Beaumont City Council
October 17, 2023

4356 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations considered "programs and services" and
are not presumed to be reasonably
proportional responses to an identified
harm except as provided in section
Capital Expenditures in General
Provisions: Other.

In other words, recipients can provide
behavioral health services to members
of the general public without any
further analysis of impacts of the
pandemic on those individuals and
whether the service is responsive.

Recipients may also use this eligible use
category to respond to increased rates of
behavioral health challenges at a
population level or, at an individual
level, new behavioral health challenges
or exacerbation of pre-existing
challenges, including new barriers to
accessing treatment.

Services that respond to these impacts
of the public health emergency may
include services across the continuum
of care, including both acute and
chronic care, such as prevention,
outpatient treatment, inpatient
treatment, crisis care, diversion
programs (e.g., from emergency
departments or criminal justice system
involvement), outreach to individuals
not yet engaged in treatment, harm
reduction, and supports for long-term
recovery (e.g., peer support or recovery
coaching, housing, transportation,
employment services).

Recipients may also provide services
for special populations, for example,
enhanced services in schools to address
increased rates of behavioral health
challenges for youths, mental health
first responder or law enforcement -
mental health co -responder programs to
divert individuals experiencing mental
illness from the criminal justice system,
or services for pregnant women with
substance use disorders or infants born
with neonatal abstinence syndrome.

Finally, recipients may use funds for
programs or services to support
equitable access to services and reduce
racial, ethnic, or socioeconomic
disparities in access to high -quality
treatment.

Eligible uses of funds may include
services typically billable to
insurance 78 or services not typically
billable to insurance, such as peer
support groups, costs for residence in
supportive housing or recovery housing,
and the 988 National Suicide Prevention
Lifeline or other hotline services.

Recipients may also use funds in
conjunction with other federal grants or
programs (see section Program
Administration Provisions), though
78 However, SLFRF funds may not be used to
reimburse a service that was also billed to
insurance.
eligible services under SLFRF are not
limited to those eligible under existing
federal programs.

Given the public health emergency's
exacerbation of the ongoing opioid and
overdose crisis, Treasury highlights
several ways that funds may be used to
respond to opioid use disorder and
prevent overdose mortality.7°
Specifically, eligible uses of funds
include programs to expand access to
evidence -based treatment like
medications to treat opioid use disorder
(e.g., direct costs or incentives for
emergency departments, prisons, jails,
and outpatient providers to offer
medications and low -barrier treatment),
naloxone distribution, syringe service
programs, outreach to individuals in
active use, post -overdose follow up
programs, programs for diversion from
the criminal justice system, and
contingency management interventions.

Finally, for clarity, Treasury has
addressed the eligibility standard for
capital expenditures, or investments in
property, facilities, or equipment, in one
section of this Supplementary
Information; see section Capital
Expenditures in General Provisions:

Other. Examples of capital expenditures
related to behavioral health that
Treasury recognizes as eligible include
behavioral health facilities and
equipment (e.g., inpatient or outpatient
mental health or substance use
treatment facilities, crisis centers,
diversion centers), as long as they
adhere to the standards detailed in the
Capital Expenditures section.
d. Preventing and Responding to
Violence
Background: The interim final rule
highlighted that some types of violence
had increased during the pandemic and
that the ability of victims to access
services had decreased, noting as an
example the challenges that individuals
affected by domestic violence face in
accessing services. Accordingly, the
interim final rule enumerated as an
eligible use, in disproportionately
impacted communities, evidence -based
community violence intervention
programs. Following the release of the
interim final rule, Treasury received
several recipient questions regarding
whether and how funds may be used to
respond to an increase in crime,
79 In line with the Department of Health and
Human Services, Overdose Prevention Strategy,
https://www.hhs.gov/overdose-prevention/ , and the
Office of National Drug Control Policy,
Administration's Statement on Drug Policy
Priorities for Year One (April 1, 2021), https://
www.whitehouse.gov/wp-content/uploads/2021/03/
Bi d enHarri s-Sta tem en t -o f-Drug-Policy-Pri on ti es- April-1.pdf.
violence, or gun violence in some
communities during the pandemic.

Treasury released further guidance
identifying how enumerated eligible
uses and eligible use categories under
the interim final rule could support
violence reduction efforts, including
rehiring public sector staff, behavioral
health services, and services to address
negative economic impacts of the
pandemic that may aid victims of crime.

The guidance also identified an
expanded set of enumerated eligible
uses to address increased gun violence.

Public Comment: Several commenters
expressed support for this use of funds.

Treasury Response: In the final rule,
Treasury is maintaining enumerated
eligible uses in this area and clarifying
how to apply eligibility standards.

Throughout the final rule, enumerated
eligible uses should respond to an
identified impact of the COVID-19
public health emergency in a reasonably
proportional manner to the extent and
type of harm experienced. Many of the
enumerated eligible uses —like
behavioral health services, services to
improve employment opportunities, and
services to address educational
disparities in disproportionately
impacted communities —that respond to
the public health and negative economic
impacts of the pandemic may also have
benefits for reducing crime or aiding
victims of crime. For example, the
pandemic exacerbated the impact of
domestic violence, sexual assault, and
human trafficking; enumerated eligible
uses like emergency housing assistance,
cash assistance, or assistance with food,
childcare, and other needs could be
used to support survivors of domestic
violence, sexual assault, or human
trafficking who experienced public
health or economic impacts due to the
pandemic.

Public Comment: Several commenters
expressed support for community
violence intervention programs or
argued that traditional public safety
approaches had negatively impacted the
social determinants of health in their
communities. Several commenters
recommended inclusion of approaches
like mental health or substance use
diversion programs.

Treasury Response: Treasury
recognizes the importance of
comprehensive approaches to
challenges like violence. The final rule
includes an enumerated eligible use for
community violence intervention
programs in all communities, not just
the disproportionately impacted
communities eligible under the interim
final rule. Given the increased rate of
violence during the pandemic, Treasury
has determined that this enumerated

Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4357
eligible use is responsive to the impacts
of the pandemic in all communities.

The final rule incorporates guidance
issued after the interim final rule on
specifically types of services eligible,
including:
• Evidence -based practices like
focused deterrence, street outreach,
violence interrupters, and hospital -
based violence intervention models,
complete with wraparound services
such as behavioral therapy, trauma
recovery, job training, education,
housing and relocation services, and
financial assistance; and
• Capacity -building efforts at
community violence intervention
programs like funding more
intervention workers, increasing their
pay, providing training and professional
development for intervention workers,
and hiring and training workers to
administer the programs.

Public Comment: Some commenters
sought further clarification on whether
some of the enumerated eligible uses are
considered responsive to all crime,
violent crime, or gun violence.

Treasury Response: Enumerated
eligible uses that respond to an increase
in gun violence may be pursued in
communities experiencing an increase
in gun violence associated with the
pandemic, specifically: (1) Hiring law
enforcement officials —even above pre -
pandemic levels —or paying overtime
where the funds are directly focused on
advancing community policing
strategies for gun violence, (2)
additional enforcement efforts to reduce
gun violence exacerbated by the
pandemic, including prosecuting gun
traffickers, dealers, and other parties
contributing to the supply of crime
guns, as well as collaborative federal,
state, and local efforts to identify and
address gun trafficking channels, and (3)
investing in technology and equipment
to allow law enforcement to more
efficiently and effectively respond to the
rise in gun violence resulting from the
pandemic, for example technology to
assist in the identification of guns
whose serial numbers have been
damaged.

3. Negative Economic Impacts
a. Assistance to Households
Background
While the U.S. economy is now on the
path to a strong recovery, the public
health emergency, including the
necessary measures taken to protect
public health, resulted in significant
economic and financial hardship for
many Americans. As businesses closed,
consumers stayed home, schools shifted
to remote education, and travel declined
precipitously, over 22 million jobs were
lost in March and April 2020.80 One
year later, in April 2021, the economy
still remained over 8 million jobs below
its pre -pandemic peak,81 and the
unemployment rate hovered around 6
percent.S2
In the months since Treasury issued
the interim final rule in May 2021, the
economy has made large strides in its
recovery. The economy gained over 4
million jobs in the seven months from
May to November 2021; 83 the
unemployment rate fell more than 1.5
percentage points to 4.2 percent, which
is the lowest rate since February 2020; S4
and the size of the nation's economy
surpassed the pre -pandemic peak in the
second quarter of 2021.85
While the economy has made
immense progress in its recovery since
May 2021, the economy has also faced
setbacks that illustrate the continued
risks to the recovery. As the Delta
variant spread across the country this
summer and fall, the United States faced
another severe wave of cases, deaths,
and strain on the healthcare system,
which contributed to a slowdown in the
pace of recovery in the third quarter.86
Supply chain disruptions have also
demonstrated the difficulties of
restarting a global economy.87
Moreover, although many Americans
have returned to work as of November
2021, the economy remains 3.9 million
jobs below its pre -pandemic peak,88 and

2.4 million workers have dropped out of
the labor market altogether relative to
February 2020.89 Thus, despite much
80 U.S. Bureau of Labor Statistics, All Employees,
Total Nonfarm [PAYEMS], retrieved from FRED,
Federal Reserve Bank of St. Louis; https://
fred.stlouisfed.org/series/PAYEMS (last visited
December 7, 2021).
81 id.
82 U.S. Bureau of Labor Statistics, Unemployment
Rate [UNRATE], retrieved from FRED, Federal
Reserve Bank of St. Louis; https://fred .
stlouisfed.org/series/UNRATE (last visited
December 7, 2021).
83 U.S. Bureau of Labor Statistics, supra note 80.
84 U.S. Bureau of Labor Statistics, supra note 82.
85 U.S. Bureau of Economic Analysis, Real Gross
Domestic Product [GDPC1], retrieved from FRED,
Federal Reserve Bank of St. Louis, https://fred .
stlouisfed.org/series/GDPC1 (last visited December
7, 2021).
86 U.S. Department of the Treasury, Economy
Statement by Catherine Wolfram, Acting Assistant
Secretary for Economy Policy, for the Treasury
Borrowing Advisory Committee (November 1,
2021), available at https://home.treasury.gov/news/
press-releases/jy0453.
87 Yuka Hayashi, IMF Cuts Global Growth
Forecast Amid Supply -Chain Disruptions,
Pandemic Pressures, Wall Street Journal (October
12, 2021), available at https://www.wsj.com/
articles/imf-cuts-global-growth forecast -amid -
supply -chain -disruptions -warns -of -in flation-risks- 11634043601.
88 U.S. Bureau of Labor Statistics, supra note 80.
89 U.S. Bureau of Labor Statistics, Civilian Labor
Force Level [CLF160V], retrieved from FRED,
progress, there is a continued need to
respond to the pandemic's economic
effects to ensure a full, broad -based, and
equitable recovery.

Indeed, the pandemic's economic
impacts continue to affect some
demographic groups more than others.

Rates of unemployment remain
particularly severe among workers of
color and workers with lower levels of
educational attainment; for example, the
overall unemployment rate in the
United States was 4.2 percent in
November 2021, but certain groups saw
much higher rates: 6.7 percent for Black
workers, 5.2 percent for Hispanic or
Latino workers, and 5.7 percent for
workers without a high school
diploma.90 Job losses have also been
particularly steep among low -wage
workers, with these workers remaining
furthest from recovery as of the end of
2020.91 A severe recession, and its
concentrated impact among low-income
workers, has amplified food and
housing insecurity, with an estimated
nearly 20 million adults living in
households where there is sometimes or
often not enough food to eat and an
estimated 12 million adults living in
households that were not current on
rent.92
While economic effects have been
seen across many communities, there
are additional disparities by race and
income. For example, approximately
Federal Reserve Bank of St. Louis, https://fred .
stlouisfed.org/series/CLFI6OV (last visited
December 7, 2021).
90 U.S. Bureau of Labor Statistics, Labor Force
Statistics from the Current Population Survey:

Employment status of the civilian population by sex
and age (December 6, 2021), https://www.bls.gov/
news.release/empsit.t0l.htm (last visited December
7, 2021); U.S. Bureau of Labor Statistics, Labor
Force Statistics from the Current Population
Survey: Employment status of the civilian
noninstitutional population by race, Hispanic or
Latino ethnicity, sex, and age (December 6, 2021),
https://www.bls.gov/web/empsit/cpseea04.htm (last
visited December 7, 2021); U.S. Bureau of Labor
Statistics, Labor Force Statistics from the Current
Population Survey: Employment status of the
civilian noninstitutional population 25 years and
over by educational attainment (December 6, 2021),
https://www.bls.gov/web/empsit/cpseea05.htm (last
visited December 7, 2021).
91 Elise Gould & Jori Kandra, Wages grew in 2020
because the bottom fell out of the low -wage labor
market, Economic Policy Institute (Feb. 24, 2021),
https://files.epi.org/pdf/219418.pdf . See also,
Michael Dalton et al., The K -Shaped Recovery:

Examining the Diverging Fortunes of Workers in the
Recovery from the COVID-19 Pandemic using
Business and Household Survey Microdata, U.S.

Bureau of Labor Statistics Working Paper Series
(July 2021), https://www.bls.gov/osmr/research-
papers/2021 /pdf/ec210020. pd f.
92 Center on Budget and Policy Priorities,
Tracking the COVID-19 Recession's Effects on
Food, Housing, and Employment Hardships,
h ttp s: //www. cb p p. org/research /poverty -an d -
inequality/tracking-the-covid-19-economys-effects-
onfood-housing-and (last visited December 17,
2021).

