period of performance and on the provided below. In short, this option over the March 3, 2021 level of
definition of payroll and benefits. Other allows recipients to pay for payroll and budgeted FTEs (i.e., the actual number
commenters requested preferential covered benefits associated with the of FTEs); note again that recipients may
hiring for workers laid off, a strong recipient increasing its number of choose whether to conduct the analysis
commitment to equity, and a budgeted full-time equivalent of FTEs that can be covered by SLFRF
requirement that funds would not be employees (FTEs) up to 7.5 percent funds on a government-wide basis or for
used to pay for contract or temporary above its pre-pandemic employment an individual department, agency, or
replacement workers during a labor baseline, which adjusts for the authority.
dispute. continued underinvestment in state and These FTEs must have begun their
Treasury Response: The final rule local governments since the Great employment on or after March 3, 2021,
allows for an expanded set of eligible Recession. State and local government which is the beginning of the period of
uses to restore and support public sector employment as a share of population in performance. For administrative
employment. Eligible uses include 2019 remained considerably below its convenience, recipients do not need to
hiring up to a pre-pandemic baseline share prior to the Great Recession in demonstrate that the reduction in
that is adjusted for historic 2007, which presented major risks to number of FTEs was due to the COVID–
underinvestment in the public sector, recipients mounting a response to the 19 pandemic, as Treasury assumes the
providing additional funds for COVID–19 public health emergency. vast majority of employment reductions
employees who experienced pay cuts or The adjustment factor of 7.5 percent during this time were due to pandemic
were furloughed, avoiding layoffs, results from estimating how much larger fiscal pressures on state and local
providing worker retention incentives, 2019 state and local government budgets. Recipients do not need to hire
and paying for ancillary administrative for the same roles that existed pre-
employment would have needed to be
costs related to hiring. pandemic.
for the share of state and local
Restoring pre-pandemic employment. For illustration, consider a
In response to comments and government employment to population hypothetical recipient with 1,000
recognizing underinvestment in public in 2019 to have been back at its 2007 budgeted FTEs on January 27, 2020 (950
sector employment, the final rule level and is intended to correct for this filled FTE positions and 50 unfilled FTE
expands the ability to use SLFRF funds gap. positions). The recipient’s pre-
to restore pre-pandemic employment. Recipients should complete the steps pandemic baseline is 1000 FTEs; its
Treasury is also clarifying how, and the described below. Recipients may choose adjusted pre-pandemic baseline is 1,000
extent to which, recipients may use whether to conduct this analysis on a * 1.075 = 1075 FTEs. Now, assume that
SLFRF funds to rehire public government-wide basis or for an on March 3, 2021, the recipient had 800
employees. individual department, agency, or budgeted FTEs in total (795 filled FTE
The final rule provides two options to authority. positions and 5 unfilled FTE positions),
restore pre-pandemic employment, • Step One: Identify the recipient’s with 50 FTEs primarily dedicated to
depending on recipient’s needs. Under budgeted FTE level on January 27, 2020. responding to the COVID–19 public
the first and simpler option, recipients This includes all budgeted positions, health emergency. The recipient would
may use SLFRF funds to rehire staff for filled and unfilled. This is called the have the option of using either 800 FTEs
pre-pandemic positions that were pre-pandemic baseline. or 750 FTEs as its actual number of
unfilled or were eliminated due the • Step Two: Multiply the pre- FTEs for the calculation; assuming it
pandemic without undergoing further pandemic baseline by 1.075 (that is, 1 chooses the lower number, it would be
analysis. Under the second option, the + adjustment factor). This is called the able to fund up to 325 FTEs with SLFRF
final rule provides recipients an option adjusted pre-pandemic baseline. funds (that is, 1,075¥750 = 325 FTEs).
to hire above the pre-pandemic baseline, • Step Three: Identify the recipient’s
by adjusting the pre-pandemic baseline budgeted FTE level on March 3, 2021, consider public health and safety FTEs to be
for historical growth in public sector which is the beginning of the period of entirely devoted to mitigating or responding to the
performance for SLFRF funds. COVID–19 public health emergency if the FTE, or
employment over time, as well as his or her operating unit of division, is primarily
flexibility on roles for hire. Recipients Recipients may, but are not required to, dedicated to responding to the COVID–19 public
may choose between these options but exclude FTEs dedicated to responding health emergency. Recipients may also consider
cannot use both. to the COVID–19 public health other presumptions for assessing the extent to
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emergency.244 This is called the actual which an FTE, division, or operating unit is
To pursue the first option, recipients engaged in activities that respond to the COVID–19
may use SLFRF funds to hire employees number of FTEs. public health emergency, provided that the
for the same positions that existed on recipient reassesses periodically and maintains
244 Recipients may determine that a portion of an records to support its assessment, such as payroll
January 27, 2020 but that were unfilled FTE’s time is dedicated to responding to the records, attestations from supervisors or staff, or
or eliminated as of March 3, 2021, COVID–19 public health emergency. Further, for regular work product or correspondence
without undergoing further analysis. For administrative convenience, the recipient may demonstrating work on the COVID–19 response.
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Specifically, the recipient would be able employee not received a pay cut or been Effective Service Delivery:
to use SLFRF to fund payroll and furloughed would not be reasonably Administrative Expenses
covered benefits for up to 325 FTEs that proportional. The interim final rule provided that
begin their employment on or after Recipients may also provide premium funds could be used for: ‘‘Expenses to
March 3, 2021, for costs obligated by pay to certain employees, as detailed improve efficacy of public health or
December 31, 2024, and expended by further in section Premium Pay. economic relief programs:
December 31, 2026, consistent with the Administrative costs associated with the
Uniform Guidance’s Cost Principles, as Avoiding layoffs. Funds may be used
to maintain current compensation recipient’s COVID–19 public health
long as SLFRF funds are used for emergency assistance programs,
additional FTEs hired over the levels, with adjustments for inflation, in
including services responding to the
recipient’s 750 FTE level (which is its order to prevent layoffs that would
COVID–19 public health emergency or
March 3, 2021 budgeted FTE level). otherwise be necessary. Recipients must
its negative economic impacts, that are
In hiring new employees, the final be able to substantiate that layoffs were
not federally funded.’’ In the final rule,
rule encourages recipients to ensure a likely in the absence of SLFRF funds Treasury is clarifying that there are
diverse workforce. The final rule also and would be substantially due to the several categories of eligible
prohibits recipients from using funds to public health emergency or its negative administrative expenses.
temporarily fill positions during a labor economic impacts (e.g., fiscal pressures First, recipients may use funds for
dispute, as this would not constitute on state and local budgets) and should administrative costs to improve the
responding to the public health or document their assessment. efficacy of public health or economic
negative economic impacts of the relief programs through tools like
Retaining workers. Funds may be
pandemic. Further, recipients must program evaluation, data analysis, and
used to provide worker retention
ensure that its hiring practices do not targeted consumer outreach (see section
incentives, which are designed to
violate conflict-of-interest policies.245 Effective Service Delivery: Program
Total compensation for a hired persuade employees to remain with the
employer as compared to other Evaluation, Data, and Outreach).
employee that is substantially in excess Second, recipients may use funds for
of typical compensation for employees employment options. Recipients must
be able to substantiate that the administrative costs associated with
of their experience and tenure within programs to respond to the public
the recipient’s government, without a employees were likely to leave
employment in the absence of the health emergency and its negative
corresponding business case, may economic impacts, including programs
indicate a potential conflict-of-interest retention incentive and should
document their assessment. For that are not funded by SLFRF or not
in fact or appearance. federally funded. In other words,
Providing additional funding for example, a recipient may determine that
a retention bonus is necessary based on Treasury recognizes that responding to
employees who experienced pay cuts
the public health and economic impacts
and furloughs. In recognition of the the presence of an alternative
of the pandemic requires many
economic hardship caused by pay cuts employment offer for an employee.
programs and activities, some of which
and furloughs, additional funds may be All worker retention incentives must are not funded by SLFRF. Executing
provided to employees who experienced be narrowly tailored to need and should these programs effectively is a
pay cuts or were furloughed since the not exceed incentives traditionally component of responding to the public
onset of the pandemic on January 27, offered by the recipient or compensation health and negative economic impacts
2020. Recipients must be able to that alternative employers may offer to of the pandemic.
substantiate that the pay cut or furlough compete for the employees. Further, Finally, recipients may use funds for
was substantially due to the public
because retention incentives are direct and indirect administrative costs
health emergency or its negative
intended to provide additional incentive for administering the SLFRF program
economic impacts (e.g., fiscal pressures
to remain with the employer, they must and projects funded by the SLFRF
on state and local budgets) and should
be entirely additive to an employee’s program. See section Administrative
document their assessment. As a
regular rate of wages and other Expenses in Program Administration
reminder, this additional funding must
remuneration and may not be used to Provisions for details on this eligible use
be reasonably proportional to the
reduce or substitute for an employee’s category.
negative economic impact of the pay cut
or furlough on the employee, which normal earnings. Treasury will presume Effective Service Delivery: Program
would include taking into account that retention incentives that are less Evaluation, Data, and Outreach
unemployment insurance (UI) benefits than 25 percent of the rate of base pay
for an individual employee or 10 The Supplementary Information of
that a furloughed employee may have the interim final rule provided that
received during the furloughed period. percent for a group or category of
employees are reasonably proportional state, local and Tribal governments may
Treasury presumes that additional funds use SLFRF funds to improve the design
beyond the difference in pay had the to the need to retain employees, as long
and execution of programs responding
as the other requirements are met.
245 As part of accepting the Award Terms and
to the COVID–19 pandemic and to
Ancillary administrative costs. Funds improve the efficacy of programs
Conditions for SLFRF, each recipient agreed to
maintain a conflict-of-interest policy consistent
may be used to pay for ancillary addressing negative economic impacts.
with 2 CFR 200.318(c)112 that is applicable to all administrative costs associated with The interim final rule included high-
activities funded with the SLFRF award. Pursuant administering SLFRF-funded hiring and level guidance about how SLFRF funds
to this policy, decisions concerning SLFRF must be retention programs detailed above, could be used in this eligible use
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free of undisclosed personal or organizational
conflicts of interest, both in fact and in appearance. including costs to publish job postings, category, including the use of targeted
A recipient may not use control over SLFRF for review applications, and onboard and consumer outreach, improvements to
their own private gain. Furthermore, no employee, train new hires. For additional data or technology infrastructure,
officer, or agent may participate in the selection,
award, or administration of a contract supported by
information on administrative expenses, impact evaluations, and data analysis.
a federal award if he or she has a real or apparent see section Administrative Expenses in Since the publication of the interim
conflict of interest. Program Administration Provisions. final rule, Treasury has also released
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4388 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations
supplementary information on data and quasi-experimental designs) as well • Technology infrastructure resources
analysis, evidence building, and as rapid-cycle evaluations, process or to improve access to and the user-
program evaluation in the Compliance implementation evaluations, outcome experience of government information
and Reporting Guidance. evaluations, and cost-benefit analyses. technology systems, including upgrades
Public Comment: Treasury received Recipients are encouraged to undertake to hardware and software as well as
positive comments about the rigorous program evaluations when improvements to public-facing websites
opportunity to invest in data and practicable, assess the impact of their or to data management systems, to
technology upgrades with SLFRF funds. programs by beneficiary demographics increase public access and improve
For example, one commenter noted that (including race, ethnicity, gender, public delivery of government programs
investing in technology for better income, and other relevant factors), and and services (including in the judicial,
connectivity, coupled with software and engage with community stakeholders legislative, or executive branches).
