Sneak Preview: Treasury Issues 2023 SLFRF Interim Final Rule

(The following was excerpted from a recent Thompson Grants Compliance Expert article.) The Department of the Treasury recently issued an interim final rule that expands the eligible uses for Coronavirus State and Local Fiscal Recovery Fund (SLFRF) dollars. Recipients now may use these funds for eligible natural disaster emergency relief efforts, surface transportation projects and Title I community development projects.

More than 30,000 SLFRF governmental recipients already had been required to comply with provisions in a 2022 final rule (31 C.F.R. Part 35), which took effect April 1, 2022. Under the 2022 rule, recipients may use SLFRF funds to replace public sector revenue lost due to the COVID-19 pandemic; respond to the public health and negative economic impacts of the pandemic; provide premium pay for essential workers in critical sectors; and invest in water, sewer and broadband infrastructure. Treasury’s continuously updated SLFRF 2022 Final Rule Frequently Asked Questions document states that when the national health emergency was terminated on April 10, recipients generally were allowed to continue to make investments using their SLFRF funds without changes, with the exception of projects in the premium pay eligible use category (i.e., recipients may not use SLFRF funds for premium pay after April 10).

In December 2022, Congress amended the SLFRF program through the Consolidated Appropriations Act (CAA) of 2023 (Pub. L. 117-328), to provide additional flexibility for how recipients can use SLFRF funds. These funds may now be used for the following:

• Emergency relief from natural disasters — SLFRF funds may be used for this purpose using a two-step process. First, recipients must identify a natural disaster that has occurred or is expected to occur imminently, or a natural disaster that is threatened to occur in the future. Next, they must identify emergency relief (e.g., financial assistance needed to save lives or protect property) that responds to the physical or negative economic impacts, or potential physical or negative economic impacts of the identified natural disaster. The emergency relief must be related and reasonably proportional to the impact identified.
• Surface transportation projects — SLFRF funds may be used for eligible projects under 26 surface transportation programs specified in the 2023 CAA. This eligible use category includes three pathways. Pathway One outlines how recipients may use SLFRF funds for projects receiving funding from under numerous Department of Transportation (DOT) programs. Pathway Two outlines how recipients may use SLFRF funds for projects that are not receiving funding from DOT. Pathway Three outlines how recipients may use SLFRF funds to satisfy nonfederal share requirements for certain surface transportation projects (e.g., the Nationally Significant Multimodal Freight and Highway Projects (INFRA) program; Fixed Guideway Capital Investment Grants; or to repay a loan provided under the Transportation Infrastructure Finance and Innovation Act (TIFIA) program.
• Title I projects — Recipients may use SLFRF funds for activities that are eligible under section 105(a) of the Housing and Community Development Act of 1974 (Pub. L. 93-383) (Title I projects), which are the eligible activities under the Community Development Block Grant and Indian Community Development Block Grant programs. Treasury notes that the eligible activities under the Title I projects eligible use category are broad and enable recipients to undertake a wide range of projects.

(The full version of this story has now been made available to all for a limited time here.)

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