4358 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations half of low-income, Black, and Hispanic
parents reported difficulty covering
costs related to food, housing, utility, or
medical care.93 Over the course of the
pandemic, inequities also manifested
along gender lines, as schools closed to
in -person activities, leaving many
working families without childcare
during the day.94 Women of color have
been hit especially hard: The labor force
participation rate for Black women has
fallen by 3.6 percentage points 95 during
the pandemic as compared to 1.3
percentage points for Black men 96 and

1.7 percentage points for White
women.97
As the economy recovers, the effects
of the pandemic -related recession may
continue to impact households,
including a risk of longer -term effects on
earnings and economic potential. For
example, unemployed workers,
especially those who have experienced
longer periods of unemployment, earn
lower wages over the long term once
rehired.98 In addition to the labor
market consequences for unemployed
workers, recessions can also cause
longer -term economic challenges
93 Michael Karpman, Dulce Gonzalez, Genevieve
M. Kenney, Parents Are Struggling to Provide for
Their Families during the Pandemic, Urban
Institute (May 2020), https://www.urban.org/
research/publication/paren ts-are-struggling-
provide-their-families-d uring-pandemic?utm_
source=urban_researcher&utm_
medi um=email&utm_cam paign=covid_
parents&utm_term=lhp.
94 Women have carried a larger share of childcare
responsibilities than men during the COVID-19
crisis. See, e.g., Gema Zamarro & Maria J. Prados,
Gender differences in couples' division of
childcare, work and mental health during COVID-
19, Rev. Econ. Household 19:11-40 (2021),
available at https://link.springer.com/article/

10.1007/s11150-020-09534-7; Titan Alon et al., The
Impact of COVID-19 on Gender Equality, National
Bureau of Economic Research Working Paper 26947
(April 2020), available at https://www.nber.org/
papers/w26947.
9s U.S. Bureau of Labor Statistics, Labor Force
Participation Rate -20 Yrs. & Over, Black or African
American Women [LNS11300032], retrieved from
FRED, Federal Reserve Bank of St. Louis; https://
fred.stlouisfed.org/series/LNS11300032 (last visited
December 7, 2021).
96 U.S. Bureau of Labor Statistics, Labor Force
Participation Rate -20 Yrs. & Over, Black or African
American Men [LNS11300031], retrieved from
FRED, Federal Reserve Bank of St. Louis; https://
fred.stlouisfed.org/series/LNS11300031 (last visited
December 7, 2021).
97 U.S. Bureau of Labor Statistics, Labor Force
Participation Rate -20 Yrs. & Over, White Women
[LNS11300029], retrieved from FRED, Federal
Reserve Bank of St. Louis; https://fred.stlouis
fed.org/series/LNS11300029 (last visited December
7, 2021).
98 See, e.g., Michael Greenstone & Adam Looney,
Unemployment and Earnings Losses: A Look at
Long -Term Impacts of the Great Recession on
American Workers, Brookings Institution (Nov. 4,
2011), https://www.brookings.edu/blog/jobs/2011/
11 /04/unem ployment-and-earnings-losses-a-look-
a t -1 ong-term -impacts-o f -the -great -recession -on- american-workers/.
through, among other factors, damaged
consumer credit scores 99 and reduced
familial and childhood wellbeing.1oo
These potential long-term economic
consequences underscore the continued
need for robust policy support.

Low- and moderate -income
households, those with income levels at
or below 300 percent of the federal
poverty level (FPL), face particular
hardships and challenges. These
households report much higher rates of
food insecurity and housing hardships
than households with higher incomes.

For example, households with incomes
at or below 300 percent FPL are several
times more likely to have reported
struggling with food insecurity
compared to households with income
above 300 percent FPL.101 Similarly,
low- and moderate -income households
reported being housing insecure 1°2 at
rates more than twice as high as higher -
income households, and low- and
moderate -income households reported
housing quality hardship 103 at rates
statistically significantly greater than
the rate for higher -income
households.104 The economic crisis
caused by the pandemic worsened
economic outcomes for workers in many
low- and moderate -income households.

Industries that employed low -wage
workers experienced a disproportionate
level of job loss. For example, from
February 2020 to February 2021, the
hospitality and leisure industry lost
nearly 3.5 million jobs.105 While the
99 Chi Chi Wu, Solving the Credit Conundrum:

Helping Consumers' Credit Records Impaired by the
Foreclosure Crisis and Great Recession, National
Consumer Law Center (Dec. 2013), https://
www.ncic.org/images/pd f/credit_reports/report-
credit-conundrum-2013. pd f.
100Irwin Garfinkel, Sara McLanahan, Christopher
Wimer, eds., Children of the Great Recession,
Russell Sage Foundation (Aug. 2016), available at
https://www.russellsage . org/publications/children-
great-recession.
101 Kyle J. Casewell and Stephen Zuckerman,
Food Insecurity, Housing Hardship, and Medical
Care Utilization, Urban Institute (June 2018),
available at https://www.urban.org/sites/default/
files/publication/98701/2001896 foodinsecurity_
h o u singh and sh i p_m e d i cal care u til iza ti on_ finalized.pdf.
192 Housing insecurity is defined as not paying
the full amount of rent or mortgage and/or utility
bills (gas, oil, or electricity) sometime in the
previous 12 months.
103 Housing quality hardship is defined as an
affirmative response to one or more questions
related to problems with a respondent's physical
dwelling: Pests and/or insects; leaking roof or
ceiling; windows that are broken or cannot shut;
exposed electrical wires; broken plumbing (toilet,
hot water, other); holes in walls, ceiling, or floor;
no appliances (refrigerator or stove); and no phone
(of any kind).
1941d.
105 Elise Gould and Melat Kassa. Low -wage, low -
hours workers were hit hardest in the COVID-19
recession: The State of Working America 2020
employment report, Economic Policy Institute (May
entire industry was impacted, 72
percent of the job losses occurred in the
lowest wage service occupations
compared to only a 6 percent rate of job
loss in the highest wage management
and finance jobs.106 Similar trends exist
in other heavily impacted industries. In
public education, the lowest wage
occupations, service and transportation
jobs, saw a job loss rate of 20 and 26
percent, respectively.107 During that
same time period, the highest wage
occupations in public education,
management, actually saw jobs increase
by 7 percent.1o8
While many households suffered
negative economic outcomes as a result
of the COVID-19 pandemic and
economic recession, households with
low incomes were impacted in
disproportionate and exceptional ways.

From January 2020 to March 2021, low -
wage workers experienced job loss at a
rate five times higher than middle -wage
workers, and high -wage workers
actually experienced an increase in job
opportunities.109 Because workers in
low-income households were more
likely to lose their job or experience
reductions in pay, those same
households were also more likely to
experience economic hardships like
trouble paying utility bills, affording
rent or mortgage payments, purchasing
food, and paying for medical
expenses.11O The disproportionate
negative impacts the pandemic has had
on low-income families extend beyond
financial insecurity. For example, low-
income families have reported higher
levels of social isolation, stress, and
other negative mental health outcomes
during the pandemic. While over half of
all U.S. adults report that their mental
health was negatively affected by the
pandemic, adults with low incomes
reported major negative mental health
impacts at a rate nearly twice that of
adults with high incomes.111
2021), available at https://www.epi.org/publication/
swa-2020-employment-report/.
los 7d.
107 Id.
108 id.
199R. Chetty, J. Friedman, N. Hendren, M.

Stepner, & Team, T. O. I., The Economic Impacts
of COVID-19: Evidence from a New Public Database
Built Using Private Sector Data (No. w27431; p.
w27431) (2020), National Bureau of Economic
Research. https://doi.org/10.3386/w27431 .
110 M. Despard, Michal Grinstein-Weiss, Yung
Chun, and Stephen Roll, COVID-19 job and income
loss leading to more hunger and financial hardship,
Brookings Institute (July 13, 2020), https://
www.brookings.edu/blog/upfront/2020/07/13/
covid-19job-and-income-loss-leading-to-more-
h unger-and-financial-hardship/.
111N. Panchal, R. Kamal, C. Munana, & P.

Chidambaram, The Implications of COVID-19 for
Mental Health and Substance Use, Kaiser Family
Foundation (February 10, 2021), https://

Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 /Rules and Regulations 4359 Summary of Interim Final Rule and
Final Rule Structure
Summary: The interim final rule
provided a non -exhaustive list of
enumerated eligible uses to respond to
the negative economic impacts of the
pandemic through assistance to
households, as well as a standard for
assessing whether uses of funds beyond
those enumerated are eligible.

The interim final rule described
enumerated eligible uses for assistance
to households in several categories: (1)
Assistance to unemployed workers, (2)
state Unemployment Insurance Trust
Funds, (3) assistance to households, and
(4) expenses to improve the efficacy of
economic relief. Note that the interim
final rule posed several questions to the
public on enumerated eligible uses for
assistance to households; comments on
these questions are addressed in the
relevant subject matter section below.

In addition, in recognition that pre-
existing health, economic, and social
disparities contributed to
disproportionate pandemic impacts in
certain communities, the interim final
rule also provided a broader list of
enumerated eligible uses to respond to
the pandemic in disproportionately
impacted communities, specifically: (1)
Building stronger communities through
investments in housing and
neighborhoods, (2) addressing
educational disparities, and (3)
promoting healthy childhood
environments. In the interim final rule,
under the Public Health section,
recipients could also provide services to
address health disparities and increase
access to health and social services;
these eligible uses have been re-
organized into the Assistance to
Households section to consolidate
responses in disproportionately
impacted communities and enhance
clarity.

This section addresses enumerated
eligible uses in the final rule to respond
to negative economic impacts to
households. As a reminder, recipients
may presume that a household or
population that experienced
unemployment, experienced increased
food or housing insecurity, or is low or
moderate income experienced negative
economic impacts resulting from the
pandemic, and recipients may provide
services to them that respond to these
impacts, including these enumerated
eligible uses.

For guidance on how to determine
whether a particular use, beyond those
enumerated, is eligible; further detail on
www.kff.org/coronavirus-covid-19/issue-brief/the-
implications-of-covid-19-for-mental-health-and-
substance-use/.
which households and communities are
presumed eligible for services; and how
to identify eligible households and
communities beyond those presumed
eligible, see section General Provisions:

Structure and Standards.

Reorganizations and Cross -
References: The final rule reorganizes
all enumerated eligible uses for
impacted and disproportionately
impacted households into the section
Assistance to Households, with the
exception that expenses to improve the
efficacy of economic relief has been re -
categorized into a different section of
the final rule for increased clarity; for
discussion of that use category, see
section General Provisions: Other.

Note that in conducting this
reorganization, and based on further
analysis and in response to comments,
Treasury has determined that several
enumerated uses included in the
interim final rule for disproportionately
impacted communities are directly
responsive to negative economic
impacts experienced by impacted
households. In the final rule, these uses
have been moved from
"disproportionately impacted" to
"impacted" households accordingly,
making these services available to both
disproportionately impacted and
impacted households. These uses
include assistance applying for public
benefits or services; programs or
services that address or mitigate the
impacts of the COVID-19 public health
emergency on childhood health or
welfare, including childcare, early
learning services, programs to provide
home visits, and services for families
involved in the child welfare system
and foster youth; programs to address
the impacts of lost instructional time for
students; 112 and programs or services
that address housing insecurity, lack of
affordable housing, or homelessness.

The following activities remain
enumerated eligible uses for
disproportionately impacted
households: Remediation of lead paint
or other lead hazards; housing vouchers
and assistance relocating to
neighborhoods with higher levels of
economic opportunity; and programs or
services that address educational
disparities, including assistance to high -
poverty school districts to advance
equitable funding across districts and
geographies and evidence -based
services to address the academic, social,
emotional, and mental health needs of
students.
112 For which recipients may presume that any
student who did not have access to in -person
instruction for a significant period of time was
impacted by the pandemic.

Enumerated Eligible Uses for Impacted
Households
The interim final rule included
several enumerated eligible uses to
provide assistance to households or
populations facing negative economic
impacts due to COVID-19. Enumerated
eligible uses included: Food assistance;
rent, mortgage, or utility assistance;
counseling and legal aid to prevent
eviction or homelessness; emergency
assistance for burials, home repairs,
weatherization, or other needs; internet
access or digital literacy assistance; cash
assistance; or job training to address
negative economic or public health
impacts experienced due to a worker's
occupation or level of training. It also
posed a question as to what other types
of services or costs Treasury should
consider as eligible uses to respond to
the negative economic impacts of
COVID-19.

This section addresses each of these
enumerated eligible uses in turn, with
the exception of job training, which has
been re -categorized for increased clarity
to the eligible use for "assistance to
unemployed and underemployed
workers." In general, commenters
supported inclusion of these
enumerated eligible uses to address key
economic needs among households due
to the pandemic, and Treasury is
maintaining these eligible uses in the
final rule, in line with commenters'
recommendations.

1. Food assistance. The interim final
rule included an enumerated eligible
use for food assistance. Some
commenters expressed support for this
eligible use and emphasized the
importance of aid to address food
insecurity. Some commenters raised
questions as to whether food assistance
funds could be used to augment services
provided through organizations like
food banks, churches, and other food
delivery services, or generally be sub -
awarded to these organizations.