hardware upgrades, will allow the (including intended beneficiaries) when • Community outreach and
workforce to be more productive. developing Learning Agendas and engagement resources to support the
Treasury also received comments designing evaluations to ensure that gathering and sharing of information in
seeking clarification on using funds for programmatic, cultural, linguistic, and ways that improve equity and effective
investments in data and technology, historical nuances are accurately and implementation of SLFRF-funded
including whether upgrading respectfully addressed. programs and programs that respond to
government websites to improve Recipients are also encouraged to use the public health emergency and its
community outreach and investing in relevant evidence Clearinghouses,248 negative economic impacts, or which
technologies that support social among other sources, to assess the level households, small businesses, or
distancing were eligible uses. of evidence for their interventions and impacted industries are accessing
Treasury Response: Governments identify evidence-based models that during the pandemic that are funded by
with high capacity to use data and could be applied in their jurisdiction other sources. These methods include
evidence to administer programs are (meaning models with strong or but are not limited to community
more likely to be responsive to the moderate evidence; see Compliance and meetings, online surveys, focus groups,
needs of their community, more Reporting Guidance for details on these human-centered design activities,
transparent about their community terms). behavioral science techniques, and
impact, and more resilient to • Data analysis resources to gather, other community engagement tools.
emergencies such as the pandemic and assess, and use data for effective policy- • Capacity building resources to
its economic impacts.246 Treasury making and real-time tracking of support using data and evidence in
recognizes that collecting high-quality program performance to support designing, executing, and evaluating
data and developing community-driven, effective implementation of SLFRF- programs, including hiring public sector
evidence-based programs requires funded programs and programs that staff, contractors, academics,
resources to hire and build the capacity respond to the public health emergency consultants, and others with expertise
of staff, adopt new processes and and its negative economic impacts, or in evaluation, data, technology, and
systems, and use new technology and which households, small businesses, or community engagement as well as
tools in order to effectively develop, impacted industries are accessing technical assistance support for public
execute, and evaluate programs. As during the pandemic that are funded by sector staff, staff of subrecipients, and
such, Treasury is clarifying that other sources. These resources include community partners to support effective
recipients may use SLFRF funds toward but are not limited to data gathering, implementation of SLFRF-funded
the following non-exhaustive list of uses data cleaning, data analysis, data programs and programs that respond to
to address the data, evidence, and infrastructure, data management, data the public health emergency and its
program administration needs of sharing, data transparency, performance negative economic impacts, or which
recipients. Additional information may management, outcomes-based households, small businesses, or
be provided in the Compliance and budgeting, outcomes-based impacted industries are accessing
Reporting Guidance. procurement, and other data needs. during the pandemic that are funded by
• Program evaluation and evidence Treasury encourages the disaggregation other sources.
resources to support building and using of data to identify disparate program
Administrative Needs Caused or
evidence to improve outcomes, impacts and the use of cross-
Exacerbated by the Pandemic
including development of Learning jurisdictional data sharing to better
Agendas 247 to support strategic measure and implement government As described in guidance and the
evidence building, selection of programs. interim final rule, SLFRF funds may be
evidence-based interventions, and used to address administrative needs of
program evaluations including impact 248 Evidence Clearinghouses are databases of recipient governments that were caused
evaluations (randomized control trials research in particular program areas. Frequently or exacerbated by the pandemic.
these Clearinghouses identify evidence-based Guidance following the interim final
programs, the strength of the evidence for those
246 Results for America, Invest in What Works
programs, and provide contextual or supporting rule included several examples of this,
State Standard of Excellence (August 2020), https:// information in easy to understand formats. Many for example, uses of funds to address
2020state.results4america.org/2020_State- federal departments have developed rigorous and backlogs resulting from pandemic-
Standard-of-Excellence.pdf. helpful Clearinghouses that cover a wide range of
247 Learning Agendas are systematic plans to
related shutdowns (e.g., backlogs in
uses enumerated in this final rule as well as other
identify, prioritize, answer important questions programs that may be responsive to public health court systems).249 This also includes
about programs and policies using analytic or negative economic impacts of the pandemic. For
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techniques that are appropriate to the type of more information on Clearinghouses, please see the 249 See FAQ 2.19. Coronavirus State and Local
question asked. For more information on learning Compliance and Reporting Guidance: U.S. Fiscal Recovery Funds, Frequently Asked
agendas, please see OMB Memorandum M–19–23, Department of the Treasury, Recipient Compliance Questions, as of July 19, 2021; https://
available at: https://www.whitehouse.gov/wp- and Reporting Responsibilities, as of November 5, home.treasury.gov/system/files/136/SLFRPFAQ.pdf.
content/uploads/2019/07/M-19-23.pdf and OMB 2021; https://home.treasury.gov/policy-issues/ In the case of courts specifically, this includes
Memorandum M–21–27, available at: https:// coronavirus/assistance-for-state-local-and-tribal- ‘‘implementing COVID–19 safety measures to
www.whitehouse.gov/wp-content/uploads/2021/06/ governments/state-and-local-fiscal-recovery-funds/ facilitate court operations, hiring additional court
M-21-27.pdf. recipient-compliance-and-reporting-responsibilities. staff or attorneys to increase speed of case
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Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4389
using funds for increased repair or commenters argued that Treasury Treasury Response: Capital
maintenance needs to respond to should limit use of funds on capital expenditures, in certain cases, can be
significantly greater use of public expenditures not related to addressing a appropriate responses to the public
facilities during the pandemic (e.g., direct pandemic harm, such as general health and economic impacts of the
increased use of parks resulting in economic development or workforce pandemic, in addition to programs and
damage or increased need for development, and some expressed services. Like other eligible uses of
maintenance). Some commenters support for generally limiting capital SLFRF funds in this category, capital
expressed support for the ability to use expenditures to those that address the expenditures should be a related and
funds for these purposes. Treasury is needs of low-income communities and reasonably proportional response to a
maintaining these enumerated eligible communities of color. public health or negative economic
uses in the final rule and clarifying that Many commenters requested that impact of the pandemic. The final rule
capital expenditures such as technology capital expenditures related to direct clarifies and expands how SLFRF funds
infrastructure to adapt government COVID–19 public health response be may be used for certain capital
operations to the pandemic (e.g., video- included as enumerated eligible uses. expenditures, including criteria and
conferencing software, improvements to The requested types of expenditures documentation requirements specified
case management systems or data include improvements and construction in this section, as applicable.
sharing resources), reduce government of hospitals and health clinics
backlogs, or meet increased (including behavioral health clinics), as Treasury provides presumptions and
maintenance needs are eligible. well as other health-related guidelines for capital expenditures that
infrastructure improvements, such as are enumerated earlier in sections
b. Capital Expenditures improvements to medical equipment or Public Health, Negative Economic
The interim final rule expressly public health information technology. Impacts, and General Provisions: Other
permitted use of funds for a limited These commenters stated that under the Public Health and Negative
number of capital expenditures that investments in health and public health Economic Impact eligible use category
mostly pertained to COVID–19 systems are vital to ensuring critical (‘‘enumerated projects’’), along with
prevention and mitigation. These infrastructure necessary to respond to capital expenditures beyond those
included capital investments in public continued impacts of COVID–19 or to enumerated by Treasury. In addition to
facilities to meet pandemic operational address disparities in health, due to lack satisfying the two-part framework in
needs, such as physical plant of access to health care, that contributed Standards: Designating a Public Health
improvements to public hospitals and to disproportionate impacts of COVID– Impact and Standards: Designating a
health clinics; adaptations to public 19 on some communities. Further, some Negative Economic Impact for
buildings to implement COVID–19 commenters requested that construction identifying and designing a response to
mitigation tactics; ventilation or improvements of emergency a pandemic harm, Treasury will require
improvements in congregate settings, management and public safety facilities projects with total expected capital
health care settings, or other key be deemed eligible, citing that some of expenditure costs of $1 million or
locations; assistance to small businesses these sites serve as remote vaccination greater to undergo additional analysis to
and nonprofits and aid to impacted sites or are otherwise crucial to the justify their capital expenditure.
industries to implement COVID–19 pandemic public health response. Increased reporting requirements will be
prevention or mitigation tactics, such as Commenters also requested use of required for projects that are larger in
physical plant changes to enable social funds for capital expenditures that size, as well as projects that are not
distancing. For disproportionately support community needs apart from enumerated as eligible by Treasury,
impacted populations and communities, health care, such as new construction or with certain exceptions for Tribal
the interim final rule also expressly improvements to schools, affordable governments discussed below. Smaller
permitted development of affordable housing (beyond presumed projects with total expected capital
housing to increase the supply of disproportionately impacted expenditures below $1 million will not
affordable and high-quality living units. communities), childcare facilities, and be required to undergo additional
Public Comment: Many commenters community centers; some suggested that analysis to justify their capital
supported the interim final rule’s all types of projects permissible under expenditure, as such projects will be
allowance of capital expenditures in the Community Development Block presumed to be reasonably proportional,
facilities to meet pandemic operational Grant Program should be eligible both provided that they are responding to a
needs but requested that the final rule for policy and administrability reasons. harm caused or exacerbated by the
explicitly allow for a broader range of Further, some commenters also asked public health emergency. These
capital expenditures. Commenters for clarification as to whether parks and
standards and documentation
expressed an interest in investing in recreational facilities are eligible if built
requirements are designed to minimize
equipment, real property, and facilities in certain disproportionately impacted
administrative burden while also
that they argued will yield lasting areas, as well as public transportation
ensuring that projects are reasonably
benefits beyond the SLFRF period of infrastructure.
Finally, some commenters also proportional and supporting Treasury’s
performance. Some commenters stated risk-based approach to overall program
that the approach in the interim final requested use of funds for capital
expenditures in government management and monitoring.
rule limited the vast majority of capital
expenditures to governments that administration buildings, such as public This section provides (1) an overview
experienced revenue loss under courthouses, as well as technology of general standards governing capital
Sections 602(c)(1)(C) and 603(c)(1)(C) infrastructure that would allow for expenditures; (2) presumptions on
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and that this approach may prevent remote delivery of public benefits. capital expenditures, which help guide
some governments from fully meeting Others also asked about whether funds recipients in determining whether the
the needs of their residents. A few could be used to renovate vacant expenditure meets the standards and the
business district buildings or associated documentation requirements;
resolution, and other expenses to expedite case commercial spaces to spur economic and (3) additional standards and
resolution are eligible uses.’’ recovery. requirements that may apply.
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4390 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations
Overview of General Standards more cost effective than construction of request further information on SLFRF
In considering whether a capital a new, larger facility. The needs of expenditures and projects, including
expenditure would be eligible under the communities differ, and recipients are capital expenditures, as part of the
public health and negative economic responsible for identifying uses of regular SLFRF reporting and
impacts eligible use category, recipients SLFRF funds that best respond to these compliance process, including to assess
must satisfy the requirements for all needs. The Written Justification their eligibility under the final rule.
uses under the public health and recognizes this while also establishing The Written Justification should (1)
negative economic impacts eligible use consistent documentation and reporting describe the harm or need to be
category, including identifying an to support monitoring and compliance addressed; (2) explain why a capital
impact or harm and designing a with the ARPA and final rule. Finally, expenditure is appropriate to address
the Written Justification also reflects the the harm or need; and (3) compare the
response that addresses or responds to
fact that infrastructure projects are proposed capital expenditure against
the identified impact or harm.
generally not within scope of this alternative capital expenditures that
Responses must be reasonably designed
eligible use category. See section Uses could be made. The information
to benefit the individual or class that
Outside the Scope of this Category in required for the Written Justification
experienced the impact or harm and
General Provisions: Other. reflects the framework applicable to all
must be related and reasonably
As noted above, Tribal governments uses under the public health and
proportional to the extent and type of
are not required to complete the Written negative economic impacts eligible use
impact or harm. Recipients should
Justification for projects with total category, providing justification for the
consult further details on this standard
capital expenditures of $1 million or reasonable design, relatedness, and
provided in the sections Standards: greater. Tribal governments generally reasonable proportionality of the capital
Designating a Public Health Impact and have limited administrative capacity expenditure in response to the harm or
Standards: Designating a Negative due to their small size and impact identified.
