Treasury Explains That SLFRF Interim Rule Is Currently Binding

The Department of the Treasury wants to make itself perfectly clear; so much so that it recently issued an “explainer” to better clarify its position related to its May interim final rule pertaining to its Coronavirus State and Local Fiscal Recovery Funds (SLFRF) program.

The American Rescue Plan Act (Pub. L. 117-2) provided $350 billion under the SLFRF for eligible state, local, territorial and tribal governments to respond to the COVID-19 emergency and bring back jobs. This funding is subject to the requirements specified in Treasury’s May 17 interim final rule, which became effective on that date and details whether a program, project or service is an eligible use.

Treasury accepted public comments on the interim final rule through July 16, and will be reviewing some 1,000 submitted comments through the fall prior to adopting a final rule, which will respond to the comments received. However, until it adopts the final rule, Treasury explains that the interim final rule “will remain binding and effective,” meaning that “recipients can and should rely on the interim final rule to determine whether uses of funds are eligible under this program.”

Treasury emphasizes that funds “used in a manner consistent with the interim final rule” while it is effective “will not be subject to recoupment.” The interim final rule implements four categories of eligible uses. Treasury sought to clarify these eligible uses by including a nonexclusive list of programs or services that are eligible as responding to the public health emergency and its negative economic impacts, and a nonexclusive list of government services that may be funded to the extent of a government’s reduction in revenue.

The following list includes eligible examples, but other projects may be eligible, so Treasury urged recipients to use the interim final rule to interpret whether their use of funds meets the criteria of what is eligible:

• expenses related to COVID-19 vaccination programs and sites;
• costs of providing COVID-19 testing and monitoring, contact tracing, and monitoring of case trends and genomic sequencing for variants;
• COVID-19-related expenses in congregate living facilities, including skilled nursing facilities, long-term care facilities, incarceration settings, homeless shelters, residential foster care facilities, residential behavioral health treatment, and other group living facilities;
• COVID-19-related expenses of public hospitals, clinics and similar facilities;
• expenses of establishing temporary public medical facilities and other measures to increase COVID-19 treatment capacity;
• emergency medical response expenses, including emergency medical transportation, related to COVID-19;
• mental health treatment, substance misuse treatment and other behavioral health services;
• assistance to unemployed workers, including services like job training to accelerate rehiring of unemployed workers;
• assistance to households or populations facing negative economic impacts, including food assistance; rent, mortgage or utility assistance; counseling and legal aid to prevent eviction or homelessness; internet access or digital literacy assistance;
• assistance to small businesses facing negative economic impacts, including to address financial hardship; implement COVID-19 prevention or mitigation tactics; or provide technical assistance, counseling or other services to assist with business planning needs;
• for state, local or tribal governments, payroll and covered benefit expenses for public safety, public health, health care, human services and similar employees responding to the COVID-19 public health emergency; and
• payroll, covered benefits and other costs associated with rehiring public sector staff, up to the pre-pandemic staffing level of the government.

Additionally, recipients can use SLFRF funds, up to their amount of revenue loss due to COVID-19, with broad discretion to provide government services (e.g., police, fire, and other public safety services, school or educational services, health services, environmental services, and maintenance or pay-go funded building of infrastructure including roads). Treasury also urged recipients to consider FAQs the agency has issued to help assess whether a project or service would be an eligible use under SLFRF.

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