Treasury Response: Treasury is
maintaining this enumerated eligible
use without change. Recipients may, as
was the case under the interim final
rule, administer programs through a
wide range of entities, including
nonprofit and for-profit entities, to carry
out eligible uses on behalf of the
recipient government (see section
Distinguishing Subrecipients versus
Beneficiaries). Further, Treasury is
clarifying that capital expenditures
related to food banks and other facilities
primarily dedicated to addressing food
insecurity are eligible; recipients
seeking to use funds for capital
expenditures should refer to the section
Capital Expenditures in General

4360 Federal Register / Vol. 87, No. 18 /Thursday, January 27, 2022 /Rules and Regulations Provisions: Other for additional
eligibility standards that apply to uses
of funds for capital expenditures.

2. Emergency housing assistance. The
interim final rule included an
enumerated eligible use for rent,
mortgage, or utility assistance and
counseling and legal aid to prevent
eviction or homelessness.

Public Comment: Several commenters
supported the inclusion of eviction
prevention activities as an eligible use
given the high number of households
behind on rent and potentially at risk of
eviction. Following release of the
interim final rule, Treasury had also
received requests for elaboration on the
types of eligible services in this
category. Some commenters also
recommended including assistance to
households for delinquent property
taxes, for example to prevent tax
foreclosures on homes, as an
enumerated eligible use.

Treasury Response: In response to
requests for elaboration on the types of
eligible services for eviction prevention,
Treasury has provided further guidance
that these services include "housing
stability services that enable eligible
households to maintain or obtain
housing, such as housing counseling,
fair housing counseling, case
management related to housing stability,
outreach to households at risk of
eviction or promotion of housing
support programs, housing related
services for survivors of domestic abuse
or human trafficking, and specialized
services for individuals with disabilities
or seniors that support their ability to
access or maintain housing," as well as
"legal aid such as legal services or
attorney's fees related to eviction
proceedings and maintaining housing
stability, court -based eviction
prevention or eviction diversion
programs, and other legal services that
help households maintain or obtain
housing." 113 Treasury also emphasized
that recipients may work with court
systems, nonprofits, and a wide range of
other organizations to implement
strategies to support housing stability
and prevent evictions.

In the final rule, Treasury is
maintaining these enumerated eligible
uses, including those described in the
interim final rule and later guidance, in
line with commenters'
recommendations. To enhance clarity,
Treasury is also elaborating on some
types of services included under this
eligible use category; this remains a
113 See FAQ 2.21. Coronavirus State and Local
Fiscal Recovery Funds, Frequently Asked
Questions, as of July 19, 2021; https://
home. treasury.gov/system/files/136/SLFRPFAQ. pd f.
non -exhaustive list of eligible services.

For example, eligible services under this
use category include: Rent, rental
arrears, utility costs or arrears (e.g.,
electricity, gas, water and sewer, trash
removal, and energy costs, such as fuel
oil), reasonable accrued late fees (if not
included in rental or utility arrears),
mortgage payment assistance, financial
assistance to allow a homeowner to
reinstate a mortgage or to pay other
housing -related costs related to a period
of forbearance, delinquency, or default,
mortgage principal reduction,
facilitating mortgage interest rate
reductions, counseling to prevent
foreclosure or displacement, relocation
expenses following eviction or
foreclosure (e.g., rental security
deposits, application or screening fees).

Treasury is clarifying that assistance to
households for delinquent property
taxes, for example to prevent tax
foreclosures on homes, was permissible
under the interim final rule and
continues to be so under the final rule.

In addition, Treasury is also clarifying
that recipients may administer utility
assistance or address arrears on behalf
of households through direct or bulk
payments to utility providers to
facilitate utility assistance to multiple
consumers at once, so long as the
payments offset customer balances and
therefore provide assistance to
households.

This eligible use category also
includes emergency assistance for
individuals experiencing homelessness,
either individual -level assistance (e.g.,
rapid rehousing services) or assistance
for groups of individuals (e.g., master
leases of hotels, motels, or similar
facilities to expand available shelter).

Further, Treasury is clarifying that
transitional shelters (e.g., temporary
residences for people experiencing
homelessness) are eligible capital
expenditures. Recipients seeking to use
funds for capital expenditures should
refer to the section Capital Expenditures
in General Provisions: Other for
additional eligibility standards that
apply to uses of funds for capital
expenditures.

Note that this enumerated eligible use
describes "emergency housing
assistance," or assistance for responses
to the immediate or near -term negative
economic impacts of the pandemic. The
final rule also clarifies and expands the
ability of recipients to use SLFRF funds
to address the general lack of affordable
housing and housing challenges
underscored by the pandemic. For
discussion of affordable housing eligible
uses, including services that primarily
increase access to affordable, high -
quality housing and support stable
housing and homeownership over the
long term, see the eligible use for
"promoting long-term housing security:

Affordable housing and homelessness."

3. Emergency assistance for pressing
needs: Burials, home repairs,
weatherization, or other needs. The
interim final rule included an
enumerated eligible use for emergency
assistance for burials, home repairs,
weatherization, and other needs; these
types of programs may provide
emergency assistance for pressing and
unavoidable household needs. Treasury
did not receive comments on this
eligible use and is maintaining it in the
final rule.

Background on Home Repairs and
Weatherization: The economic
downturn has meant fewer households
had the resources needed to make
necessary home repairs and
improvements. In May 2021, 28 percent
of landlords reported deferring
maintenance and 27 percent of tenants
reported maintenance requests going
unanswered.114 While small and
cosmetic repairs can often wait,
deferring major repairs, such as
plumbing needs, can result in unsafe
and unhealthy living environments and,
eventually, the need for more expensive
repairs and fixes.

In addition to repairs, many homes
are in need of weatherization.

Weatherization assistance helps low -
and moderate -income Americans save
energy, reduce their utility bills, and
keeps them and their homes safe. One
in three households is energy
insecure,115 meaning they do not have
the ability to meet their energy needs.116
Weatherization efforts are particularly
important for low- and moderate -
income households. Households of
color, renters, and households with low
or moderate incomes are all more likely
to report energy insecurity.117 These
114 Jung Hyun Choi, Laurie Goodman, and Daniel
Pang, The Pandemic Is Making It Difficult for Mom -
and -Pop Landlords to Maintain Their Properties,
Urban Institute (July 23, 2021), https://
www. urban.org/urban-wire/pandemic-making-it-
di fficul t -mom -and -pop -landlords -maintain -their - properties.
115 U.S. Energy Information Administration,
Residential Energy Consumption Survey (2017),
Retrieved from https://www.eia.gov/consumption/
residential /data/2015/h c/ph p/h c 11.1. ph p.

D. Hernandez, Understanding `energy insecurity'
and why it matters to health, Social Science &
Medicine, 167, 1-10 (2016), https://doi.org/

10.1016/j.socscimed.2016.08.029.
116 Hernandez, D. (2016). Understanding `energy
insecurity' and why it matters to health. Social
Science & Medicine, 167, 1-10. https://doi.org/

10.1016/j. socscimed.2016.08.029.
117U.S. Energy Information Administration,
Residential Energy Consumption Survey (RECS)
https://www.eia.gov/consumptionlresidential/data/
2015/hc/php/hc11.1.php. (last visited November 9,
2021)

Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 /Rules and Regulations 4361 disparities are partially a result of
economic hardship but are also caused
by inequitable access to housing with
proper insulation, up to date heating,
cooling, and ventilation systems, and
functioning and up to date lighting and
appliances.118 While programs that
address the effects of energy hardships,
like the Low -Income Home Energy
Assistance Program (LIHEAP), are
critical, weatherization attempts to
address root causes by addressing issues
that lead to energy insecurities.

4. Internet access or digital literacy
assistance. The interim final rule
included an enumerated eligible use for
assistance to households for internet
access or digital literacy assistance. This
enumerated eligible use, which
responds to the negative economic
impacts of the pandemic on a household
by providing assistance that helps them
secure internet access or increase their
ability to use computers and the
internet, is separate from the eligible use
category for investments in broadband
infrastructure, under Sections
602(c)(1)(D) and 603(c)(1)(D), which is
used to build new broadband networks
through infrastructure construction or
modernization. For discussion of
broadband infrastructure investment in
the final rule, see section Broadband
Infrastructure in Infrastructure.

Background: The COVID-19 public
health emergency has underscored the
importance of universally available,
high-speed, reliable, and affordable
broadband coverage as millions of
Americans rely on the internet to
participate in, among other critical
activities, school, healthcare, and work.

Recognizing the need for such
connectivity, SLFRF funds can be used
to make necessary investments in
broadband infrastructure that increase
access over the long term, as well as the
necessary supports to purchase internet
access or gain digital literacy skills
needed to complete activities of daily
living during the pandemic.

The National Telecommunications
and Information Administration (NTIA)
highlighted the growing necessity of
broadband in daily lives through its
analysis of NTIA internet Use Survey
data, noting that Americans turn to
broadband internet service for every
facet of daily life including work, study,
and healthcare.119 With increased use of
119 A. Drehobl, & L. Ross, Lifting the high energy
burden in America's largest cities: How energy
efficiency can improve low income and
underserved communities, American Council for an
Energy Efficient Economy (2016), https://
www.aceee.org/sites/default/files/publications/
researchreports/u 1602. pd f.
119 See, e.g., Nation Telecommunications and
Information Administration, More than Half of
technology for daily activities and the
movement by many businesses and
schools to operating remotely during the
pandemic, broadband has become even
more critical for people across the
country to carry out their daily lives.

However, even in areas where
broadband infrastructure exists,
broadband access may be out of reach
for millions of Americans because it is
unaffordable, as the United States has
some of the highest broadband prices in
the Organisation for Economic Co-
operation and Development (OECD).12o
According to a 2021 Pew Research
Center study, 20 percent of non -
broadband users say that the monthly
cost of home broadband is the primary
reason they do not have broadband at
home, and 40 percent say that cost is
one reason for their lack of home
broadband.121 Further, according to
another survey, 22 percent of parents
with homebound schoolchildren during
the COVID-19 pandemic say that it is
very or somewhat likely that their
children will have to rely on public wi-
fi to finish their schoolwork because
there is no reliable internet connection
at home; this percentage nearly doubles
for lower -income parents, 40 percent of
whom noted that their children will
have to rely on public wi-fi.122 The
same survey showed that 36 percent of
lower -income parents with homebound
children say their child will not be able
to complete their schoolwork because
they do not have access to a computer
at home.123
Public Comment: Many commenters
highlighted the importance of
broadband access during the pandemic,
including for remote work and
American Households Used the Internet for Health -
Related Activities in 2019, NTIA Data Show
(December 7, 2020), https://www.ntia.gov/blog/
2020/more-hal f-american-households-used-
i n to rn a t -h e al th -related -activities -2 019-n ti a -data - show; Nation Telecommunications and Information
Administration, Nearly a Third of American
Employees Worked Remotely in 2019, NTIA Data
Show (September 3, 2020) https://www.ntia.gov/
blog/2020/nearly-third-american-em ployees-
worked-remotely-2019-ntia-data-show; and
generally, Nation Telecommunications and
Information Administration, Digital Nation Data
Explorer (June 10, 2020), https://www.ntia.gov/
data/digital-nation-data-explorer.
129BroadbandSearch Blog Post, How Do U.S.

Internet Costs Compare To The Rest Of The World?,
available at https://www.broadbandsearch.net/blog/
internet-costs-compared-worldwide.
121 Pew Research Center, Mobile Technology and
Home Broadband 2021 (June 3, 2021), https://
www.pewresearch.org/internet/2021/06/03/mobile-
technology-and-home-broadband-2021 /.
122 Pew Research Center, 53% of Americans Say
the internet Has Been Essential During the COVID-
19 Outbreak (April 30, 2020), https://www.pew
research.org/internet/2020/04/30/53-of-americans-
sa y-th e -intern e t -h as -b een -essential -during-th e- covid-19-outbreak/.
129 M.
education, and argued that affordability
presents a major barrier to broadband
adoption by households; in other words,
many households live in areas that have
broadband infrastructure and service
available but are unable to purchase
service for their household due to the
high cost. These commenters argued
that broadband must be affordable to be
accessible.

Commenters proposed several
potential responses to affordability
concerns. Some commenters
recommended that building "gap
networks," or broadband networks built
at low cost to provide affordable service
in areas where it is lacking, be eligible
as assistance to households to respond
to the negative economic impacts of the
pandemic, even if they do not meet the
technical standards for eligibility under
the eligible use category of broadband
infrastructure investment, especially the
required speed standards for new
service. These commenters argued that
the networks have shown promise as a
timely means to expand access to
affordable broadband internet during
the pandemic, even if they may not
provide service speeds needed for more
intensive internet uses. Another
commenter requested eligible uses
include funding cellular towers to
decrease costs. One commenter
recommended that affordability should
be addressed through other programs
but not SLFRF given that affordability
and availability may require nuanced
solutions that would be complex to
combine.