Economic Impact under General corresponding limited ability to 1. Description of harm or need to be
Provisions: Structure and Standards. supplement staffing for short-term addressed: Recipients should provide a
In addition to the framework description of the specific harm or need
programs. In addition, Tribal
described above, for projects with total to be addressed, and why the harm was
governments are already subject to
expected capital expenditures of $1 exacerbated or caused by the public
unique considerations that require
million or greater, recipients must additional administrative processes and health emergency. When appropriate,
complete and meet the substantive administrative burden for Tribal recipients may provide quantitative
requirements of a Written Justification government decision making, including information on the extent and type of
for their capital expenditure, except for capital expenditures. Tribal the harm, such as the number of
Tribal governments as discussed below. governments generally are subject to a individuals or entities affected.
This Written Justification helps clarify jurisdictionally complex sets of rules 2. Explanation of why a capital
the application of this interpretive and regulations in the case of expenditure is appropriate: Recipients
framework to capital expenditures, improvements to land for which the title should provide an independent
while recognizing that the needs of is held in trust by the United States for assessment demonstrating why a capital
communities differ. In particular, this a Tribe (Tribal Trust Lands).250 This expenditure is appropriate to address
justification reflects the fact that the includes the requirement in certain the specified harm or need. This should
time required for a large construction circumstances to seek the input or include an explanation of why existing
project may make capital expenditures approval of one or more federal agencies capital equipment, property, or facilities
less responsive to pandemic-related such the Department of the Interior, would be inadequate to addressing the
needs relative to other types of which holds fee title of Tribal Trust harm or need and why policy changes
responses. In addition, as discussed in Lands. or additional funding to pertinent
section Timeline for Use of SLFRF As a result of their limited programs or services would be
Funds of this Supplemental administrative capacity and unique and insufficient without the corresponding
Information, SLFRF funds must be complex rules and regulations capital expenditures. Recipients are not
obligated by December 31, 2024 and applicable to Tribal governments required to demonstrate that the harm or
expended by December 31, 2026. operating on Tribal Trust Lands, Tribal need would be irremediable but for the
Capital expenditures may involve long governments would experience additional capital expenditure; rather,
lead-times, and the Written Justification significant and redundant they may show that other interventions
may support recipients in analyzing administrative burden by also being would be inefficient, costly, or
proposed capital expenditures to required to complete a Written otherwise not reasonably designed to
confirm that they conform to the Justification for applicable capital remedy the harm without additional
obligation and expenditure timing expenditures. While Tribal governments capital expenditure.
requirements. Further, such large are not required to complete the Written 3. Comparison of the proposed capital
projects may be less likely to be Justification for applicable capital expenditure against alternative capital
reasonably proportional to the harm expenditures, the associated substantive expenditures: Recipients should provide
identified. For example, construction of requirements continue to apply, an objective comparison of the proposed
a new, larger public facility for the including the requirement that a capital capital expenditure against at least two
purpose of increasing the ability to expenditure must be reasonably alternative capital expenditures and
socially distance generally would not be designed to benefit the individual or demonstrate why their proposed capital
considered a reasonably proportional class that experienced the identified expenditure is superior to alternative
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response compared to other less time- impact or harm and must be related and capital expenditures that could be
and resource-intensive options that may reasonably proportional to the extent made. Specifically, recipients should
be available and would be equally or and type of impact or harm. Note that, assess the proposed capital expenditure
more effective. Other solutions, such as as a general matter, Treasury may also against at least two alternative types or
improvements in ventilation, could be sizes of capital expenditures that are
made more quickly and are typically 250 See 25 U.S.C. 5108. potentially effective and reasonably
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Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4391
feasible. Where relevant, recipients availability on the spread of COVID–19. the disease.252 These alternatives
should compare the proposal against the Recipients may also consider other include personal protective equipment,
alternative of improving existing capital public health impacts of the level of ventilation improvements, utilizing
assets already owned or leasing other diagnostic testing capacity, for example excess capacity in other facilities or
capital assets. Recipients should use if insufficient capacity has decreased wings, or temporary facility capacity
quantitative data when available, testing for other health conditions. The expansions.
although they are encouraged to recipient may consider alternatives such Large capital expenditures intended
supplement with qualitative as expanding existing laboratories or for general economic development or to
information and narrative description. building a laboratory of a different size. aid the travel, tourism, and hospitality
Recipients that complete analyses with In comparing the effectiveness of the industries—such as convention centers
minimal or no quantitative data should capital expenditures, examples of and stadiums—are, on balance,
provide an explanation for doing so. factors that the recipient may consider generally not reasonably proportional to
In determining whether their include when the facilities will become addressing the negative economic
proposed capital expenditure is superior operational and for how long; the daily impacts of the pandemic, as the efficacy
to alternative capital expenditures, throughput of COVID–19 tests; and the of a large capital expenditure intended
recipients should consider the following effect on minimizing delays in test for general economic development in
factors against each selected alternative. results on the populations that such remedying pandemic harms may be very
a. A comparison of the effectiveness of tests will serve. In comparing costs, the limited compared to its cost.253
the capital expenditures in addressing recipient may compare the total
the harm identified. Recipients should Presumptions on Capital Expenditures
expected cost of the new laboratory
generally consider the effectiveness of (including costs of acquisition of real For administrative convenience, the
the capital expenditures in addressing property, construction of the laboratory, final rule provides presumptions on
the harm over the useful life of the and purchase of any necessary whether a Written Justification is
capital asset and may consider metrics equipment needed to operationalize the required—and required to be submitted
such as the number of impacted or lab), against the expected costs of to Treasury through reporting—based on
disproportionately impacted individuals expanding existing laboratories the type and size of the capital
or entities served, when such (whether by replacing current expenditure, as detailed in the table
individuals or entities are estimated to equipment with higher throughout below.
be served, the relative time horizons of devices or physically expanding space As discussed above, Tribal
the project, and consideration of any to accommodate additional capacity) or governments are not required to
uncertainties or risks involved with the building a new laboratory of a different complete the Written Justification for
capital expenditure. size, including by leasing property. As applicable capital expenditures, but the
b. A comparison of the expected total a reminder, recipients should only associated substantive requirements
cost of the capital expenditures. consider alternatives that are potentially continue to apply, including the
Recipients should consider the expected effective and reasonably feasible. requirement that a capital expenditure
total cost of the capital expenditure Because, in all cases, uses of SLFRF must be reasonably designed to benefit
required to construct, purchase, install, funds to respond to public health and the individual or class that experienced
or improve the capital assets intended to negative economic impacts of the the identified impact or harm and must
address the public health or negative pandemic must be related and be related and reasonably proportional
economic impact of the public health reasonably proportional to a harm to the extent and type of impact or
emergency. Recipients should include caused or exacerbated by the pandemic, harm.
pre-development costs in their some capital expenditures may not
calculation and may choose to include eligible. For example, constructing a 252 For instance, the CDC has published detailed
information on ongoing operational new correctional facility would recommendations for nursing homes, long-term care
costs, although this information is not facilities, and correctional and detention facilities,
generally not be a proportional response on infection prevention and control. Many of these
required. to an increase in the rate of certain recommendations are relatively low cost, such as
Recipients should balance the crimes or overall crime as most proper use of PPE. In addition, increasing
effectiveness and costs of the proposed correctional facilities have historically vaccination rates among nursing home staff is
capital expenditure against alternatives among the most important ways to decrease the
accommodated fluctuations in spread of the disease. Centers for Disease Control
and demonstrate that their proposed occupancy.251 In addition, construction and Prevention, Interim Infection Prevention and
capital expenditure is superior. Further, of new congregate facilities, which Control Recommendations to Prevent SARS–CoV–
recipients should choose the most cost- would generally be expected to involve 2 Spread in Nursing Homes (September 10, 2021),
effective option unless it substantively https://www.cdc.gov/coronavirus/2019-ncov/hcp/
expenditures greater than $1 million, long-term-care.html#anchor_1631030153017.
reduces the effectiveness of the capital would generally not be a proportional 253 For instance, researchers have found no
investment in addressing the harm response to mitigate or prevent COVID– consistent positive relationship between building
identified. 19, because such construction is sports facilities and local economic development.
As an example, a recipient As Siegfried and Zimbalist (2000, 103) write in a
generally expected to be more costly review of the literature, ‘‘independent work on the
considering building a new diagnostic
than alternative approaches or capital economic impact of stadiums and arenas has
testing laboratory to enhance COVID–19
expenditures that may be equally or uniformly found that there is no statistically
testing capacity may consider whether significant positive correlation between sports
more effective in decreasing spread of
existing laboratories sufficiently meet facility construction and economic development.’’
demand for COVID–19 testing, John Siegfried and Andrew Zimbalist, The
251 See, e.g., ‘‘Economic Perspectives on Economics of Sports Facilities and Their
considering the demand for test results
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Incarceration and the Criminal Justice System,’’ Communities, Journal of Economic Perspectives 14,
(along with their turnaround time) as Council of Economic Advisers (April 2016), pg. 36– no. 3 (Summer 2000): 95–114, https://
well as the impact of current testing 43. www.aeaweb.org/articles?id=10.1257/jep.14.3.95.
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4392 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations
If a project has total expected cap- and the use is enumerated by Treasury as eligible, and the use is beyond those enumerated by Treas-
ital expenditures of then 254 ury as eligible, then 255
Less than $1 million ........................ No Written Justification required ............................... No Written Justification required.
Greater than or equal to $1 million, Written Justification required but recipients are not Written Justification required and recipients must
but less than $10 million. required to submit as part of regular reporting to submit as part of regular reporting to Treasury.
Treasury.
$10 million or more ......................... Written Justification required and recipients must
submit as part of regular reporting to Treasury.
In selecting these thresholds, Treasury projects may be less likely to be projects with total expected capital
recognized that capital expenditures reasonably proportional responses. The expenditures of less than $1 million and
vary widely in size and therefore would $10 million threshold also generally will not require recipients to complete,
benefit from tiered treatment to aligns with thresholds in other parts of submit, or meet the substantive
implement eligibility standards while the SLFRF program, such as for requirements of a Written Justification
minimizing administrative burden, enhanced reporting on labor practices. for the capital expenditure. In essence,
especially for smaller projects. For Expenditures from closely related recipients may pursue an enumerated
example, Treasury selected $1 million activities directed toward a common project with total expected capital
as a threshold for whether a recipient purpose are considered part of the scope expenditures of under $1 million
needs to complete a Written of one project. These expenditures can without having to undergo additional
Justification as well as a threshold include capital expenditures, as well as assessments to meet SLFRF
under which capital expenditures expenditures on related programs, requirements.
would be presumed reasonably services, or other interventions. A • Projects with total expected capital
proportional. Treasury estimates that $1 project includes expenditures that are expenditures of at least $1 million but
million would encapsulate the costs of interdependent (e.g., acquisition of land, under $10 million: Recipients should
a significant portion of equipment or construction of the school on the land, complete a Written Justification for the
small renovations. These types of and purchase of school equipment), or capital expenditure and make an
smaller projects are often a necessary are of the same or similar type and independent assessment of whether
and reasonably proportional part of a would be utilized for a common their proposed capital expenditure
response to the public health purpose (e.g., acquisition of a fleet of meets the substantive requirements of
emergency; therefore, the $1 million ambulances that would be used for the Written Justification. Recipients will
threshold provides a simplified pathway COVID–19 emergency response). not be required to submit the Written
to complete smaller projects more likely Recipients must not segment a larger Justification as part of regular reporting
to meet the eligibility standard. At the project into smaller projects in order to to Treasury but should keep
same time, Treasury selected $10 evade review. A recipient undertaking a documentation for their records.
million as the threshold for more set of identical or similar projects (e.g., • Projects with total expected capital
intensive reporting requirements, development of a number of new expenditures of at least $10 million:
estimating that projects larger than $10 affordable housing complexes across the Similar to the above, recipients should
million would likely constitute recipient jurisdiction) may complete complete a Written Justification of the
significant improvements or one Written Justification capital expenditure and make an
construction of mid- or large-sized comprehensively addressing the entire independent assessment of whether
facilities. As discussed above, given set of projects. their proposed capital expenditure
their scale and longer time to meets the substantive requirements of
completion, these types of larger Projects Enumerated as Eligible by the Written Justification. Further,
Treasury recipients will be asked to submit the
254 Whether or not a Written Justification is
Under the public health and negative Written Justification as part of regular
required, recipients should still determine that the
response is related and reasonably proportional to
economic impacts eligible use category, reporting to Treasury. Similar to other
the public health emergency and its negative the final rule provides a non-exclusive parts of the SLFRF program, such as on
economic impacts. Treasury recognizes that list of eligible uses of funding for reporting on labor practices, Treasury
enumerated eligible uses are ‘‘related’’ to the public projects that respond to the public recognizes that projects with expected
health emergency and its negative economic
impacts and presumed to be reasonably health emergency or its negative total capital expenditures of at least $10
proportional, except recipients pursuing projects economic impacts. Treasury has million may be less likely to meet
with expected total capital expenditures equal to or determined that these enumerated eligibility requirements and therefore
greater than $1 million should still independently projects are related to the public health
determine that the expenditures are a reasonably requires recipients to provide an
proportional response. Enumerated projects with emergency and its negative economic enhanced level of information to
total expected capital expenditures under $1 impacts; however, recipients (other than Treasury.
million receive a safe harbor and deemed to meet Tribal governments) undertaking these
the related and reasonably proportional standard.
projects with total expected capital Projects Beyond Those Enumerated as
255 Whether or not a Written Justification is
expenditures of $1 million or greater Eligible by Treasury
required, recipients should still determine that the
response is related and reasonably proportional to must still complete and meet the As with all uses, recipients that
the public health emergency and its negative substantive requirements of a Written undertake capital expenditures beyond
economic impacts. Treasury presumes that projects those enumerated as eligible by
Justification as part of their
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with total expected capital expenditures under $1
million are reasonably proportional in size to demonstration that the project is a Treasury must meet the two-part
responding to the public health emergency and its related and reasonably proportional framework under Standards:
negative economic impacts; however, recipients response to the harm identified. Designating a Public Health Impact and
should determine that the response otherwise meets
the requirements of the standard, including that the
• Projects with total expected capital Standards: Designating a Negative
response is related to the public health emergency expenditures of under $1 million: Economic Impact under General
and its negative economic impacts. Treasury provides a safe harbor for Provisions: Structure and Standards,
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Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4393
including the requirement that (e.g., professional certification, or acceptable levels of practice, or
responses are related and reasonably licensure, and/or robust in-house otherwise are determined to be
proportional to the harm or impact training), that hire local workers and/or generally acceptable by the design and
identified. As part of that assessment, workers from historically underserved construction industry.
these recipients may also be asked to communities, and who directly employ Further, as with all other uses of
complete a Written Justification. their workforce or have policies and funds under the SLFRF program, the
Recipients (other than Tribal practices in place to ensure contractors Uniform Guidance at 2 CFR part 200
governments) are subject to the and subcontractors meet high labor applies to capital expenditures unless
following presumptions for the Written standards. Treasury further encourages stated otherwise. Importantly, this
Justification of the capital expenditure, recipients to prioritize employers includes 2 CFR part 200 Subpart D on
based on the total expected capital (including contractors and post-federal award requirements,
expenditures of the project: subcontractors) without recent including property standards pertaining
• Projects with total expected capital violations of federal and state labor and to insurance coverage, real property,
expenditures of under $1 million: employment laws. and equipment; procurement standards;
Treasury provides a safe harbor for Treasury believes that such practices sub-recipient monitoring and
unenumerated projects with total will promote effective and efficient management; and record retention and
expected capital expenditures of under delivery of high-quality projects and access.
$1 million and will not require support the economic recovery through
strong employment opportunities for Definitions
recipients to complete, submit, or meet
the substantive requirements of a workers. Such practices will reduce Treasury adopts several definitions
Written Justification of the capital likelihood of potential project from the Uniform Guidance at 2 CFR
expenditure. Recipients should still challenges like work stoppages or safety 200.1 under this section, including for
make a determination as to whether the accidents, while ensuring a reliable capital expenditures, capital assets,
capital expenditure is part of a response supply of skilled labor and minimizing equipment, and supplies.
that is related and reasonably disruptions, such as those associated Per the Uniform Guidance, the term
proportional to the public health with labor disputes or workplace ‘‘capital expenditures’’ means
emergency or its negative economic injuries. That will, in turn, promote on- ‘‘expenditures to acquire capital assets
impacts. time and on-budget delivery. or expenditures to make additions,
• Projects with total expected capital Furthermore, among other improvements, modifications,
expenditures of $1 million or over: requirements contained in 2 CFR 200, replacements, rearrangements,
Recipients should complete a Written Appendix II, all contracts made by a reinstallations, renovations, or
Justification of the capital expenditure recipient or subrecipient in excess of alterations to capital assets that
and make an independent assessment $100,000 with respect to a capital materially increase their value or useful
that their proposed capital expenditure expenditure that involve employment of life.’’ The term ‘‘capital assets’’ means
meets the substantive requirements of mechanics or laborers must include a ‘‘tangible or intangible assets used in
the Written Justification. Further, provision for compliance with certain operations having a useful life of more
recipients will be asked to submit the provisions of the Contract Work Hours than one year which are capitalized in
and Safety Standards Act, 40 U.S.C. accordance with [Generally Accepted
Written Justification as part of regular
3702 and 3704, as supplemented by Accounting Principles].’’
reporting to Treasury.
Treasury employs a risk-based Department of Labor regulations (29 Capital assets include lands, facilities,
approach to overall program CFR part 5). equipment, and intellectual property.
Treasury will seek information from Equipment means ‘‘tangible personal
management and monitoring, which
recipients on their workforce plans and property (including information
may result in heightened scrutiny on
practices related to capital expenditures technology systems) having a useful life
larger projects. Accordingly, recipients
undertaken under the public health and of more than one year and a per-unit
pursuing projects with larger capital
negative economic impacts eligible use acquisition cost which equals or
expenditures should complete more
category with SLFRF funds. This exceeds the lesser of the capitalization
detailed analyses for their Written
reporting will support transparency and level established by the non-Federal
Justification, commensurate with the
competition by enhancing available entity for financial statement purposes,
scale of the project.
information on the services being or $5,000.’’ Supplies, which means all
Additional Provisions, Standards, and provided. tangible personal property other than
Definitions those included as ‘‘equipment,’’ are not
Environmental, Uniform Guidance, and
Strong Labor Standards in Construction Other Generally Applicable considered capital expenditures.
Recipients may also use SLFRF funds
Treasury encourages recipients to Requirements
for pre-project development costs that
carry out projects in ways that produce Treasury cautions that, as is the case are tied to or reasonably expected to
high-quality work, avert disruptive and with all projects using SLFRF funds, all lead to an eligible capital expenditure.
costly delays, and promote efficiency. projects must comply with applicable For example, pre-project costs
Treasury encourages recipients to use federal, state, and local law. In the case associated with planning and
strong labor standards, including project of capital expenditures in particular, engineering for an eligible project are
labor agreements (PLAs) and this includes environmental and considered an eligible use of funds.
community benefits agreements that permitting laws and regulations.
offer wages at or above the prevailing Likewise, as with all capital expenditure c. Distinguishing Subrecipients Versus
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rate and include local hire provisions. projects using the SLFRF funds, projects Beneficiaries
Treasury also recommends that must be completed in a manner that is Under the interim final rule, state,
recipients prioritize in their technically sound, meaning that it must local, and Tribal governments that
procurement decisions employers who meet design and construction methods receive a federal award directly from a
can demonstrate that their workforce and use materials that are approved, federal awarding agency, such as
meets high safety and training standards codified, recognized, fall under standard Treasury, are designated as ‘‘recipients,’’
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4394 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations
and state, local, and Tribal governments including an agreement that the pass- entity as a result of experiencing a
are authorized to transfer funds to other through entity considers a contract.’’ public health impact or negative
entities, including private entities like Further, 2 CFR 200.1 of the Uniform economic impact of the pandemic, the
nonprofits. The interim final rule stated Guidance defines a subrecipient, in that individual or entity is acting as a
that, ‘‘[a] transferee receiving a transfer ‘‘[s]ubrecipient means an entity, usually beneficiary. Acting as a beneficiary, the
from a recipient under sections 602(c)(3) but not limited to non-Federal entities, individual or entity is not subject to
and 603(c)(3) will be a subrecipient. that receives a subaward from a pass- subrecipient monitoring and reporting
Subrecipients are entities that receive a through entity to carry out part of a requirements.
subaward from a recipient to carry out Federal award; but does not include an
individual that is a beneficiary of such d. Uses Outside the Scope of This
a program or project on behalf of the
award. A subrecipient may also be a Category
recipient with the recipient’s Federal
award funding.’’ recipient of other Federal awards Summary of the Interim Final Rule and
For funds transferred to a directly from a Federal awarding Final Rule Structure
subrecipient, the interim final rule agency.’’ Treasury is aligning the
In the interim final rule, Treasury
noted that ‘‘[r]ecipients continue to be definition of subrecipient in the final
noted that certain uses of funds are not
responsible for monitoring and rule with the definition of subrecipient
permissible under the eligible use
overseeing the subrecipient’s use of in the Uniform Guidance.
Treasury is maintaining the category of responding to the public
SLFRF funds and other activities related health and negative economic impacts
to the award to ensure that the monitoring and subrecipient reporting
requirements outlined in the final rule. of the pandemic. In the final rule, these
subrecipient complies with the statutory uses remain impermissible, but
and regulatory requirements and the Per 2 CFR 200.101 (b)(2) of the Uniform
Guidance, the terms and conditions of Treasury has re-categorized where they
terms and conditions of the award. are addressed to increase clarity.
Recipients also remain responsible for federal awards flow down to subawards
to subrecipients. Therefore, non-federal Specifically, the interim final rule
reporting to Treasury on their provided that the following uses of
entities, as defined in the Uniform
subrecipients’ use of payments from the funds are not eligible under this eligible
Guidance, must comply with the
SLFRF funds for the duration of the use category: Contributions to rainy day
applicable requirements in the Uniform
award.’’ funds, financial reserves, or similar
Guidance regardless of whether the non-
Public Comment: Treasury received federal entity is a recipient or funds; payment of interest or principal
many comments requesting clarification subrecipient of a federal award. This on outstanding debt instruments; fees or
about which entities qualify as includes requirements such as the issuance costs associated with the
subrecipients and are, in turn, subject to treatment of eligible uses of funds, issuance of new debt; and satisfaction of
subrecipient monitoring and reporting procurement, and reporting any obligation arising under or pursuant
requirements. For example, commenters requirements. to a settlement agreement, judgment,
sought clarification about whether a The Uniform Guidance definitions for consent decree, or judicially confirmed
nonprofit that received a grant to both subaward and subrecipient specify debt restructuring plan in a judicial,
provide services under a program to that payments to individuals or entities administrative, or regulatory
carry out an enumerated eligible use that are direct beneficiaries of a federal proceeding, except to the extent the
would qualify as a subrecipient and be award are not considered subrecipients. judgment or settlement requires the
subject to subrecipient monitoring and The final rule adopts this definition of provision of services that would
reporting requirements. Similarly, a beneficiary and outlines that respond to the COVID–19 public health
commenters also wondered if a households, communities, small emergency. These uses of funds remain
nonprofit that received a grant in businesses, nonprofits, and impacted ineligible under the final rule; Treasury
recognition of experiencing a negative industries are all potential beneficiaries has re-categorized these issues to the
economic impact of the public health of projects carried out with SLFRF section Restrictions on Use, which
emergency would also be a subrecipient funds. Beneficiaries are not subject to describes restrictions that apply to all
and subject to subrecipient reporting the requirements placed on eligible use categories, to clarify that
requirements. subrecipients in the Uniform Guidance, these uses are not eligible under any
Treasury Response: Treasury is including audit pursuant to the Single eligible use category of SLFRF. Treasury
clarifying the distinction between a Audit Act and 2 CFR part 200, subpart responds to public comments on this
subrecipient and beneficiary in the final F or subrecipient reporting issue in the section Restrictions on Use.