Treasury Response: The interpretive
framework and enumerated eligible uses
allow recipients flexibility to address
identified pandemic impacts, including
through solutions that take into account
the particularized issues in their
community. Given extensive commenter
feedback on the importance of
affordability to achieving broadband
access, and the centrality of broadband
to participating in work, education,
healthcare, and other activities during
the pandemic, affordability programs
are an appropriate eligible use to
respond to the negative economic
impacts of the pandemic and Treasury
is maintaining the enumerated eligible
use for assistance to households for
internet access and digital literacy
programs in the final rule.

Building or constructing new
broadband networks is an infrastructure
investment and is governed by a
separate clause in the statute. Treasury
has addressed comments on "gap
networks" that require infrastructure
build -out in the section Broadband
Infrastructure in Infrastructure.

4362 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 /Rules and Regulations Public Comment: Some commenters
also use the term "gap networks" to
refer to equipment installed as part of
wi-fi systems, such as routers, repeaters,
and access points; this equipment
provides consumer access to an existing
broadband network and does not require
new network build -out or construction.

These commenters recommended that
Treasury permit, as assistance to
households for internet access,
investments in public wi-fi networks,
free wi-fi in public housing
communities, and other equipment that
offers internet access to end users by
utilizing existing broadband networks.

Other commenters recommended that
eligible uses in this category include
providing devices and equipment
necessary to access the internet, like
computers and routers, directly to low-
income households.

Treasury Response: Treasury has
determined that these services, which
expand internet access without
constructing new networks, are an
appropriate enumerated eligible use as
assistance to households to respond to
a negative economic impact, and they
are permitted under the final rule.

Treasury is clarifying that eligible uses
under this category can also include a
wide range of programs and services to
expand internet access and digital
literacy, such as subsidies for the cost of
internet service, other programs that
support adoption of internet service
where available, digital literacy
programs, or programs that provide
devices and equipment to access the
internet (e.g., programs that provide
equipment like tablets, computers, or
routers) to households. Recipients
seeking to use funds for equipment
should refer to the section Capital
Expenditures in General Provisions:

Other for additional eligibility standards
that apply to uses of funds for capital
expenditures (e.g., equipment, property,
and facilities).

5. Cash assistance. The interim final
rule included as an enumerated eligible
use cash assistance and provided that
cash transfers must be "reasonably
proportional" to the negative economic
impact they address and may not be
"grossly in excess of the amount needed
to address" the impact. In assessing
whether a transfer is reasonably
proportional, recipients may "consider
and take guidance from the per person
amounts previously provided by the
Federal Government in response to the
COVID-19 crisis," and transfers
"grossly in excess of such amounts" are
not eligible.

Public Comment: Several commenters
expressed support for this eligible use,
noting that this is a common policy tool
for some governments to support the
well-being of households and
individuals in their communities. Some
commenters requested that Treasury set
a specific dollar amount for permissible
cash transfers, and Treasury has also
received recipient questions on whether
specific types of transfers, such as those
to a substantial share of the population
in the jurisdiction, would be a
permissible use of funds.

Treasury Response: Treasury is
maintaining this enumerated eligible
use in the final rule, in line with
commenters' recommendations. Because
the final rule is intended to provide
flexibility to recipients to respond to the
particularized pandemic impacts in
their communities, which may vary in
type and intensity, setting a specific
dollar threshold for eligible cash
transfers would fail to recognize the
particularized needs of communities
and limit recipients' flexibility to tailor
their response to those needs.

To provide greater clarity, Treasury is
elaborating on the analysis that
recipients may undertake to assess the
eligibility of specific cash assistance
programs or transfers. Cash transfers,
like all eligible uses in this category,
must respond to the negative economic
impacts of the pandemic on a household
or class of households. For the reasons
discussed above, recipients may
presume that low- and moderate -income
households (as defined in the final rule),
as well as households that experienced
unemployment, food insecurity, or
housing insecurity, experienced a
negative economic impact due to the
pandemic.

Recipients may also identify other
households or classes of households
that experienced a negative economic
impact of the pandemic and provide
cash assistance that is reasonably
proportional to, and not grossly in
excess of, the amount needed to address
the negative economic impact. For
example, in the ARPA, Congress
authorized Economic Impact Payments
to households at certain income levels,
identifying and responding to a negative
economic impact of the pandemic on
these households.

Finally, Treasury has reiterated in the
final rule that responses to negative
economic impacts should be reasonably
proportional to the impact that they are
intended to address. Uses that bear no
relation or are grossly disproportionate
to the type or extent of harm
experienced would not be eligible uses.

Reasonably proportional refers to the
scale of the response compared to the
scale of the harm. It also refers to the
targeting of the response to beneficiaries
compared to the amount of harm they
experienced; for example, it may not be
reasonably proportional for a cash
assistance program to provide assistance
in a very small amount to a group that
experienced severe harm and in a much
larger amount to a group that
experienced relatively little harm.

6. Survivor's benefits. The interim
final rule included an enumerated
eligible use for survivor's benefits to
surviving family members of
individuals who have died from
COVID-19, including cash assistance to
widows, widowers, or dependents.

Public Comment: Treasury did not
receive any comments on the inclusion
of survivor's benefits as an enumerated
use for impacted households in the
interim final rule.

Treasury Response: This use of funds
remains eligible under the final rule.

Consistent with the general
reorganization noted above, the final
rule organizes survivor's benefits under
assistance to households to clarify that
households are the intended
beneficiaries of survivor's benefits.

7. Assistance accessing or applying
for public benefits or services.

Recognizing that eligible households
often face barriers to accessing public
benefits or services that improve health
and economic outcomes, the interim
final rule included as an enumerated
eligible use in disproportionately
impacted communities, public benefits
navigators to assist community members
with navigating and applying for
available federal, state, and local public
benefits or services. Treasury also
clarified in subsequent guidance after
the interim final rule that this eligible
use category would include outreach
efforts to increase uptake of the Child
Tax Credit.

Background: The under -enrollment of
eligible households in social assistance
programs is a well -recognized and
persistent challenge. There are many
reasons why a household may not be
receiving a particular benefit even
though they are eligible. For many
federal programs, enrollment processes
vary from state -to -state. Sometimes,
households are simply unaware that
they are eligible for a particular
benefit.124 For example, despite having
one of the highest rates of participation
of any benefits program, nearly 20
percent of eligible individuals do not
participate in the Supplementary
Nutritional Assistance Program
124 Amy Finkelstein & Matthew J Notowidigdo,
Take -Up and Targeting: Experimental Evidence
from SNAP, The Quarterly Journal of Economics,
vol 134(3), pages 1505-1556 (2019), https://
www.nber.org/papers/w24652 .

Federal Register / Vol. 87, No. 18 /Thursday, January 27, 2022 /Rules and Regulations 4363
(SNAP).125 In other cases, policies like
public charge and asset testing can
discourage otherwise eligible
households.126 While the gap between
households that need assistance and the
number of households participating in
public benefit programs has always
existed, narrowing that gap and
ensuring households receive the support
they need is critical in mitigating the
negative economic impacts of the
pandemic.

Public Comment: Treasury has also
received feedback from recipients and
stakeholders noting the need to increase
awareness and uptake of assistance
programs, including gaps that remain in
enrollment of eligible households in
programs to address the negative
economic impacts of the pandemic.127
Treasury Response: Treasury has
determined that this impact of the
pandemic is widely experienced across
many jurisdictions and programs or
services to increase awareness and
uptake of assistance programs would
respond to the pandemic's negative
economic impact in all communities. As
such, in the final rule, this use is eligible
for any impacted household or class of
households, not only in
disproportionately impacted
communities.

8. Promoting healthy childhood
environments. The interim final rule
included programs and services that
promote healthy childhood
environments as an enumerated eligible
use for disproportionately impacted
households. The interim final rule listed
three programs or services included
under this use: Childcare; programs to
provide home visits by health
professionals, parent educators, and
social service professionals to
individuals with young children to
provide education and assistance for
economic support, health needs, or
child development; and services for
child welfare -involved families and
foster youth to provide support and
128 United States Department of Agriculture,
Trends in Supplemental Nutrition Assistance
Program Participation Rates: Fiscal Year 2016 to
Fiscal Year 2018 (May 2021), https://fns-prod .
azureedge.net/sites/default/files/resource-files/
Tren d s2016-2 018. p d f.
128 Jeremy Barofsky et al., Spreading Fear: The
Announcement Of The Public Charge Rule Reduced
Enrollment hi Child Safety -Net Programs, Health
Affairs (October 2020), https://www.health
a ffairs. org/doi/full/10.1377/hltha ff.2020.00763.
127 See, e.g., U.S. Department of the Treasury, By
ZIP Code: Number of Children under Age 18 with
a Social Security Number Who Are Not Found on
a Tax Year 2019 or 2020 Tax Return but who
Appear on a Tax Year 2019 Form 1095 and
Associated Number of Policy Holders (June 2021),
https://home.treasmy.gov/system/files/131/
Estimated -Counts -of -Children -Unclaimed for-CTC-
by-ZIP-Code-2019.pdf.
education on child development,
positive parenting, coping skills, or
recovery for mental health and
substance use. The interim final rule
also included an enumerated eligible
use for early learning services in
disproportionately impacted
communities, to address disparities in
education.

Public Comment: Childcare and Early
Learning: Treasury received multiple
comments that were supportive of the
provision of childcare. Treasury has also
received multiple comments and
questions indicating that recipients have
identified a need for childcare for a
broader range of households and
communities, for example those that
may need childcare in order to return to
work, in addition to households and
communities disproportionately
impacted by the pandemic. Several
commenters expressed uncertainty
about how childcare facilities should
interact with the boundaries of a QCT.

Finally, one commenter recommended
that pre -K or early learning services
encompass care for infants and toddlers,
arguing that these types of care are often
more expensive or challenging to access
for families.

Background: Childcare and Early
Learning: As daycares and schools
closed in -person activities during the
pandemic, many working families were
left without childcare during the day.128
Although daycare centers and schools
have since reopened in many
communities, there remains a persistent
childcare shortage as childcare
employment levels have not fully
rebounded since the sharp decline in
childcare employment at the beginning
of the pandemic.129 As a result, working
parents in communities across the
country, and more specifically women,
may face challenges entering or
reentering the labor force.130
128 Women have carried a larger share of
childcare responsibilities than men during the
COVID-19 crisis. See, e.g., Gema Zamarro & Mari'a
J. Prados, Gender differences in couples' division of
childcare, work and mental health during COVID-
19, Rev. Econ. Household 19:11-40 (2021),
available at https://link.springer.com/article/

10.1007/s11150-020-09534-7; Titan Alon et al., The
Impact of COVID-19 on Gender Equality, National
Bureau of Economic Research Working Paper 26947
(April 2020), available at https://www.nber.org/
papers/w26947.
129 See, e.g., Center For The Study Of Child Care
Employment (CSCCE), Child Care Sector Jobs: BLS
Analysis (November 8, 2021), https://cscce .
berkeley.edu/child-care-sector-jobs-bls-analysis/;
Emma K. Lee, and Zachary Parolin. The Care
Burden during COVID-19: A National Database of
Child Care Closures in the United States, Socius
(January 2021), doi:10.1177/23780231211032028.
130 Jason Furman, Melissa Schettini Kearney, and
Wilson Powell, The Role of Childcare Challenges in
the US Jobs Market Recovery During the COVID-
19 Pandemic, NBER Working Paper No. 28934 (June
2021), https://www.nber.org/papers/w28934 .

Low-income households are also more
likely to lose access to quality
childcare.131 The widespread closure of
childcare centers combined with a lack
of access to paid family leave means
parents in low-income households are
more likely to experience a reduction of
income or leave their jobs due to a lack
of childcare options.132
Additionally, childcare providers
serving primarily low-income families
were less likely to remain open during
the pandemic because of tighter profit
margins and general community
financial insecurity, compared to
childcare providers serving primarily
high -income families.133 134
In addition to disruptions to
childcare, early learning services were
also significantly impacted by the
pandemic, and the disruption of these
services had widespread ramifications
for learning loss, parental support, and
equity. Early learning centers have seen
declined enrollment across the board,
though there was a larger dip in
enrollment for low-income
households.135 This lower enrollment
coincides with a diminishing workforce,
as similarly to childcare, early
childhood educators have been leaving
the profession due to long hours, low
pay,136 and health and safety
concerns.137 As a result, children's
school readiness has suffered, leading to
potential long-term impacts on life
outcomes.138 The impact also extended
131 U.S. Census Bureau, Phase 3.2 Household
Pulse Survey: Table 2. Childcare Arrangements in
the Last 4 Weeks for Children Under 5 Years Old,
by Selected Characteristics, (Washington: 2021),
available at https://www.census.gov/programs-
surveys/household-pulse-survey/data.html.
132 Id.
133 N. Kalluri, C. Kelly, & A. Garg, Child Care
During the COVID-19 Pandemic: A Bad Situation
Made Worse. Pediatrics (2021), https://doi.org/

10.1542/ped s.2020-041525.
134 National Association for the Education of
Young Children, Am I Next? Sacrificing to Stay
Open, Child Care Providers Face a Bleak Future
Without Relief (December 2020), https://
www.naeyc.org/sites/default/files/globally-shared/
downloads/PDF.
138 G. G. Weisenfeld, Impacts of Covid-19 on
Preschool Enrollment and Spending, New
Brunswick, NJ: National Institute for Early
Education Research (2021), https://nieer.org/wp-
content/uploads/2021/03/NIEER_Policy_Brief
Impacts-of-Covid-19on_Preschool_Enrollment and_
Spen ding_3_16_21. pd f.
138 Heather Long, 'The pay is absolute crap':

Child-care workers are quitting rapidly, a red flag
for the economy, Washington Post (September 19,
2021), https://www.washingtonpost.com/business/
2021 /09/19/childcare-workers-quit/.
132 Monash University, The emotional toll of
COVID-19 among early childhood educators
(August 5, 2020) https://lens.monash.edu/@
education/2020/08/05/1381001 /the-emotional-toll-
of-covid-19-among-early-childhood-educators.
138 Daphna Bassok and Anna Shapiro,
Understanding COVID-19-era enrollment drops
Continued

4364 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations to parents. Parents, especially mothers,
may face challenges reentering or
remaining in the workforce if early
learning services are unavailable.