rule. The Uniform Guidance definitions requirements. As noted above, the interim final rule
for subaward and subrecipient inform The distinction between a also posed several questions on what
Treasury’s distinction between subrecipient and a beneficiary, other types of services or costs Treasury
subrecipients and beneficiaries. therefore, is contingent upon the should consider as eligible uses to
First, per 2 CFR 200.1 of Uniform rationale for why a recipient is respond to the public health and
Guidance ‘‘[s]ubaward means an award providing funds to the individual or negative economic impacts of COVID–
provided by a pass-through entity 256 to entity. If the recipient is providing 19, including in disproportionately
a subrecipient for the subrecipient to funds to the individual or entity for the impacted communities. In this section,
carry out part of a Federal award purpose of carrying out a SLFRF Treasury addresses proposed uses of
received by the pass-through entity. It program or project on behalf of the funds suggested by commenters that
does not include payments to a recipient, the individual or entity is Treasury has not included as
contractor or payments to an individual acting as a subrecipient. Acting as a enumerated eligible uses of funds in this
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that is a beneficiary of a Federal subrecipient, the individual or entity is eligible use category.
program. A subaward may be provided subject to subrecipient monitoring and
reporting requirements. Conversely, if General Eligible Uses
through any form of legal agreement,
the recipient is providing funds to the Public Comment: Commenters
256 In this context, a pass-through entity means a individual or entity for the purpose of proposed a wide variety of additional
recipient of SLFRF funds. directly benefitting the individual or recommended enumerated eligible uses
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Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4395
in all sections of the public health and recipients to identify other public health Treasury Response: In the final rule,
negative economic impacts eligible use or negative economic impacts to Treasury is maintaining the approach
category, including in impacted and additional households, small under the interim final rule that general
disproportionately impacted businesses, or nonprofits, including infrastructure projects, including roads,
communities. The proposed additional classes of these entities, and pursue streets, and surface transportation
uses included general categories of programs and services that respond to infrastructure, would generally not be
services (e.g., legal and social services, those impacts. Treasury also notes that eligible, unless the project responded to
long-term investments to remediate some populations are presumed to be a specific pandemic public health need
long-term disparities, response to impacted or disproportionately or a specific negative economic impact.
natural disasters). Other suggested uses impacted by the pandemic, and thus The ARPA expressly includes
of funds respond to needs widely eligible for responsive services; these infrastructure if it is ‘‘necessary’’ and in
experienced across the country (e.g., presumed eligible populations may water, sewer, or broadband, suggesting
access to and affordability of health encompass many individuals in the that the statute contemplates only those
insurance). Finally, other suggested uses specific populations for whom types of infrastructure. Further,
of funds were highly specific (e.g., commenters recommended services. For responding to the public health and
healthcare equipment for a specific details on these issues, see section negative economic impacts of the
health condition, fire hydrants, weather General Provisions: Structure and pandemic requires identifying whether,
alert systems) or most applicable to the Standards. and the extent to which, there has been
particularized needs to certain a harm that resulted from the COVID–
Infrastructure, Community 19 public health emergency and
populations or geographic areas of the
Development, and General Economic whether, and the extent to which, the
United States (e.g., senior citizens,
Development use would respond or address this
immigrants, formerly incarcerated
individuals, responding to Some potential additions to harm. Uses of funds intended to
environmental issues in certain enumerated eligible uses were also generally grow the economy and
geographic regions). Other commenters recommended by several commenters therefore enhance opportunities for
generally requested a high degree of each but are not included as enumerated workers and businesses would not be an
flexibility to respond to the particular eligible uses in the final rule. eligible use, because such assistance is
needs of their communities. Public Comment: Infrastructure: In not reasonably designed to impact
Treasury Response: Given the large the interim final rule, Treasury noted individuals or classes that have been
number and diversity of SLFRF that a ‘‘general infrastructure project, for identified as having experienced a
recipients, Treasury has aimed to example, typically would not be negative economic impact. In other
include as enumerated eligible uses included [in this eligible use category] words, there is not a reasonable
programs, services, and capital unless the project responded to a connection between the assistance
expenditures that respond to public specific pandemic public health need.’’ provided and an impact on the
health and negative economic impacts Numerous commenters requested that beneficiaries. Such an activity would be
of the pandemic experienced widely in Treasury permit investments in attenuated from and thus not reasonably
many jurisdictions across the country, infrastructure as a response to the designed to benefit the households that
making it clear and simple for recipients public health and negative economic experienced the negative economic
to pursue these enumerated eligible uses impacts of the pandemic. While these impact.
under the final rule. This provides comments most commonly Note, however, that Treasury has
enumerated eligible uses that many recommended that constructing and clarified that capital expenditures that
recipients may want to pursue, while maintaining roads and surface are related and reasonably proportional
including uses that are responsive to the transportation infrastructure be eligible, to responding to the public health and
pandemic’s impacts across the diverse the proposed uses for infrastructure economic impacts of the pandemic are
range of SLFRF recipients. In the final ranged widely and included parking eligible uses of funds, in addition to
rule, Treasury has clarified several lots, bridges, traffic management programs and services; for details on
additional uses that generally respond infrastructure, solid waste disposal eligibility criteria for capital
to pandemic impacts experienced facilities, and utility infrastructure expenditures, see section Capital
broadly across jurisdictions and (outside of water, sewer, and Expenditures in General Provisions:
populations. broadband). Other.
Treasury has not chosen to include as Many commenters argued that Public Comment: Community
enumerated uses all uses proposed by infrastructure development and Development Block Grant: Several
commenters; given the significant range, maintenance is a pressing need in their commenters recommended that
and in some cases highly specific communities and that their Treasury enumerate as eligible uses
nature, of the proposed uses Treasury communities had less need for water, those eligible under the Department of
was not able to assess that the proposed sewer, and broadband infrastructure or Housing and Urban Development’s
uses would respond to negative other eligible uses to respond to the Community Development Block Grant
economic impacts experienced public health and negative economic (CDBG) or the Housing and Community
generally across the country, supporting impacts of the pandemic. Other Development Act of 1974, which
an enumerated eligible use available to commenters argued that these uses established the CDBG program.
all recipients presumptively. would stimulate the economy, attract Commenters requested that these uses
However, Treasury emphasizes that businesses, or allow for tourist be eligible either to respond to the
the enumerated eligible uses are non- movement; these commenters argued negative economic impacts of the
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exhaustive and that other uses, beyond that, by generally supporting a stronger pandemic, or in the alternate the
those enumerated, are eligible. Treasury economy or facilitating conditions that disproportionate negative economic
recognizes that the impacts of the are more conducive to business activity impacts of the pandemic in certain
pandemic vary over time, by and tourism, these uses respond to the communities. Under the CDBG program,
jurisdiction, and by population; as such, negative economic impacts of the recipient governments may undertake a
the final rule provides flexibility for pandemic. wide range of community and economic
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4396 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations
development services and projects. businesses for general economic reasonably designed to respond to the
Commenters reasoned that many state development activities argued that harm, benefit the beneficiaries that
and local governments are familiar with subsidies to businesses increase job experienced it, and be related and
this program, and that aligning to its growth and that, in some cases, reasonably proportional to that harm or
eligible uses may help recipients easily assistance to companies that excelled impact.
understand and pursue eligible projects. during the public health emergency As noted above, recipients should
Commenters also noted that Treasury would help create more job analyze eligible uses based on the
had chosen to align with existing federal opportunities for workers or expand the beneficiary of the assistance, and
programs in other eligible use jurisdiction’s tax base and produce recipients may not provide assistance to
categories, namely water infrastructure, funds to support government services. small businesses or impacted industries
in the interim final rule. In contrast, other commenters argued that did not experience a negative
Treasury Response: In the final rule, that academic research consistently economic impact. Provision of
Treasury is not including all categories finds that economic development assistance to a business that did not
of projects permissible under CDBG as subsidies have a negligible, or even experience a negative economic impact,
enumerated eligible uses to respond to negative, economic effect, citing under the theory that such assistance
the public health and negative economic research findings to this effect.257 would generally grow the economy and
impacts of the pandemic. Because CDBG Treasury Response: In the final rule, therefore enhance opportunities for
permits such a broad range of activities, Treasury maintains the interim final workers, would not be an eligible use,
including services to individual rule’s approach that general economic because such assistance is not
households, communities, small development or workforce development, reasonably designed to impact
businesses, general economic meaning activities that do not respond individuals or classes that have been
development activities, and capital to negative economic impacts of the identified as having experienced a
expenditures, Treasury determined that pandemic and rather seek to more negative economic impact. In other
it was more appropriate to assess the generally enhance the jurisdiction’s words, there is not a reasonable
underlying types of projects eligible business climate, would generally not connection between the assistance
within CDBG and whether each type of be eligible under this eligible use provided and an impact on the
project responds to the negative category. As noted above, to identify an beneficiaries. Such an activity would be
economic impacts of the pandemic. In eligible use of funds under this category, attenuated from and thus not reasonably
other words, Treasury considered a recipient must identify a beneficiary designed to benefit the households that
whether various types of community or class of beneficiaries that experienced experienced the negative economic
and economic development projects a harm or impact due to the pandemic, impact. Research cited by some
respond to the impacts of the pandemic and eligible uses of funds must be commenters finding that business
in different communities and subsidies have limited or negative
circumstances. In the final rule, 257 See, e.g., Matthew D. Mitchell et al., The
economic impact also suggests that such
Treasury addresses the eligibility of Economics of a Targeted Economic Development
Subsidy (Arlington, VA: Mercatus Center at George a response may not be reasonably
these various types of projects in each Mason University, 2019), 5, available at https:// designed to benefit households and
relevant eligible use category within www.mercatus.org/publications/government- other entities impacted by the
public health and negative economic spending/economics-targeted-economic-
pandemic. Similarly, planning activities
impacts under SLFRF, including development-subsidy; Timothy J. Bartik, Who
Benefits from Economic Development Incentives? for an economic development or
assistance for impacted households, How Incentive Effects on Local Incomes and the workforce strategy regarding general
disproportionately impacted Income Distribution Vary with Different future economic growth do not provide
households, disproportionately Assumptions about Incentive Policy and the Local
Economy (Upjohn Institute Technical Report No. a program, service, or capital
impacted small businesses, and capital 13–034, W.E. Upjohn Institute for Employment expenditure that responds to negative
expenditures. Research, March 1, 2018), available at: https:// economic impacts of the pandemic.
Public Comment: General Economic research.upjohn.org/up_technicalreports/34/; Cailin
However, Treasury notes that the final
Development: Treasury provided Slattery and Owen Zidar, Evaluating State and
rule includes as enumerated eligible
guidance following the interim final Local Business Tax Incentives, Journal of Economic
Perspectives 34, no. 2 (2020): 90–118, available at: uses many types of assistance that
rule that general economic development https://www.aeaweb.org/articles?id=10.1257/ respond to negative economic impacts
or workforce development would jep.34.2.90; Kenneth Thomas, The State of State and
of the pandemic and may produce
generally not be eligible as it does not Local Subsidies to Business (Mercatus Policy Brief,
Mercatus Center at George Mason University, economic development benefits. For
respond to a negative economic impact
Arlington, VA, October 2019), available at: https:// example, see sections Assistance to
of the COVID–19 public health www.mercatus.org/system/files/thomas_-_policy_ Unemployed Workers, Assistance to
emergency. brief_-_the_state_of_state_and_local_subsidies_to_
Some commenters recommended that business_-_v1.pdf; Dennis Coates, Growth Effects of Small Businesses, and Capital
Treasury expand enumerated eligible Sports Franchises, Stadiums, and Arenas: 15 Years Expenditures.
Later (Mercatus Working Paper, Mercatus Center at
uses to include general economic George Mason University, Arlington, VA, B. Premium Pay
development activities, beyond those September 2015), available at: https://
that respond to negative economic www.mercatus.org/system/files/Coates-Sports- Background and Summary of the
impacts of the pandemic, such as Franchises.pdf; Dennis Coates and Brad R. Interim Final Rule
Humphreys, Do Economists Reach a Conclusion on
creating an economic development Subsidies for Sports Franchises, Stadiums, and Sections 602(c)(1)(B) and 603(c)(1)(B)
strategy for the jurisdiction’s overall Mega-Events?, Econ Journal Watch 5, no. 3 (2008): of the Social Security Act, as added by
economic growth, creating a general 294–315, available at: https://econjwatch.org/ the ARPA, provide that SLFRF funds
workforce development strategy, or articles/do-economists-reach-a-conclusion-on- may be used ‘‘to respond to workers
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subsidies-for-sports-franchises-stadiums-and-mega-
providing funds to businesses that did events; Matthew D. Mitchell, Daniel Sutter, and performing essential work during the
not experience negative economic Scott Eastman, The Political Economy of Targeted COVID–19 public health emergency by
impacts to carry out economic Economic Development Incentives, Review of providing premium pay to eligible
Regional Studies 48, no. 1 (2018): 1–9, available at:
development activities or to incentivize https://www.mercatus.org/publications/corporate-
workers of the . . . government that are
the addition or retention of jobs. welfare/political-economy-targeted-economic- performing such essential work, or by
Commenters supportive of assistance to development-incentives. providing grants to eligible employers
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Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4397
that have eligible workers who perform questions regarding premium pay these commenters represented public
essential work.’’ program structuring. This section employees, e.g., employees of facilities
Premium pay is designed to responds to the comments by addressing and public works; public utilities;
compensate workers that, by virtue of the three requirements in turn, then the courthouse employees; police, fire, and
their employment, were forced to take overall definition of premium pay and, emergency medical services; and waste
on additional burdens and make great finally, program structure. and wastewater services. Others were a
personal sacrifices as a result of the mixture of public and private sector
COVID–19 pandemic. Premium pay can Eligible Workers employees, e.g., coroners and medical
be thought of as hazard pay by another The ARPA defines ‘‘eligible workers’’ examiners; transportation infrastructure
name.258 as ‘‘those workers needed to maintain (specifically electric vehicle
During the public health emergency, continuity of operations of essential infrastructure and supply equipment);
employers’ policies on COVID–19- critical infrastructure sectors and electric utilities, natural gas, and steam
related premium pay or hazard pay have additional sectors as each . . . supply; and grocery employees. Other
varied widely, with many essential [government] may designate as critical commenters requested that Treasury
workers not yet compensated for the to protect the health and wellbeing of prohibit certain occupations currently
heightened risks they have faced and [its] residents.’’ The interim final rule included in the eligible workers
continue to face.259 Many of these supplemented this definition by definition (e.g., police and corrections
workers earn lower wages on average identifying a list of ‘‘essential critical officers) from receiving premium pay for
and live in socioeconomically infrastructure sectors’’ whose workers performance of regular duties.
underserved communities as compared are eligible workers, based on the list of Commenters also asked Treasury to
to the general population.260 A recent sectors in the HEROES Act, a bill clarify which government workers are
study found that 25 percent of essential introduced in the House of included in the definition of eligible
workers were estimated to have low Representatives in 2020 that would have workers. The interim final rule included
household income, with 13 percent in provided premium pay to essential as an essential critical infrastructure
high-risk households.261 The low pay of workers.262 In addition to the critical sector, ‘‘any work performed by an
many essential workers makes them less infrastructure sectors defined in the employee of a State, local, or Tribal
able to cope with the financial interim final rule, the chief executive (or government.’’ Some commenters
consequences of the pandemic or their equivalent) of a recipient government requested that Treasury adopt a
work-related health risks. As Americans may designate additional non-public 263 definition of eligible worker that
return to work and governments relax sectors as critical so long as doing so is includes all employees of the recipient
certain rules, essential workers will necessary to protecting the health and government; however, all public
continue to bear the brunt of the risk of wellbeing of the residents of such employees of state, local, and Tribal
maintaining the ongoing operation of jurisdiction. governments are already included in the
vital facilities and services. The added Public Comment: Treasury received interim final rule definition of ‘‘eligible
health risk to essential workers is one multiple comments on the definition of worker.’’ Commenters asked whether
prominent way in which the pandemic ‘‘eligible worker’’ included in the this includes governments that did not
has amplified pre-existing interim final rule. Many commenters receive SLFRF funds (i.e., ‘‘non
socioeconomic inequities. Premium pay agreed with the definition of eligible recipient governments’’). Many
is designed to address the disparity worker adopted by Treasury. Other commenters from Tribal governments
between the critical services provided commenters sought clarification about requested that the definition of eligible
by and the risks taken by essential or changes to the definition of eligible worker, which includes ‘‘any work
workers and the relatively low worker, including the definition of performed by an employee of a . . .
compensation they tend to receive. eligible sectors, the inclusion of Tribal government,’’ also include an
The interim final rule established a government workers in the definition of employee of a ‘‘Tribal enterprise’’ to
three-part framework for recipients eligible workers, and the process for remove uncertainty regarding which
seeking to use SLFRF funds for employees are included.
designating additional non-public
premium pay. First, to receive premium Finally, commenters made
sectors as eligible.
pay one must be an eligible worker. Some commenters asked Treasury to suggestions for the process by which the
Second, an eligible worker must also change how it identifies eligible sectors, chief executive (or equivalent) of a
perform essential work. Finally, including suggestions to add to or recipient government may designate
premium pay must respond to workers additional non-public sectors as critical.
subtract from the list of eligible sectors.
performing essential work during the Commenters asked that Treasury adopt
For example, some commenters asked
COVID–19 public health emergency. a requirement that Treasury must
Treasury to consider using Bureau of
Most of the comments received by approve or deny any additional non-
Labor Statistics (BLS)-Standard
Treasury pertaining to premium pay public sector identified by the chief
Occupational Classifications to identify
related to these three requirements. executive of a recipient government
specific sectors or occupations, in
Comments also addressed the definition prior to implementation of the
contrast to the approach taken in the
of premium pay generally and posed recipient’s program.
interim final rule, which included a
Some commenters asked Treasury to
mixture of economic sectors, industries,
258 See U.S. Department of Labor, Hazard Pay,
clarify whether their chief executive (or
https://www.dol.gov/general/topic/wages/ and occupations. Many commenters
equivalent) could designate particular,
hazardpay (last visited October 18, 2021). asked Treasury to explicitly clarify that
and in some cases all, employees of the
259 Economic Policy Institute, Only 30% of those
a particular industry or occupation is
working outside their home are receiving hazard recipient government as eligible for
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covered by the definition of ‘‘essential
pay (June 16, 2020), https://www.epi.org/press/only- premium pay.
30-of-those-working-outside-their-home-are- critical infrastructure sector.’’ Some of Treasury Response: In the final rule,
receiving-hazard-pay-black-and-hispanic-workers-
are-most-concerned-about-bringing-the- 262 See H.R. 6800, 116th Cong. (2020).
Treasury will preserve the definition of
coronavirus-home/. 263 Note that the sectors defined in the interim ‘‘eligible worker’’ as it was defined in
260 McCormack, supra note 65.
final rule already include all state, local, and Tribal the interim final rule with minor
261 Id. government employees. modifications to clarify that all public
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4398 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations
employees of recipient governments are final rule,265 the chief executive (or definition of ‘‘regular’’ in-person
already included in the interim final equivalent) of a recipient government interactions and whether Treasury
rule definition of ‘‘eligible worker.’’ A may also identify the non-public sector could clarify which job functions merit
more specific eligibility system (e.g., as critical so long as the chief executive more (or less) premium pay.
linking eligibility to specific deems the non-public sector necessary Treasury Response: Treasury is
occupational or industry codes) would to protecting the health and wellbeing of maintaining the definition of ‘‘essential
have provided more certainty but would residents. Treasury has, where possible, work’’ in the final rule without
have been much more rigid. In contrast, clarified the definition of ‘‘essential modification. The test adopted in the
the current definition is flexible enough critical infrastructure sectors.’’ For interim final rule was designed to
to give recipients the ability to tailor instance, Treasury has clarified in the compensate workers facing
their premium pay programs to meet final rule that work performed by an disproportionate risk due to the
their needs while ensuring that employee of a Tribal government pandemic. COVID–19 is transmitted
programs focus on sectors where includes an employee of a Tribal through person-to-person interactions,
workers were forced to shoulder enterprise and discussed in this and therefore, workers with regular in-
substantial risk as a result of the Supplementary Information how a person interactions are the primary
COVID–19 pandemic. Furthermore, the recipient may qualify other non-public group facing increased health risks.
critical infrastructure sectors defined in sectors as essential critical Although COVID–19 is not transmitted
the interim final rule already include infrastructure. primarily by people handling items,
many of the occupations that such work may present increased risk in
Essential Work certain cases, and the final rule
commenters requested be added. For
example, Treasury received many The interim final rule defined maintains the interim final rule’s
comments from public workers asking ‘‘essential work’’ as work that (1) is not inclusion of such work in order to give
to be included in the definition of performed while teleworking from a recipient governments the flexibility to
‘‘eligible worker’’ even though these residence and (2) involves either (i) include workers performing such work
workers already fall within the scope of regular, in-person interactions with as they determine appropriate. Changing
‘‘any work performed by an employee of patients, the public, or coworkers of the the test as some commenters suggested,
a State, local, or Tribal government.’’ individual that is performing the work e.g., by eliminating the in-person work
Treasury has clarified in the final rule or (ii) regular physical handling of items requirement or allowing recipients to
that the chief executive’s discretion to that were handled by, or are to be designate which employees are
designate additional sectors as critical handled by, patients, the public, or essential, even if not working in person,
relates only to ‘‘non-public’’ sectors, coworkers of the individual that is would no longer focus the program on
since all public employees of recipient performing the work. Treasury adopted workers taking on additional health
governments are already included in the this definition of essential work to risks and instead allow premium pay to
definition of ‘‘eligible worker.’’ While ensure that premium pay is targeted to be awarded to individuals who
all such public employees are ‘‘eligible workers that faced or face heightened experienced relatively little risk of
workers’’ and the chief executive (or risks due to the character of their work exposure to COVID–19. To maintain
equivalent) of a recipient government during a pandemic. flexibility, Treasury is not defining the
Public Comment: Some commenters term ‘‘regular’’ with regard to in-person
may designate additional non-public
found the definition unclear and asked interactions, allowing recipients to
sectors as critical, in order to receive
Treasury to clarify what constitutes develop programs based on the specific
premium pay, these workers must still
‘‘essential work.’’ Others disagreed with workforce to be served and local
meet the other premium pay
the essential work test altogether, circumstances. Generally speaking,
requirements (e.g., performing essential
arguing that it forces recipients to however, recipients are encouraged to
work).
distinguish between essential and non- consider an eligible worker’s risk of
Treasury recognizes that the list of essential employees, which may be exposure in designing premium pay
‘‘essential critical infrastructure sectors’’ difficult to do. Accordingly, these programs.
includes both occupations and sectors. commenters asked Treasury to allow
Recipients, if uncertain which Respond To
recipients to determine which workers
occupations are included in a critical qualify as essential. Treasury also As required by the ARPA, the interim
infrastructure sector, may consult received several requests that specific final rule required that premium pay
government occupational classifications occupations be explicitly deemed programs ‘‘respond to’’ eligible workers
if helpful but are not required to do essential, including all public performing essential work during the
so.264 Furthermore, a recipient employees, veterinarians, election COVID–19 public health emergency.
government does not need to submit to administrators, detention staff and Premium pay responds to eligible
Treasury for approval its designation of sheriff’s deputies, and employees of workers performing essential work if it
a sector as essential critical utilities, such as electric power, natural prioritizes low- and moderate-income
infrastructure; rather, Treasury will gas, steam supply, water supply, and persons, given the significant share of
defer to the reasonable interpretation of sewage removal. essential workers that are low- and
the recipient government and the Several commenters requested that moderate-income and may be least able
discretion of the recipient’s chief Treasury not distinguish between to bear added costs associated with
executive in making such designations. remote and in-person work or amend illness. The level of the award limit—up
If a recipient is unsure if a non-public the standard so that employees to $13 per hour not to exceed $25,000
sector is covered by the definition in the providing essential services would still in aggregate—in the ARPA supports this
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be eligible even if they worked reasoning.