Treasury Response: Childcare and
Early Learning Services: Treasury agrees
with commenters' analysis that
challenges accessing or affording
childcare have been widespread during
the pandemic, affecting many
jurisdictions and populations across the
country. Disruptions to early care and
learning services similarly have had
broad impact and likely result in
negative impacts for young children and
their parents. As such, these
enumerated eligible uses are generally
responsive to the negative economic
impacts of the pandemic in all
communities, not just in
disproportionately impacted
communities. Under the final rule,
childcare and early learning services are
available to impacted households or
classes of households, not just those
disproportionately impacted. These
eligible uses can include new or
expanded services, increasing access to
services, efforts to bolster, support, or
preserve existing providers and services,
and similar activities.

Further, Treasury is clarifying that
improvements to or new construction of
childcare, daycare, and early learning
facilities are eligible capital
expenditures. Recipients seeking to use
funds for capital expenditures should
refer to the section Capital Expenditures
in General Provisions: Other for
additional eligibility standards that
apply to uses of funds for capital
expenditures.

Public Comment: Home Visiting:

Treasury has also received questions
about whether the provision of home
visiting services would be responsive to
the health and mental health needs of
impacted new mothers, citing the
positive mental health impacts shown
on the mother as well as improved
outcomes for children.

Background: Home Visiting: Pregnant
and recently pregnant individuals are at
an increased risk for serious illness from
COVID-19.13° Furthermore, pregnant
individuals with COVID-19 are more
likely to experience preterm birth
(delivering the baby earlier than 37
among early -grade public school students,
Brookings Institution (February 22, 2021), https://
www.brookings.edu/blog/brown-center-chalkboard/
2021/02/22/understanding-covid-19-era-
enrollmen t -drops -among -early -grade -public -school - students/.
1as Centers for Disease Control and Prevention,
Pregnant and Recently Pregnant People, https://
www.cdc.gov/coronavirus/2019-ncov/nee d-extra-
precautions/pregnant- people.html (last visited
November 9, 2021).
weeks).14° In addition to heightened
health risks from COVID-19, pregnant
individuals may have experienced
significant changes to their prenatal care
during the pandemic 141 or may also
have experienced increased mental
health challenges, including high levels
of depression, anxiety, loneliness, and
post -traumatic stress during the
pandemic.142
Home visiting services provided to
families, particularly new mothers and
newborns, feature regular home visits
from trained nurses, social workers,
and/or counselors who provide health
care, mental health resources, positive
parenting support, support in making
personal health decisions, and
awareness of other potentially helpful
services. These functions have become
even more essential at mitigating
negative factors associated with the
pandemic. Home visits give
professionals a chance to flag potential
domestic violence, which has risen
worldwide over the course of the
pandemic.143 Racial health disparities
can also be driven down by home visits.

For example, Black women are more
likely to avoid hospitals during the
pandemic, and home visitors can help
either assuage concerns around
hospitals or give effective advice for
alternative methods of childbirth.144
Given the disproportionate effect of the
pandemic on people of color, home
visits are an essential equity tool that
tackle major negative effects of the
pandemic. These are just a few
selections from the evidence that
suggests many home visiting models can
have a positive effect on maternal
physical and mental health.145
Treasury Response: Home Visiting:

Given the widespread impact of
140 Id.
141 Sarah Javaid, Sarah Barringer, Sarah D
Compton, Elizabeth Kaselitz, Maria Muzik, Cheryl
A. Moyer, The impact of COVID-19 on prenatal
care in the United States: Qualitative analysis from
a survey of 2519 pregnant women, Midwifery,
Volume 98, 2021, 102991, ISSN 0266-6138, https://
doi.org/10.1016/j.midw.2021.102991.
142A Basu, HH Kim, R Basaldua, KW Choi, L
Charron, et al., A cross -national study of factors
associated with women's perinatal mental health
and wellbeing during the COVID-19 pandemic,
PLOS ONE 16(4): e0249780, (2021), https://doi.org/

10.1371 /jo urnal. pon e.0249780.
141 Amanda Taub, A New Covid-19 Crisis:

Domestic Abuse Rises Worldwide, New York Times
(April 6, 2020), https://www.nytimes.com/2020/04/
06/world/coronavirus-domestic-violence.html.
144 Xenia Shih Bion, Efforts to Reduce Black
Maternal Mortality Complicated by COVID-19,
California Health Care Foundation (April 20, 2020),
https://www . chcf. org/bl og/e fforts-red uce-black-
maternal-mortality-complicated-covid-19/.
146 U.S. Department of Health and Human
Services, Home Visiting Evidence of Effectiveness,
https ://homvee.acf.hhs.gov/outcomes/maternal %20
health/In %20Brief.

COVID-19 on pregnant and recently
pregnant individuals, Treasury is re -
categorizing home visiting services as an
eligible use for impacted communities,
not just disproportionately impacted
communities. Under the final rule, these
eligible uses are available to impacted
households or classes of households.

Public Comment: Child Welfare:

While the interim final rule noted that
certain types of assistance, particularly
around child development and
parenting, were eligible for child
welfare -involved families, Treasury has
received some recipient questions
asking whether financial, educational,
housing, or other supports and services
are eligible uses for foster youth,
including those aging out of the system,
and child welfare -involved families.

Other commenters asked about whether
funding for kinship care would be
eligible.

Background: Child Welfare: The
COVID-19 pandemic placed meaningful
strain on the child welfare and foster
care system. Court hearings were
delayed,146 essential mental health care
was shifted to a virtual environment,
and attendance and performance in
school among foster children dropped
sharply.147 Additionally, there was a
nationwide rise of new children
entering the foster care system and
many states placed temporary moratoria
on children aging out of the foster care
system.148 As these temporary moratoria
expire, additional support will be
needed to assist children exiting the
system.

Additionally, financial and material
hardship are causal factors in the
increase of new children entering the
foster care system, whether through loss
of a caregiver, domestic violence,149 or
other associated costs of the pandemic.

Therefore, support to decrease these
hardships will support families and
increase positive outcomes for youth
146 National Conference of State Legislatures,
Criminal Justice System Responses to COVID-19
(November 16, 2020), https://www.ncsl.org/
research/civil-and-criminal justice/criminal justice-
and-covid-19.aspx.
147 John Burton Advocates for Youth, The
Cumulative Impact of the Pandemic on Youth Who
Have Been in Foster Care or Homeless (May 2020)
https://jbay.org/wp-content/uploads/2021 /04/JBAY-
COVID-19-Im p a c t. p d f.
148 John Kelly, Next Week, Thousands of Foster
Youth Will Age Out on the Same Day (September
21, 2021), https://imprintnews.org/subscriber-
content/thousands-of-foster-youth-will-age-out-on-
the-same-day/59006.
146 Conrad-Hiebner, Aislinn, and Elizabeth
Byram, The Temporal Impact of Economic
Insecurity on Child Maltreatment: A Systematic
Review. Trauma, Violence, & Abuse, vol. 21, no. 1,
Jan. 2020, pp. 157-178, doi:10.1177/
1524838018756122.

Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4365 and families that may otherwise become
involved in the child welfare system.

Treasury Response: In the final rule,
Treasury is clarifying that services to
foster youth, including those aging out
of the system, and child welfare -
involved families may encompass a
wide array of financial, educational,
child development, or health supports,
or other supports necessary, including
supports for kinship care.

9. Addressing the impacts of lost
instructional time.

Public Comment: The interim final
rule included an enumerated eligible
use to address educational disparities in
disproportionately impacted
communities, recognizing that
underserved students have been more
severely impacted by the pandemic and
including responsive services for early
learning, enhance funding to high -
poverty districts, and providing
evidence -based services to address the
academic, social, emotional, and mental
health needs of students. Some
commenters expressed concerns that
learning loss or the negative impacts of
lost instructional time due to school
closures or remote education during the
pandemic had affected a significant
share of students in grades kindergarten
through twelve (K-12), including
students who may not fall within a
disproportionally impacted group.

Background: The COVID-19
pandemic resulted in the widespread
closure of schools across the nation.

While many schools and districts
reopened to in -person instruction or
implemented remote learning, the shift
was not immediate or without
consequence. Children who received
virtual only or combined remote and in -
person instruction were more likely to
report experiencing negative mental -
and physical health outcomes than
children who received in -person
instruction.15°
Treasury Response: Under the final
rule, addressing the impact of lost
instructional time and/or learning loss
is an enumerated eligible use for
impacted households. When providing
services to address lost instructional
time, recipients may presume that any
K-12 student who lost access to in -
person instruction for a significant
period of time has been impacted by the
pandemic and is thus eligible for
responsive services.
155 Verlenden JV, Pampati S, Rasberry CN, et al.

Association of Children's Mode of School
Instruction with Child and Parent Experiences and
Well -Being During the COVID-19 Pandemic—
COVID Experiences Survey, United States, October
8 —November 13, 2020. MMWR Morb Mortal Wkly
Rep 2021;70:369-376. DOI: http://dx.doi.org/

10.15585/mmwr.mm7011a1external icon.

Interventions or services that address
the impact of lost instructional time
may include offering high -quality
tutoring and other extended learning
opportunities, providing differentiated
instruction, implementing activities to
meet the comprehensive needs of
students, expanding and improving
language access for parents and families,
providing information and assistance to
parents and families on how they can
effectively support students, including
in a distance learning environment,
improving student engagement in
distance education, and administering
and using high -quality assessments to
assess students' academic progress,
among others. In designing services
under this eligible use, recipients may
wish to reference guidance from the
Department of Education on strategies
for addressing lost instructional time.151
The final rule also maintains a
separate enumerated eligible use for
addressing educational disparities in
disproportionately impacted
communities. This eligible use includes
services to address disparities in
educational outcomes that predate the
pandemic and amplified its impact on
underserved students; these include, for
example, enhanced funding to high -
poverty districts and providing
evidence -based services to address the
academic, social, emotional, and mental
health needs of students.

Finally, as described in the section
Public Health, recipients can provide a
broad range of behavioral health
services, including services for children
and youth in schools, to respond to the
impacts of the pandemic on mental
health and other behavioral health
issues. When providing behavioral
health services, recipients may presume
that the general public was impacted by
the pandemic and provide behavioral
health services to members of the
general public, including children and
youth in schools, without any further
analysis of impacts of the pandemic on
those individuals and whether the
service is responsive.

10. Promoting long-term housing
security: affordable housing and
homelessness. Under the interim final
rule, recipients may use SLFRF funds to
provide a set of housing services to
communities that have been
disproportionately impacted by the
pandemic. Specifically, the interim final
rule provided that programs or services
that address housing insecurity, lack of
affordable housing, or homelessness,
151 U.S. Department of Education, Strategies for
Using American Rescue Plan Funding to Address
the Impact of Lost Instructional Time, August 2021.

Retrieved from https://www2.ed.gov/documents/
coronavirus/lost-instructional-time. pd f.
were responsive to the negative
economic impacts of the pandemic
when provided to disproportionately
impacted households and communities.

The enumerated uses included
supportive housing or other programs or
services to improve access to stable,
affordable housing among individuals
who are homeless and development of
affordable housing to increase supply of
affordable and high -quality living units.

Many recipients have already
announced plans to use SLFRF funds
for affordable housing interventions in
all of these categories. Treasury received
many comments asking for additional
clarity or flexibility in these uses.

As detailed below, based on multiple
public comments and questions and
Treasury's subsequent analysis,
Treasury has determined that
supportive housing or other programs or
services to improve access to stable,
affordable housing among individuals
who are homeless, and the development
of affordable housing to increase supply
of affordable and high -quality living
units are responsive to the needs of
impacted populations, not only
disproportionately impacted
populations. This final rule reflects this
clarification and builds on the
objectives stated in the interim final rule
to improve access to stable, affordable
housing, including through
interventions that increase the supply of
affordable and high -quality living units,
improve housing security, and support
durable and sustainable
homeownership.

Finally, note that "emergency housing
assistance," or assistance for responses
to the immediate negative economic
impacts of the pandemic through
services like financial assistance for
rental arrears or mortgage payments, is
also an eligible use category for
assistance to households under the final
rule; see the eligible use for "emergency
housing assistance" above. The
provision of housing vouchers and
assistance relocating to neighborhoods
with higher levels of economic
opportunity remains an eligible use
under assistance to disproportionately
impacted households; for discussion,
see the eligible use for "housing
vouchers and assistance relocating"
below.