264 See, e.g., sources such as Bureau of Labor
remotely. Finally, a few commenters Accordingly, the interim final rule
Statistics, Occupational Outlook Handbook, required written justification for how
which provide information on which requested clarification as to the
professions or occupations are typically
premium pay to certain higher-income
included in interpretations of a sector, https:// 265 Public sector workers are ‘‘eligible workers’’ workers responds to eligible workers
www.bls.gov/ooh/. under the interim final rule and final rule. performing essential work: If a recipient
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Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4399
(or grantee) uses SLFRF funds to thresholds for permitting or reporting on final rule for recipients because
provide premium pay to an employee premium pay. Treasury understands that most
and the pay or grant would increase a Finally, there was also some employers, public and private, are
worker’s total pay above 150 percent of uncertainty as to the threshold and the familiar with and are routinely required
their residing state or county’s average requirement for written justification. to apply the FLSA.
annual wage for all occupations, as Some commenters interpreted the With this addition, the final rule
defined by the BLS Occupational threshold as a hard cap on who was provides that premium pay is
Employment and Wage Statistics, eligible for premium pay, which is not responsive to eligible workers
whichever is higher, on an annual basis, the case. Relatedly, some commenters performing essential work during the
then the recipient must provide, also requested further guidance on what public health emergency if each eligible
whether for themselves or on behalf of recipients should include in the written worker who receives premium pay falls
a grantee, written justification to justification submitted to the Secretary. into one of three categories: (1) The
Treasury detailing how the award Treasury Response: The final rule worker’s pay is below the wage
responds to eligible workers performing makes some modifications to the threshold, (2) the worker is not exempt
essential work. determination of when premium pay from the FLSA overtime provisions, or
‘‘responds to’’ eligible workers (3) the recipient has submitted a written
Public Comment: Treasury received
performing essential work during the justification to Treasury.
numerous comments on the wage public health emergency. Under the The final rule makes it clear that
threshold and the written justification interim final rule, premium pay was written justification to Treasury is not
requirement. Several commenters responsive if either the workers’ pay necessary with respect to eligible
supported the threshold as a way to was below a wage threshold or, if the workers whose pay is less than the wage
encourage recipients to target premium pay was above a wage threshold, the threshold. Nor is written justification
pay to lower-income, eligible workers. recipient submitted written justification necessary with respect to eligible
Some commenters even asked Treasury to Treasury explaining how the workers who are not exempt from the
to make the wage threshold a firm premium pay was responsive. The final FLSA overtime provisions. The written
restriction, above which an eligible rule retains these two means of justification is only necessary if the
worker could not receive premium pay. establishing premium pay in response to worker’s pay (with or without the
Others agreed with the threshold but workers performing essential work and premium) exceeds the threshold, and
also requested flexibility to use existing adds an additional means of the worker is exempt from the FLSA
worker classifications as an demonstrating that premium pay is overtime provisions. The final rule also
administratively simple way to identify responsive. Under the final rule, a clarifies that a worker’s pay exceeds the
workers for whom premium pay would recipient may also show that premium threshold if either the premium pay
be responsive. For instance, a few pay is responsive by demonstrating that increases the worker’s total pay above
commenters asked Treasury to allow the eligible worker receiving premium the wage threshold or the worker’s total
recipients or grantees to presume that pay is not exempt from the FLSA pay was already above the threshold,
premium pay ‘‘responds to’’ eligible overtime provisions.267 This change will before receiving premium pay.
workers performing essential work expand the number of workers eligible Treasury has also updated the final
when it is provided to employees who to receive premium pay 268 and does not rule to clarify that written justification
are not exempt from the Fair Labor require recipients to provide written means a brief, written narrative
Standards Act (FLSA) overtime justification to Treasury regarding the justification of how the premium pay or
provisions—a test that employers are workers who are not exempt from the grant is responsive to workers
routinely required to apply.266 FLSA overtime provisions, making the performing essential work during the
In contrast, several commenters program easier to administer for public health emergency. This could
disagreed with the threshold and the recipients. Incorporating this change include a description of the essential
requirement for written justification. A further simplifies application of the workers’ duties, health or financial risks
few commenters thought the threshold faced due to COVID–19, and why the
was too low to capture employees in 267 Department of Labor, Overtime Pay, https:// recipient determined that the premium
certain critical infrastructure sectors www.dol.gov/agencies/whd/overtime; see also 29 pay was responsive despite the workers’
U.S.C. 207.
(e.g., public safety, waste collection) and 268 Among workers that report working overtime,
higher income.
that it did not sufficiently account for roughly 41–44 percent of workers earn above
Recipients should refer to SLFRF
the variance in economic need across $50,000 per year, which is slightly less than the program reporting guidance, user
different geographic areas and family national average annual wage for all employees guides, and other documentation for
structures. Some smaller communities according to the Bureau of Labor Statistics’ further guidance on the form and
Occupational Employment and Wage Statistics,
argued that the threshold was difficult available at https://www.bls.gov/oes/. See also U.S.
content of the written justification.
to calculate and apply. Census Bureau, Basic Monthly CPS, January 2019 Treasury anticipates that recipients will
Other commenters proposed revisions through December 2019, available at https:// easily be able to satisfy the justification
www.census.gov/data/datasets/time-series/demo/ requirement for front-line workers, like
for how the threshold is calculated. For cps/cps-basic.html. Notes: Annual earnings reflect
instance, a few commenters asked weekly wages multiplied by 52. Usual weekly
nurses and hospital staff.
Treasury to consider using alternative earnings are computed by BLS to include earnings Definition of Premium Pay
earnings measures such as median from work such as tips, overtime, regular wages,
etc., but not non-labor sources of income such as The statute defines premium pay as
income. Similarly, another commenter government transfers and capital gains. Pre- ‘‘an amount of up to $13 per hour . . . ,
asked Treasury to consider the incomes overtime earnings are computed by taking the
in addition to wages or remuneration
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of workers with different levels of difference of usual weekly earnings and earnings
from overtime last week and multiplying by 52. the eligible worker otherwise receives,
seniority in developing any income
Note, some sources multiply weekly earnings by 50 for all work performed by the eligible
instead of 52 to account for unpaid time off and worker during the COVID–19 public
266 See generally 29 U.S.C. 207(a); U.S. holidays, so these figures may be slightly larger
Department of Labor, Overtime Pay Requirements of than those reported elsewhere. Either assumption
health emergency. Such amount may
the FLSA (Fact Sheet No. 23), https://www.dol.gov/ may overestimate earnings if workers do not work not exceed $25,000 with respect to any
agencies/whd/fact-sheets/23-flsa-overtime-pay. year-round. single eligible worker.’’ The interim
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4400 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations
final rule incorporated this definition types of employees and permissible C. Revenue Loss
and emphasized that premium pay structures for awarding premium pay. A
Background
should be in addition to compensation few commenters asked if premium pay
typically received. could be awarded to volunteers or those Sections 602(c)(1)(C) and 603(c)(1)(C)
Public Comment: Several submitted in irregular and non-hourly or salaried of the Social Security Act provide that
comments related to the definition of employment positions. Similarly, SLFRF funds may be used ‘‘for the
‘‘premium pay.’’ Several commenters various commenters asked if part-time provision of government services to the
asked Treasury to clarify certain aspects workers were eligible for premium pay. extent of the reduction in revenue of
of the interim final rule and statutory Some commenters asked Treasury to such . . . government due to the
definition of premium pay. For instance, provide more detail on when premium COVID–19 public health emergency
a few commenters asked whether the pay may be paid retroactively or if a relative to revenues collected in the
$25,000 limit applies to the annual government could reimburse its general most recent full fiscal year of the . . .
amount of premium pay received or the fund for hazard pay already paid before government prior to the emergency.’’
aggregate amount of premium pay the start of the period of performance. This provision allows recipients
received over the period of performance. Treasury Response: Treasury has also experiencing budget shortfalls to use
A few commenters requested flexibility made clear in the final rule that a payments from the SLFRF funds to
as to how premium pay may be recipient may award premium pay to avoid cuts to government services and,
awarded, including flexibility to make non-hourly or salaried workers as well thus, enables state, local, and Tribal
monthly or quarterly payments or lump as part-time workers. Premium pay may governments to continue to provide
sum payments. Finally, commenters not, however, be awarded to volunteers. valuable services and ensures that fiscal
requested additional clarification as to If a recipient is interested in austerity measures do not hamper the
how premium pay should be calculated. compensating volunteers with SLFRF broader economic recovery.
For instance, a commenter asked how to funds, then it must do so consistent State and local government budgets
calculate the amount of and account for with the requirements set forth in other experienced stress in fiscal year 2020 as
overtime pay and other incentive eligible use categories; for example, see delayed tax filings and pandemic-
pay.269 section Public Sector Capacity and related business closures caused
Treasury Response: Treasury has Workforce in Public Health and revenues to decline sharply.271 Twenty-
clarified some of these issues in the Negative Economic Impacts. two state governments took actions to
final rule. For example, Treasury has Under the final rule, recipients may close budget gaps in fiscal year 2020 272
clarified in the final rule that the award premium pay retroactively; and nearly 80 percent of cities reported
$25,000 per employee limit is for the however, SLFRF funds may not be used being less able to meet the fiscal needs
entire period of performance, not an to reimburse a recipient or eligible of their communities relative to fiscal
employer grantee for premium pay or year 2019.273 Surveys of Tribal
annual cap. Further, recipients have
hazard pay already received by the governments and Tribal enterprises
discretion with respect to the way in
employee. To make retroactive premium conducted in 2020 found majorities of
which premium pay is awarded to
payments funded with SLFRF funds, a respondents reporting substantial cost
eligible workers (e.g., monthly,
recipient or eligible employer grantee increases and revenue decreases, with
quarterly, lump sum), provided that the
must make a new cash outlay for the Tribal governments reporting reductions
total premium pay awarded to any
premium payments and the payments in health care, housing, social services,
eligible worker does not exceed $13 per
must be in addition to any wages or and economic development activities as
hour or $25,000 over the period of
remuneration the eligible worker a result of reduced revenues.274
performance. Finally, a recipient may The economic recovery, aided by the
already received, subject to the other
award premium pay to an eligible broad distribution of COVID–19
requirements and limitations set forth in
worker in addition to the overtime pay vaccines and the deployment of federal
the ARPA and this final rule.
already earned by the eligible worker Finally, as part of accepting the stimulus, has led to a strong rebound in
but in no instance may the portion of Award Terms and Conditions for total state and local government revenue
the compensation funded with SLFRF SLFRF, each recipient agreed to and is contributing to a brighter fiscal
funds exceed $13 per hour, even if strict maintain a conflict-of-interest policy
time-and-a-half calculation requires consistent with 2 CFR 200.318(c) that is 271 In the second quarter of 2020, quarterly state
more.270 To the extent that an employer applicable to all activities funded with and local tax revenues as reported by the U.S.
is required under the FLSA to make Census Bureau fell 19 percent compared to the
the SLFRF award. This award term second quarter of 2019; U.S. Census Bureau,
payments to an eligible worker in excess requires recipients and subrecipients to Quarterly Summary of State and Local Tax
of $13 per hour or $25,000 in the report to Treasury or the pass-through Revenue, https://www.census.gov/programs-
aggregate over the period of agency, as appropriate, any potential surveys/qtax.html.
performance, the employer must use a conflict of interest related to the award
272 National Association of State Budget Officers,
source of funding other than the SLFRF Fiscal Survey of the States (Fall 2020), available at
funds per 2 CFR 200.112. Pursuant to https://higherlogicdownload.s3.amazonaws.com/
funds to satisfy those obligations. this policy, decisions concerning SLFRF NASBO/9d2d2db1-c943-4f1b-b750-0fca152d64c2/
funds must be free of undisclosed UploadedImages/Fiscal%20Survey/NASBO_Fall_
Program Structure 2020_Fiscal_Survey_of_States_S.pdf.
personal or organizational conflicts of
Public Comment: Several commenters interest, both in fact and in appearance.