Background: Affordable Housing: It is
clear that the ongoing pandemic and
resulting economic crisis are having a
profound, long-term negative effect on
the pre-existing affordable housing
crisis facing low-income households .152
152 Consumer Financial Protection Bureau,
Housing insecurity and the COVID-19 pandemic
Continued

4366 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 /Rules and Regulations The combination of a large number of
higher -income households who have
weathered the pandemic without
significant income losses, low interest
rates, and housing supply constraints
exacerbated by the pandemic, have
driven a sharp increase in the sale price
of homes.153 Meanwhile, many low-
income renters and homeowners are
struggling with lost employment and
income and are behind on their housing
payments.154
Public Comment: Affordable Housing
Outside of Low -Income Geographies: A
major theme in comments was that
affordable housing interventions,
especially development of affordable
housing, should be allowed outside of
QCTs, as concentrating the supply of
affordable housing in low-income
geographies can have the effect of
increasing both concentrated poverty
and racial and economic segregation,
while locking lower -income households
in need of housing support out of high -
opportunity neighborhoods with access
to employment and amenities.

Treasury Response: Affordable
Housing Outside Low -Income
Geographies: As previously stated,
affordable housing is not confined to
low-income geographies under the
interim final rule. As discussed
elsewhere, the interim final rule
presumed that QCTs, as well as
communities served by Tribal
governments, were disproportionately
impacted for administrative
convenience, but recipients may
identify other populations, households,
or geographic areas with disparate
impacts of COVID-19 and provide
affordable housing services to them. For
example, under the interim final rule, a
city could determine that its low-
income residents faced disproportionate
impacts of COVID-19 and develop
affordable housing targeted to these
households. Such a scenario could
include, for example, affordable projects
(March 2020), https://files.consumerfinance.gov/f/
documents/cfpb_Housing_insecurity_and_the_
COVID-19_pan demic. pd f.
153 Joint Center For Housing Studies Of Harvard
University, The State of the Nation's Housing (June
2021), https://www.jchs.harvard.edu/sites/default/
files/reports/files/Harvard_ICHS_State_Nations_
Housing_2021.pdf.
154 Davin Reed and Eileen Divringi, Household
Rental Debt During COVID-19: Update for 2021,
Federal Reserve Bank of Philadelphia (2020),
available at: https://www.philadelphiafed.org/
comm unity-development/housing-and-
neighborhoods/household-rental-debt-during-covid-
19-update for -2021. Further, some research suggests
that liquidity may be a more important predictor of
default than other factors, including income or
equity. See Trading Equity for Liquidity (June
2019), available at https://www.jpmorganchase .
com/content/dam/jpmc/jpmorgan-chase-and-co/
institute/pdf/institute-trading-equity for-
liquidity.pdf.
in higher -income neighborhoods that
would allow residents to live closer to
jobs and well-resourced schools.

Additionally, as noted above,
Treasury is finalizing the rule with some
changes to the treatment of affordable
housing development designed to
clarify that permanent supportive
housing or other programs or services to
improve access to stable, affordable
housing among individuals who are
homeless, and the development of
affordable housing to increase supply of
affordable and high -quality living units,
are responsive to individuals and
households that were impacted by the
pandemic in addition to those that were
disproportionately impacted. This shift
is in line with commenters'
recommendations and consistent with
the facts described above, which
demonstrate that lack of supply of
affordable housing units contributed to
the pandemic's impact on housing
insecurity and unsustainable housing
cost burdens and that these impacts
were experienced broadly across the
country.

Public Comment: Eligible Activities:

Many commenters asked for clarity on
what types of activities (e.g., land
acquisition, construction, pre -
construction costs, operating costs, etc.)
are eligible uses of SLFRF, and what
affordability criteria must be applied to
affordable housing development.

Commenters encouraged Treasury to
allow the full array of affordable
housing activities, including particular
requests for broad flexibility for Tribal
communities, and to specify that
"development" should include
construction, preservation,
rehabilitation, and operation. Other
commenters requested clarification
about permissible program
administration approaches for
affordable housing, such as contracting
methods and distribution of funds.

Some commenters asked that
Treasury require SLFRF funds to be
focused on the lowest -income
households, who suffer the most severe
rent burdens and risks of housing
instability, and whose housing situation
has left them particularly vulnerable to
COVID-19. For example, one
commenter argued that SLFRF funds
should only be used to support
affordable housing for households
making 50 percent of AMI or less and
that recipients should be required to set
aside significant portions of any
developments for renters making 30
percent of AMI or less and persons with
physical and sensory disabilities. Other
commenters requested a more flexible
approach to affordable housing
definitions.

Treasury Response: Eligible Activities:

The final rule clarifies eligibility of
affordable housing development for
recipients; these uses were eligible
under the interim final rule, but
Treasury is providing further guidance
to enhance clarity and respond to
recipient and commenter questions.

As with all interventions to address
the negative economic impacts of the
pandemic, affordable housing projects
must be responsive and proportional to
the harm identified. This test may be
met by affordable housing development
projects —which may involve large
expenditures and capital investments —
if the developments increase the supply
of long-term affordable housing for low-
income households. While there may be
less costly (or non -capital) alternatives
to affordable housing development, a
comprehensive response to the
widespread housing challenges
underscored by the pandemic will
require the production of additional
affordable homes, and targeted
affordable housing development is a
cost-effective and proportional response
to this need.

For purposes of this test, Treasury
will presume that any projects that
would be eligible for funding under
either the National Housing Trust Fund
(HTF) or the Home Investment
Partnerships Program (HOME) are
eligible uses of SLFRF funds. Note that
these programs use different income
limits than the definition of low- and
moderate -income adopted by Treasury.

Given the severity of the affordable
housing shortage, and the ways in
which the pandemic has exacerbated
the need for affordable, high -quality
dwelling units, Treasury has determined
that the households served by these
federal housing programs have been
impacted by the pandemic and its
negative economic impacts and that
development of affordable housing
consistent with these programs is a
related and reasonably proportional
response to those impacts. Additionally,
affordable housing projects provided by
a Tribal government are eligible uses of
SLFRF if they would be eligible for
funding under the Indian Housing Block
Grant program, the Indian Community
Development Block Grant program, or
the Bureau of Indian Affairs Housing
Improvement Program. Alignment with
these programs, which define
"affordable housing" in a manner
consistent with a proportionate
response to the affordable housing
challenges faced by low- and moderate -
income households as a result of the
negative economic impacts of the
pandemic, is intended to give recipients
comfort and clarity as they design a

Federal Register / Vol. 87, No. 18 /Thursday, January 27, 2022 /Rules and Regulations 4367
wide variety of affordable housing
interventions, including production,
rehabilitation, and preservation of
affordable rental housing and, in some
cases, affordable homeownership units.

These programs allow the financing of
a wide range of affordable housing
activities and set clear eligibility criteria
that many recipients are already familiar
with.

Finally, to further support sustainable
and durable homeownership, recipients
may consider offering down payment
assistance, such as through
contributions to a homeowner's equity
at origination or that establish a post -
closing, mortgage reserve account on
behalf of the borrower that may be
utilized to make a missed or partial
mortgage payment at any point during
the life of the loan (e.g., if the borrower
faces financial stress). Homeownership
assistance that would be eligible under
the Community Development Block
Grant (at 24 CFR 507.201(n)) is also an
eligible use of SLFRF funds.

Public Comment: Permanent
Supportive Housing: Treasury has
received comments encouraging the use
of SLFRF funds for permanent
supportive housing. This is an eligible
use under the interim final rule: Both
the development of affordable housing
(including operating subsidies) and
wraparound services such as behavioral
health services, employment services,
and other supportive services, are
eligible responses to the public health
crisis or its negative economic impacts.

Treasury Response: The final rule
maintains the eligibility of permanent
supportive housing as an enumerated
use. Treasury is also clarifying that
other affordable housing developments
targeted to specialized populations are
also eligible, for example recovery
housing for individuals in recovery from
substance use.

Public Comment: Operating Expenses:

Commenters specifically asked that
Treasury allow the use of SLFRF funds
for operating expenses of affordable
housing units, as operating subsidies are
typically required to reach extremely
low-income households, whose
affordable rents may be lower than the
ongoing cost of operating their unit.

Treasury Response: Operating
expenses for eligible affordable housing
were an eligible use of funds under the
interim final rule and the final rule
maintains this treatment. This may
include capitalized operating reserves.

Rehabilitation and repair of public
housing will also be considered an
eligible use of SLFRF funds.

Public Comment: Affordable Housing
Loans and Revolving Loan Funds: Some
commenters requested that loans with
maturities beyond the period of
performance or revolving loan funds
that revolve beyond the period of
performance be eligible uses of SLFRF
funds if used for affordable housing.

Some commenters pointed out that for-
profit developers of low-income housing
through the Low -Income Housing Tax
Credit (LIHTC) may be deterred from
accepting grants to bridge funding gaps
in current LIHTC deals by the treatment
of grants to for-profit entities in the
calculation of eligible basis for the
LIHTC.

Treasury Response: The final rule
does not change the treatment of loans
from the interim final rule. For more
details see section Treatment of Loans
in Program Administration Provisions.

Similarly, the final rule does not change
the treatment of grants to support
affordable housing development,
including developments supported by
the LIHTC: such grants are an eligible
use of funds.

Additional enumerated eligible uses
for assistance to impacted households.

As noted above, the interim final rule
posed a question on what other types of
services or costs Treasury should
consider as eligible uses to respond to
the negative economic impacts of
COVID-19. In response, commenters
proposed a wide variety of additional
recommended enumerated eligible uses
to assist households, ranging from
general categories of services (e.g., legal
and social services) to services that
respond to needs widely experienced
across the country (e.g., access to and
affordability of health insurance) to
services that are most applicable to the
particularized needs of certain
populations or geographic areas of the
United States (e.g., senior citizens,
SNAP recipients, immigrants, formerly -
incarcerated individuals, responding to
environmental issues in certain
geographic regions). Other commenters
generally requested a high degree of
flexibility to respond to the particular
needs of their communities.

Treasury Response: Given the large
number and diversity of SLFRF
recipients, Treasury's approach to
assistance to households in the final
rule aims to clarify additional
enumerated eligible uses that respond to
negative economic impacts of the
pandemic experienced widely in many
jurisdictions across the country, making
it clear and simple for recipients to
pursue these enumerated eligible uses
under the final rule. In the final rule,
Treasury is clarifying several additional
uses, which generally respond to
pandemic impacts experienced broadly
across jurisdictions and populations, are
eligible under the interim final rule as
assistance to households and continue
to be so under the final rule, as outlined
below.

11. Paid sick, medical, or family
leave.

Public Comment: Some commenters
argued that the pandemic increased the
need for paid sick or medical leave, as
staying home when ill is recommended
by the CDC to prevent spread of the
virus but lack of access to paid sick
leave often prevents workers from
staying home. Other commenters
recommended paid family leave as an
eligible use, arguing that shortages in
access to childcare or home health
assistance, as well as school closures,
may increase the need for family
members to serve as caretakers.

Background: The COVID-19
pandemic highlighted the importance of
paid leave as well as the number of
workers who do not have access to paid
sick and/or family leave. When workers
have access to paid leave, they are less
likely to report to work sick, and
therefore less likely to spread illnesses
in the workplace: One study
demonstrates that the emergency sick
leave provision of the Families First
Coronavirus Response Act (FFCRA)
reduced the spread of COVID-19.155
The lack of paid leave exacerbates
financial hardships experienced as a
result of the public health emergency. A
2018 survey by the Department of Labor
found that two-thirds of employees that
took unpaid or partial -paid leave
experienced financial hardship.'5°
Furthermore, because the Family and
Medical Leave Act (FMLA) excludes
small employers, part-time workers, and
workers who have been with their
employer for less than a year, 44 percent
of workers do not have access to even
unpaid leave.157 Workers of color and
workers with lower incomes are less
likely to have access to paid leave.158 159
155 Stefan Pichler, Katherine Wen, and Nicolas R.

Ziebarth, COVID-19 Emergency Sick Leave Has
Helped Flatten The Curve In The United States:

Study examines the impact of emergency sick leave
on the spread of COVID-19, Health Affairs 39, no.
12 (2020): 2197-2204, https://www.health
affairs. org/d oi/10.1377/h I th a ff.2020. 00863.
156 Scott Brown et al., Employee and Worksite
Perspectives of the Family and Medical Leave Act:

Results from the 2018 Surveys, Abt Associates (July
2020), https://www.dol.gov/sites/dolgov/files/
OASP/evaluation/p d f/WHD_FMLA2018Survey
Results_FinalReport_Aug2020. pd f.
157 Id.
158 Ann P. Bartel et al., Racial and ethnic
disparities in access to and use of paid family and
medical leave: evidence from four nationally
representative datasets, U.S. Bureau of Labor
Statistics (BLS) (January 2019), https://www.bls.gov/
op u b/mfr/2019/article/racial-and-ethni c -
disparities -in -access -to -and -use -of -paid family - an dmedical-leave.htm.

Continued

4368 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations For workers that are also caregivers
for children, seniors, or other family
members, there may be a similar need
for —and benefits of —paid family leave.

For example, some workers may have
struggled during the pandemic to
balance caring for children, as schools
and daycares closed, and working. For
new parents, paid parental leave results
in fewer infant hospitalizations,
lowering parental stress, increasing
parental involvement, and improving
the overall health of parent and child.16°
COVID-19 has also increased the levels
of "caregiving intensity" 161 and
"caregiving burden" 162 for those
providing care to seniors or older family
members.163 164 When surveyed, more
than half of caregivers reported that
COVID-19 increased both the amount of
caregiving responsibilities they had as
well as the negative physical and mental
impacts their caregiving responsibilities
had on themselves.165
Treasury Response: Treasury agrees
that these constitute impacts of the
pandemic, and accordingly, under the
final rule, creating, expanding, or
financially supporting paid sick,
medical, or family leave programs is an
enumerated eligible use of funds to
respond to the negative economic
impacts of the pandemic.

12. Health insurance.

Public Comment: Several commenters
recommended that uses of funds to
expand access to health insurance be
enumerated eligible uses; commenters
believed that the heightened risk of
159 U.S. Bureau of Labor Statistics, Employee
Benefits in the United States (March 2019), https://
www.bls.gov/ncs/ebs/benefits/2019/ownership/
civilian/table3l a. pd f.
160 Maya Rossin-Slater et al., Local exposure to
school shootings and youth antidepressant use,
Proceedings of the National Academy of Sciences,
vol 117(38), pages 23484-23489 (2020), https://
www.pnas.org/content/117/38/23484; Ariel Marek
Pihl and Gaetano Basso, Did California Paid Family
Leave Impact Infant Health?, Journal of Policy
Analysis and Management, https://onlinelibrary .
wiley.com/doilabs/10.1002/pam.2210.
161 J.C. Jacobs, A. Laporte, C.H. Van Houtven, P.C.

Coyte, Caregiving intensity and retirement status in
Canada. Social Science & Medicine, 102, 74-82
(2014), https://www.sciencedirect.com/science/
article/abs/pii/S0277953613006631.
162E. Lightfoot, R.P. Moone, Caregiving in times
of uncertainty: Helping adult children of aging
parents find support during the COVID-19
outbreak, Journal of Gerontological Social Work,
63(6-7), 542-552 (2020), https://www.tandfon
line.com/doi/abs/10.1080/01634372.2020.1769793.
163 Note: "Caregiving intensity" is defined as the
amount and type of care provided by informal
caregivers; "Caregiving burden" is defined as the
impacts on physical and mental health, and health -
related quality of life of informal caregivers.
164 SA Cohen, ZJ Kunicki, MM Drohan, ML
Greaney, Exploring Changes in Caregiver Burden
and Caregiving Intensity due to COVID-19,
Gerontology and Geriatric Medicine (January 2021),
doi:10.1177/2333721421999279.
165 Id.
illness or hospitalization due to COVID-
19 had increased the negative economic
impacts of lacking health insurance.

Background: In 2019, prior to the
pandemic, it was estimated that 11
percent of nonelderly adults lacked
health insurance.166 By mid -2020, job
loss had resulted in an estimated 3.3
million people losing their employer
sponsored insurance, resulting in an
additional 2 million uninsured
adults.167 Participation in Medicaid, the
Children's Health Insurance Program
(CHIP), and the Affordable Care Act
(ACA) marketplace played an important
role in minimizing the number of
people who completely lost health
insurance during the early phases of the
pandemic; Medicaid and CHIP
enrollment increased by 9 percent from
February to September 2020168 and 8.3
million people enrolled in insurance
through the ACA marketplace.169
Although the ACA, CHIP, and
Medicaid have significantly reduced the
number of uninsured Americans
through the pandemic and the economic
downturn, adequate coverage and
affordability still remains an issue for
many. In 2020, 21 percent of working -
age adults were inadequately insured,
meaning even if they had insurance,
they incurred a significant amount of
out-of-pocket costs.17° Additionally, 37
percent of adults reported struggling
with medical bills or medical debt and
71 percent of adults who did not
purchase insurance cited affordability as
the main factor.171
166 Jennifer Tolbert et al., Key Facts about the
Uninsured Population, Kaiser Family Foundation
(November 6, 2020), https://www.kff.org/uninsured/
issue-brief/key facts -about -the -uninsured -
population/.
167 Joshua Aarons et. al., As the COVID-19
Recession Extended into the Summer of 2020, More
Than 3 Million Adults Lost Employer -Sponsored
Health Insurance Coverage and 2 Million Became
Uninsured, Urban Institute (September 18, 2020),
https://www . urban. org/research/publication/covid-
19-recessi on-exten ded-s ummer-2020-more-3-
million-ad ults-lost-em ployer-sponsored-health-
insurance-coverage-and-2-million-became-
uninsured.
166 Centers for Medicare and Medicaid Services,
Medicaid and CHIP Enrollment Trends Snapshot
through September 2020 (Washington: 2021),
available at https://www.medicaid.gov/sites/
default/files/2021-01 /september-medicaid-chip-
enroll m en t- tren d -sn a p sh o t. p d f.
169 Centers for Medicare and Medicaid Services,
2021 Federal Health Insurance Exchange Weekly
Enrollment Snapshot: Final Snapshot (January 12,
2021) available at https://www.cms.gov/newsroom/
fact-sheets/2021 federal -health -insurance -
exchange -weekly -enrollment -snapshot final -
snapshot.
170 Sara R. Collins, Munira Z. Gunja, and
Gabriella N. Aboulafia, U.S. Health Insurance
Coverage in 2020: A Looming Crisis in Affordability
(New York: Commonwealth Fund, 2020), available
at https://www.commonwealthfund.org/
publications/issue-briefs/2020/aug/looming-crisis-
heal th-coverage-2020-biennial.
171 Id.

Treasury Response: Treasury agrees
that loss of health insurance, increased
financial risk from lacking health
insurance, or excessive out-of-pocket
healthcare costs constitute negative
economic impacts of the pandemic.

Under the final rule, programs or
services to expand access to health
insurance coverage are an enumerated
eligible use as assistance to households,
for example, subsidies for health
insurance premiums or expansion of a
recipient's health insurance plan to
cover additional employees who
currently lack coverage.

13. Services for the unbanked and
underbanked.

Public Comment: One commenter
expressed support for the inclusion of
services to increase banking access as an
allowable expense under SLFRF. The
commenter recommended that states be
encouraged to offer opportunities for
consumers to open safe and affordable
accounts capable of receiving direct
payments. The commenter emphasized
that allowing unbanked and
underbanked households to receive
funds securely through no -fee, direct
deposit will help connect or reconnect
consumers to the mainstream financial
system.

Background: Banking inequities can
make it difficult for unbanked or
underbanked households to access
housing, jobs, and other important
economic opportunities. Being
unbanked or underbanked can also
make it challenging for households to
apply for and receive financial
assistance, including services like
pandemic emergency housing
assistance.

Safe, affordable, and accessible
financial services play a critical role in
assisting households in the United
States in managing income volatility
and cash flow shortages.172 Currently,
over 5 percent of families, or 7 million
households are "unbanked," meaning
they do not have a bank account.173
Low-income households, non-white
households, and households with
individuals with disabilities were even
more likely to be unbanked. In 2019, 16
percent of Native American households,
14 percent of Black households, and 12
percent of Hispanic households were
unbanked, compared to 2.5 percent of
white households. Additionally,
172 Federal Deposit Insurance Corporation, FDIC
National Survey of Unbanked and Underbanked
Households (2015), https://www.fdic.gov/household
survey/2015/2015execsumm. pd f.
173 Federal Deposit Insurance Corporation, How
America Banks: Household Use of Banking and
Financial Services 2019 FDIC Survey, https://
www.fdic.gov/analysis/household-survey/
2019report.pdf.

Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4369 underbanked households —those that
have a bank account but rely on
alternative financial services, such as
money orders, payday loans, and check
cashing services— account for 16
percent of all households in the United
States.174 As a result of the COVID-19
pandemic, new social distancing
protocols have, in some instances, made
it more difficult to perform financial
transactions with paper instruments,
like banknotes, coinage, paper checks,
or money orders. Households
constrained to these payment methods
may face challenges receiving
government assistance. Additionally,
businesses have transitioned to cashless
payments systems to promote
contactless payments.175 As a result,
unbanked individuals may face
additional challenges conducting
financial transactions.

Treasury Response: Recognizing these
challenges, Treasury is clarifying that
recipients may use SLFRF funds to
provide financial services that facilitate
the delivery of federal, state, or local
benefits (e.g., Child Tax Credit, Earned
Income Tax Credit, tax refunds, or
emergency housing or food assistance
funds). The following includes a non -
exhaustive list of uses to provide
financial services to unbanked and
underbanked households:
• Provide low or no cost financial
services, including in conjunction with
administration of benefits, such as pre-
paid debit cards, e.g., via Economic
Impact Payment or General Purpose
Reloadable pre -paid cards or for the
development of public banking
infrastructure that can support benefit
delivery.
• Provide transitional services to
facilitate long-term access to banking
and financial services.
• Provide financial literacy programs
and conduct community outreach and
deploy engagement resources to
increase awareness about low-cost, no -
overdraft fee accounts, pilot new
strategies and approaches that help
overcome barriers to banking access and
support the gathering and sharing of
information in ways that improve
equity, such as community meetings,
partnerships with community -based
organizations, online surveys, focus
groups, human -centered design
174 Board of the Governors of the Federal Reserve
System, Report on the Economic Well -Being of U.S.

Households in 2018 —May 2019, https://www.federal
reserve.gov/publications/2019-economic-well-being-
of-us-househ olds-in-2018-banking-and-credit.htm.

1.75 Zaheer Allam, The Forceful Reevaluation of
Cash -Based Transactions by COVID-19 and Its
Opportunities to Transition to Cashless Systems in
Digital Urban Networks. Surveying the Covid-19
Pandemic and its Implications (2020): 107-117.
doi:10.1016 /B 9 78-0-12-824313-8.00008-5.
activities, and other community
engagement activities.

Assistance to Unemployed and
Underemployed Workers
The interim final rule included
assistance to unemployed workers as an
enumerated eligible use, including
"services like job training to accelerate
rehiring of unemployed workers."
Treasury provided further guidance,
based on recipient questions after the
interim final rule, that eligible uses
under this section also include "other
efforts to accelerate rehiring and thus
reduce unemployment, such as
childcare assistance, assistance with
transportation to and from a jobsite or
interview, and incentives for newly
employed workers[,]" as well as
assistance to unemployed workers
seeking to start small businesses.

Finally, further guidance also provided
that "public jobs programs, subsidized
employment, combined education and
on-the-job training programs, or job
training to accelerate rehiring or address
negative economic or public health
impacts experienced due to a worker's
occupation or level of training" are all
enumerated eligible uses as assistance to
unemployed or underemployed
workers.

The interim final rule defined eligible
beneficiaries of assistance as
"individuals who want and are
available for work, including those who
have looked for work sometime in the
past 12 months or who are employed
part time but who want and are
available for full-time work." This
definition is based on definitions used
by the Bureau of Labor Statistics to
define individuals currently
unemployed, as well as persons
marginally attached to the labor force
and working part-time for economic
reasons.176 The latter two classifications
are types of labor underutilization, or
"underemployed" workers.177 Finally,
the interim final rule specified that
assistance to unemployed workers
included both workers who lost their
job during the pandemic and resulting
recession and workers unemployed
when the pandemic began who saw
further deterioration of their economic
prospects due to the pandemic.

Public Comment: Commenters
generally supported the inclusion of this
enumerated eligible use. One
commenter recommended including
assistance for underemployed workers
who took jobs due to the pandemic that
176 Bureau of Labor Statistics, Labor Force
Statistics from the Current Population Survey:

Concepts and Definitions, https://www.bls.gov/cps/
definitions.htm (last visited November 9, 2021).
177 Id.
did not fully utilize their skillset or did
not provide the hours, wages, or job
quality desired. Treasury has also
received recipient questions on whether
job fairs or grants to businesses to hire
underserved workers are eligible uses
under this category. Another commenter
recommended flexibility in eligible
workforce development programs,
arguing that rural areas may face
particular challenges.

Treasury Response: Treasury is
maintaining this eligible use in the final
rule, including the enumerated eligible
services in the interim final rule and
subsequent guidance. Treasury is also
confirming that job fairs or grants to
businesses to hire underserved workers
are eligible uses under this section.

Treasury is also enumerating that job
and workforce training centers are
eligible capital expenditures, so long as
they adhere to the standards and
presumptions detailed in the section
Capital Expenditures in General
Provisions: Other.

The final rule maintains the definition
of eligible beneficiaries, which is
aligned with the Bureau of Labor
Statistics' definitions of unemployed
workers and other labor
underutilization, using a common,
widely known definition that
incorporates a broad group of
individuals both unemployed or whose
skills are otherwise underutilized in the
labor market.

In addition, recognizing that the
pandemic has generated broad
workforce disruption, in the final rule,
Treasury is making clear that recipients
may provide job training or other
enumerated types of assistance to
individuals that are currently employed
but are seeking to move to a job that
provides better opportunities for
economic advancement, such as higher
wages or more opportunities for career
advancement.