273 National League of Cities, City Fiscal
also requested elaboration on eligible Conditions (2020), available at https://www.nlc.org/
Consistent with this policy, elected wp-content/uploads/2020/08/City_Fiscal_
officials are prohibited from using their Conditions_2020_FINAL.pdf.
269 See 29 U.S.C. 207(a) (‘‘[A]t a rate not less than 274 Surveys conducted by the Center for Indian
one and one-half times the regular rate at which he official position and control over SLFRF
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Country Development at the Federal Reserve Bank
is employed.’’). funds for their own private gain. This of Minneapolis in March, April, and September
270 All recipients are required to comply with policy also prohibits, among other 2020. Elijah Moreno & Heather Sobrepena, Tribal
otherwise applicable laws, including any wage and things, elected officials from steering entities remain resilient as COVID–19 batters their
hour requirements in the Fair Labor Standards Act. finances, Federal Reserve Bank of Minneapolis
See generally, Department of Labor, Wages and the
funds to projects in which they have a (Nov. 10, 2020), https://www.minneapolisfed.org/
Fair Labor Standards Act, https://www.dol.gov/ financial interest or using funds to pay article/2020/tribal-entities-remain-resilient-as-
agencies/whd/flsa. themselves premium pay. covid-19-batters-their-finances.
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Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4401
outlook for most jurisdictions as pandemic caused state and local emergency, 5.2 percent, or the
compared to the earlier months of the government employment to contract recipient’s average annual revenue
public health emergency. For the fiscal again, but this time more sharply: By growth in the three full fiscal years prior
year ending June 30, 2021, total state May 2020, state and local government to the COVID–19 public health
and local government tax revenues payrolls fell 7.7 percent compared to emergency.282 This approach to the
increased 21 percent relative to the February 2020. Despite improvement, growth rate provides recipients with the
same period in 2020, reflecting the non-federal public sector job growth option to use a standardized growth
combined impact of the modified tax continues to lag behind the rest of the adjustment when calculating the
filing deadline in 2020 and an U.S. labor market recovery.281 counterfactual revenue trend and thus
improving economy.275 However, Summary of Interim Final Rule minimizes administrative burden, while
despite a stable budget situation overall, not disadvantaging recipients with
many governments face uncertainty as As stated above, the Social Security revenue growth that exceeded the
the COVID–19 pandemic continues to Act provides that SLFRF funds may be national average prior to the COVID–19
impact commuting patterns, hospitality used ‘‘for the provision of government public health emergency by permitting
and tourism, and other drivers of services to the extent of the reduction in these recipients to use their own
jurisdictions’ economies. Thirty-five revenue of such . . . government due to revenue growth rate over the preceding
percent of cities still report being less the COVID–19 public health emergency three years.
able to meet financial needs than in relative to revenues collected in the • Step 3: Identify actual revenue,283
fiscal year 2020,276 and over half of most recent full fiscal year of the . . .
which equals revenues collected over
surveyed Tribal governments and Tribal government prior to the emergency.’’
the twelve months immediately
enterprises reported losing at least 40 The interim final rule provided a
preceding the calculation date.
formula for calculating revenue loss
percent of their revenue since the start
through a four-step process: • Step 4: The extent of the reduction
of the pandemic.277 Budget challenges in revenue is equal to counterfactual
• Step 1: Identify revenues collected
persist as governments work to mitigate revenue less actual revenue. If actual
in the most recent full fiscal year prior
and contain COVID–19 and help revenue exceeds counterfactual revenue,
to the public health emergency (i.e., last
citizens weather the economic the extent of the reduction in revenue is
full fiscal year before January 27, 2020),
downturn. set to zero for that calculation date.
called the base year revenue.
State, local, and Tribal government • Step 2: Estimate counterfactual For illustration, consider a
budgets affect the broader economic revenue, which is the amount of hypothetical recipient with base year
recovery. During the period following revenue the recipient would have revenue equal to 100 (Step 1) that ends
the 2007–2009 recession, state and local expected in the absence of the downturn on June 30, 2019. In Step 2, the
government budget pressures led to caused by the pandemic. The hypothetical recipient finds that the
fiscal austerity that was a significant counterfactual revenue is equal to base average annual growth across all state
drag on the overall economic year revenue * [(1 + growth adjustment) and local government ‘‘General Revenue
recovery.278 Inflation-adjusted state and ∧ (n/12)], where n is the number of from Own Sources’’ in the most recent
local government revenue did not return months elapsed since the end of the three years of available data, 5.2
to the previous peak until 2013,279 base year to the calculation date, and percent, is greater than the recipient’s
while employment in the sector growth adjustment is the greater of the average annual revenue growth in the
returned to the previous peak in August average annual growth rate across all three full fiscal years prior to the public
2019, nearly a decade later.280 Just State and Local Government ‘‘General health emergency. In this illustration, n
months after recouping losses from the Revenue from Own Sources’’ in the (months elapsed) and counterfactual
previous downturn, the COVID–19 most recent three years prior to the revenue would be equal to:
As of: 12/31/2020 12/31/2021 12/31/2022 12/31/2023
n (months elapsed) .......................................................................................... 18 30 42 54
Counterfactual revenue: .................................................................................. 107.9 113.5 119.4 125.6
275 Analysis of Quarterly Summary of State and and-local-sector.html; Jiri Jonas, Great Recession 281 Pew Research, State and Local Government
Local Tax Revenue, U.S. Census Bureau, supra note and Fiscal Squeeze at U.S. Subnational Government Job Growth Lags as Economy Recovers (September
271. Level, IMF Working Paper 12/184, (July 2012), 2021), available at https://www.pewtrusts.org/en/
276 National League of Cities, City Fiscal available at https://www.imf.org/external/pubs/ft/ research-and-analysis/articles/2021/09/14/state-
Conditions (2021), available at https://www.nlc.org/ wp/2012/wp12184.pdf; Gordon, supra note 16. and-local-government-job-growth-lags-as-economy-
279 State and local government general revenue
wp-content/uploads/2021/10/2021-City-Fiscal- recovers.
Conditions-Report-2021.pdf. from own sources, adjusted for inflation using the 282 At the time the interim final rule was
Bureau of Economic Analysis’ implicit price
277 Center for Indian Country Development and published, the average annual growth across all
deflator for GDP. U.S. Census Bureau, Annual
Federal Reserve Bank of Minneapolis, One Year state and local government ‘‘General Revenue from
Survey of State Government Finances and U.S.
Into COVID–19, Pandemic’s Negative Effects Persist Bureau of Economic Analysis, National Income and Own Sources’’ in the most recent three years of
in Indian Country (May 2021), available at https:// Product Accounts, https://www.census.gov/ available data (2015–2018) was 4.1%, which was
www.minneapolisfed.org/article/2021/one-year- presented as one option for the growth adjustment.
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programs-surveys/gov-finances.html.
into-covid-19-pandemics-negative-effects-persist-in- 280 U.S. Bureau of Labor Statistics, All Employees, Since the interim final rule was published, 2019
indian-country. State Government [CES9092000001] and All data has been made available, which increases this
278 See, e.g., Nora Fitzpatrick et al., Fiscal Drag
Employees, Local Government [CES9093000001], rate to 5.2%. The final rule updates the percentage
from the State and Local Sector?, Liberty Street retrieved from FRED, Federal Reserve Bank of St. to 5.2%, as shown in Step 2.
Economics Blog, Federal Reserve Bank of New York Louis, https://fred.stlouisfed.org/series/ 283 As explained below, in the final rule,
(June 27, 2012), https://libertystreeteconomics. CES9092000001 and https://fred.stlouisfed.org/ recipients must adjust actual revenue amounts
newyorkfed.org/2012/06/fiscal-drag-from-the-state- series/CES9093000001. based on certain tax policy changes.
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4402 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations
The figure below illustrates the hypothetical recipient calculated in
reduction in revenue for the accordance with the methodology.
140
•Actual Revenue
•Extent of reduction in revenue
130
•Base year revenue
120 .....counterfactual revenue
110
100
90
80
Jun-19 Dec-20 Dec-21 Dec-22 Dec-23
Finally, as explained in greater detail are ‘due to’ the COVID–19 public health the calculation of revenue loss,
below, the clear meaning of the emergency.’’ particularly the burden involved in
statutory phrase ‘‘due to the COVID–19 Treasury received a substantial calculating the amount of general
public health emergency’’ is that it is number of comments on the revenue revenue, given that the definition of
referring to revenue reductions caused loss provisions set forth in the interim general revenue in the interim final rule
by the public health emergency. As final rule. These comments largely does not always align with the
such, it does not include revenue pertained to the following topics: The definition of revenue already calculated
reduced for reasons other than the overall methodology for calculating by recipients for other purposes, and
public health emergency. Treasury in revenue loss; the definition of requested clarifications regarding a
‘‘revenue’’; whether revenue should be number of components, including the
the interim final rule presumed that any
aggregated or calculated on some definition of revenue. Commenters also
reduction in revenue relative to the
alternative basis (e.g., source-by-source asked for clarification on the
counterfactual estimate would be or fund-by-fund); the appropriate relationship between revenue loss
considered revenue lost due to the calculation dates (i.e., fiscal year or calculations across different calculation
pandemic and thereby relieved calendar year); the presumption that all dates. Other commenters argued that the
recipients of the administrative burden revenue loss is due to the pandemic; the revenue loss formula does not precisely
of determining the extent to which base year; and the definition of capture the nuances of local revenues or
reduction in revenue was due to the ‘‘government services.’’ their particular situation. For example,
public health emergency. The some commenters stated that requiring
calculation methodology in the interim Overall Methodology for Calculating that revenues be aggregated fails to
final rule implicitly assumed that Revenue Loss capture decreases in revenue sources
recipients did not suffer a loss in As noted above, the interim final rule that cannot easily be made up for with
revenue due to the public health provided a formula for recipients to other revenue sources.
emergency if they did not experience a calculate revenue loss by comparing Treasury Response: In the final rule,
reduction in aggregate revenue actual revenues received during a given Treasury is largely maintaining the
compared to the counterfactual time-period with a counterfactual revenue loss formula as set forth in the
estimate. The interim final rule invited amount of revenue based on revenues in interim final rule. To address comments
comments on whether Treasury should the base year and an adjustment for that the formula for calculating revenue
expected growth in revenue each year. loss was difficult to apply, Treasury is
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revise its presumption to ‘‘take into
Public Comment: Treasury received including an option for recipients to use
account other factors, including actions
many public comments on the overall a standard allowance for revenue loss.
taken by the recipient as well as the methodology for calculating revenue Specifically, in the final rule, recipients
expiration of the COVID–19 public loss. Some recipients, including smaller will be permitted to elect a fixed
health emergency, in determining governments, have expressed concern amount of loss that can then be used to
whether to presume that revenue losses regarding the burden associated with fund government services. This fixed
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Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4403
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