Recipient Unemployment Insurance
Trust Funds and Related Expenses
Under the interim final rule, a
recipient may use funds to make
deposits into its account of the
Unemployment Trust Fund established
under section 904 of the Social Security
Act (42 U.S.C. 1104) up to the level
needed to restore the pre -pandemic
balance of such account as of January
27, 2020 or to pay back advances
received under Title XII of the Social
Security Act (42 U.S.C. 1321) for the
payment of benefits between January 27,
2020 and May 17, 2021. These costs
support the solvency of the
unemployment insurance system and,
ultimately, unemployment insurance
benefits provided to unemployed

4370 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations workers during the pandemic.178 The
interim final rule also posed the
question of what, if any, conditions
should be considered to ensure that
funds used under this eligible use
category repair economic impacts of the
pandemic and strengthen
unemployment insurance systems.

Public Comment: Inclusion as an
Eligible Use and Conditions:

Commenters expressed mixed
perspectives on this eligible use
category. Some commenters supported
its inclusion, arguing that
unemployment insurance systems have
faced significant costs to support
unemployed workers during the
pandemic and that this constitutes a
negative economic impact that SLFRF
funds should be able to address. Other
commenters opposed this eligible use
category, arguing that funds used under
this category may not ultimately support
unemployed workers. Some
commenters noted that unemployment
insurance taxes on businesses
automatically increase when trust fund
balances are low and suggested that
permitting the deposit of funds into
unemployment insurance trust funds
prevents a tax increase on businesses,
some of which may not have faced
negative economic impacts from the
pandemic, rather than providing
assistance to unemployed workers.

Other comments suggested that deposits
are better thought of as savings for
future needs than assistance to
unemployed workers in the near term.

Responding to the interim final rule's
question, several commenters suggested
that, if Treasury maintains this eligible
use, the final rule should require
detailed reporting on funds used under
this category or place conditions on this
category to increase the likelihood that
funds ultimately support unemployed
workers. For example, some
commenters suggested that recipients
that deposit SLFRF funds into their trust
fund should be barred from cutting
unemployment insurance benefits for
workers during the period of
performance or from erecting new
barriers to accessing benefits (e.g.,
through the application process and
ongoing requirements to receive
benefits). One commenter, noting that
unemployment insurance benefits often
provide low rates of wage replacement
and do not cover some types of
unemployed workers, argued that
recipients should not be permitted to
deposit funds into the trust fund unless
178 Note that, while the economic harm being
addressed accrued before March 3, 2021, the cost
incurred to address the harm occurs after March 3,
2021 and provides assistance to unemployed
workers, an eligible use of SLFRF funds.
the recipient concurrently expands
benefits. Finally, one commenter
suggested a cap on the amount of funds
that can be used for this purpose.

Treasury Response: Inclusion as an
Eligible Use and Conditions: In the final
rule, Treasury is maintaining the
inclusion of this eligible use category.

Because unemployment insurance trust
funds directly fund benefits to
unemployed workers, maintaining the
solvency of the trust fund is critical to
the continued provision of assistance to
unemployed workers. Further, funds
deposited into the trust fund must be
used as assistance to unemployed
workers, an eligible use of SLFRF funds.

Finally, while, in the absence of the
SLFRF, trust fund deposits would likely
be funded through increases on
employer payroll taxes, the eligibility of
uses of SLFRF funds does not depend
on how obligations would otherwise be
satisfied if the SLFRF were not available
for this use.

While deposits to unemployment
insurance trust funds generally serve as
assistance to unemployed workers,
recipients that make deposits but also
cut unemployment insurance benefits to
workers substantially decrease the
likelihood that the deposited funds will
assist unemployed workers. In other
words, SLFRF funds deposited into an
unemployment insurance trust fund
generally serve as assistance to
unemployed workers, unless recipients
take policy actions that substantially
decrease the extent to which SLFRF
funds would flow to unemployed
workers. As such, through December 31,
2024, recipients that deposit SLFRF
funds into an unemployment insurance
trust fund or use SLFRF funds to repay
principal on Title XII advances, may not
take action to reduce benefits available
to unemployed workers by changing the
computation method governing regular
unemployment compensation in a way
that results in a reduction of average
weekly benefit amounts or the number
of weeks of benefits payable (i.e., the
maximum benefit entitlement).

Finally, until the final rule becomes
effective on April 1, 2022, the interim
final rule remains binding and
effective.179 These requirements were
not in effect under the interim final rule
and do not apply to funds used (i.e.,
obligated or expended) under the
interim final rule while it is in effect. In
addition, recognizing that some
recipients have taken significant steps
179 See, e.g., U.S. Department of the Treasury,
More Information on the Conclusion of the Public
Comment Period and the Interim Final Rule on the
Coronavirus State and Local Fiscal Recovery Funds,
https://home.treasury.gov/system/files/136/IFR-
Explainer. pd f.
toward making a trust fund deposit or
repaying principal on Title XII advances
under the interim final rule, such as the
legislative appropriation of funds for
this purpose, even if a formal obligation
has not occurred, Treasury will exercise
enforcement discretion to not pursue
violations of this final rule provision
(i.e., the requirement not to reduce
benefits) for recipients that have
appropriated funds for this purpose
prior to the date of adoption of the final
rule consistent with the laws and
procedures in their jurisdiction.

Recipients should refer to Treasury's
Statement Regarding Compliance with
the Coronavirus State and Local Fiscal
Recovery Funds Interim Final Rule and
Final Rule, which provides additional
detail on these issues.

Public Comment and Treasury
Response: Technical Corrections and
Amendments: Following the interim
final rule, Treasury received recipient
questions on whether paying interest on
advances received under Title XII of the
Social Security Act (42 U.S.C. 1321) is
an eligible use of SLFRF funds; Treasury
is clarifying that such use is
permissible, consistent with Treasury's
treatment of the eligibility of interest on
Title XII advances under the
Coronavirus Relief Fund.

Treasury is further clarifying that
recipients may only use SLFRF funds
for contributions to unemployment
insurance trust funds and repayment of
the principal amount due on advances
received under Title XII of the Social
Security Act up to an amount equal to
(i) the difference between the balance in
the recipient's unemployment insurance
trust fund as of January 27, 2020 and the
balance of such account as of May 17,
2021, plus (ii) the principal amount
outstanding as of May 17, 2021 on any
advances received under Title XII of the
Social Security Act between January 27,
2020 and May 17, 2021. Further,
recipients may use SLFRF funds for the
payment of any interest due on such
Title XII advances. In other words,
excluding interest due on Title XII
advances, the magnitude of the decrease
of the balance in the unemployment
insurance trust fund plus the principal
outstanding on any Title XII borrowings
made from the beginning of the public
health emergency to the date of
publication of the SLFRF interim final
rule sets a cap on the amount of SLFRF
funds a recipient may use for trust fund
contributions and repayment of
principal on Title XII advances. Further,
a recipient that deposits SLFRF funds
into its unemployment insurance trust
fund to fully restore the pre -pandemic
balance may not draw down that

Federal Register / Vol. 87, No. 18 /Thursday, January 27, 2022 /Rules and Regulations 4371 balance and deposit more SLFRF funds,
back up to the pre -pandemic balance.

Enumerated Eligible Uses for
Disproportionately Impacted
Households
Background
The COVID-19 pandemic has had
disproportionally negative impacts on
many households and communities that
were already experiencing inequality
related to race, gender, age, or income
before the pandemic. People of color,
low-income workers, and women
disproportionately lost their jobs during
the COVID-19 pandemic and
experienced disproportionate rates of
negative health outcomes.t8o 181
These disproportionate negative
impacts experienced by systemically
underserved communities are not novel
to the COVID-19 pandemic and the
economic downturn. Research shows
that historically underserved
communities that are experiencing
economic and social disparities
typically experience disproportionate
impacts of economic downturns and
natural disasters.182 This pattern held
true for the effects of COVID-19 and the
economic downturn: Historically
undeserved groups experienced
amplified negative impacts, further
widening inequality.183
Many communities facing systemic
barriers had not yet recovered from the
impact of the Great Recession before
experiencing the impacts of COVID-19
and the economic downturn. For
example, in 2009, at the end of the Great
Recession, households without a high
school diploma had an average annual
income of $32,300 (measured in 2018
dollars). By 2018, nine years into the
economic recovery, those same
households saw their average income
increase by $600. During that same time
period, households with a bachelor's
degree saw an increase in their average
188 U.S. Department of Health and Human
Services, COVID-19 and Economic Opportunity:

Inequities in the Employment Crisis, April 2021.

Retrieved from https://aspe.hhs.gov/sites/default/
files/migrated legacy —files//199901/covid-
economic-equity-brief. pd f.
181 Adelle Simmons et al., Health disparities by
race and ethnicity during the COVID-19 pandemic:

Current evidence and policy approaches. U.S.

Department of Health and Human Services https://
aspe.hhs.gov/sites/default/files/migrated—1 egacy—
files//199516/covid-equity-issue-brief. pd f.
182 Perry, Brea L., Brian Aronson, and Bernice A.

Pescosolido, Pandemic precarity: COVID-19 is
exposing and exacerbating inequalities in the
American heartland, National Academy of Sciences
(Febuary 2021), https://www.pnas.org/content/118/
8/e2020685118.
183 Id.
household income of $6,100 (measured
in 2018 dollars).184
The impact pre-existing inequalities
have on a household or community's
ability to recover is intersectional.

Research shows that pre-existing racial
and gender disparities exacerbated the
disproportionate economic and health
impact COVID-19 and the economic
downturn had on workers of color, and
specifically, women of color.185 Another
study found that during the first six
months of the pandemic counties that
were both high -poverty and majority
non-white experienced COVID-19
infection rates eight times higher than
high -poverty, majority white
counties.186 Many residents in these
communities are still coping with the
negative health and economic impacts.

Summary of the Interim Final Rule and
Final Rule Structure
As described previously, the interim
final rule provided a broader list of
enumerated eligible uses to respond to
the pandemic in disproportionately
impacted communities, in recognition
that pre-existing health, economic, and
social disparities contributed to
disproportionate pandemic impacts in
certain communities and that
addressing the root causes of those
disparities constitutes responding to the
public health and negative economic
impacts of the pandemic. The interim
final rule described eligible uses in
disproportionately impacted
communities in four categories, spread
across public health and negative
economic impacts: (1) Addressing
disparities in public health outcomes,
(2) building stronger communities
through investments in housing and
neighborhoods, (3) addressing
educational disparities, and (4)
promoting healthy childhood
environments. As described above,
Treasury has moved eligible uses related
to community violence intervention,
assistance accessing or applying to
public benefits and services, affordable
housing development, healthy
childhood environments, and
addressing lost instructional time in K-
184 Jesse Bennet & Rakesh Kochhar, Two
Recessions, Two Recoveries, Pew Research Center
(December 13, 2019), https://www.pewresearch.org/
social-trends/2019/12/13/two-recessions-two-
recoveries-2/.
185 Darrick Hamilton et al., Building an Equitable
Recovery: The role of Race, Labor Markets, and
Education, The New School's Institute on Race and
Political Economy (February 2021).
188 Adhikari S, Pantaleo NP, Feldman JM,
Ogedegbe 0, Thorpe L, Troxel AB. Assessment of
Community -Level Disparities in Coronavirus
Disease 2019 (COVID-19) Infections and Deaths in
Large US Metropolitan Areas. JAMA Netw Open.
2020;3(7):e2016938. doi:10.1001/
j amanetworkopen.202 0.16938.
12 schools into the category "assistance
to impacted households," recognizing
that these pandemic impacts were
widely shared across the country.

This section discusses enumerated
eligible uses to address health
disparities, to build stronger
communities through investments in
neighborhoods, to address educational
disparities, to provide rental assistance
vouchers or assistance relocating to
areas of greater economic opportunity,
and additional eligible uses to respond
to negative economic impacts in
disproportionately impacted
communities. While many of these
services impact both health and
economic outcomes, Treasury has
consolidated them into a single section
for simplicity and clarity and to reflect
the intertwined nature of these issues.

As a reminder, recipients can
presume these uses are eligible when
provided in a QCT, to families and
individuals living in QCTs, by Tribal or
territorial governments, or to low-
income households or communities. As
provided in section Standards:

Designating Other Disproportionately
Impacted Classes, recipients can also
provide these services to other
populations, households, or geographic
areas disproportionately impacted by
the pandemic. Recipients may also
identify additional disproportionate
impacts of the pandemic and design an
appropriate response to address that
harm. For details on eligibility
standards and presumed eligible
populations, see section General
Provisions: Structure and Standards.

Enumerated Eligible Uses for
Disproportionately Impacted
Households

1. Addressing health disparities.

Public Comment: General: In general,
commenters supported eligible uses to
address health disparities and support
health equity; several commenters
highlighted the disparities faced by
communities of color and low-income
populations, as well as the importance
of community engagement in
developing effective programs to serve
disproportionately impacted
communities. Many commenters
recommended additional enumerated
eligible uses to address health
disparities; these are discussed further
below in this section.

Treasury Response: In line with
commenters' recommendations, the
final rule maintains several enumerated
eligible uses to address health
disparities, specifically:
a. Community health workers.

Treasury received few comments on
community health workers, though one

4372 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations requested further clarification on their
role.187 Treasury is maintaining this
eligible use in the final rule.
b. Remediation of lead paint or other
lead hazards. The interim final rule
included remediation of lead paint or
other lead hazards as an enumerated
eligible use to address health
disparities.

Public Comment: Treasury received
several comments asking for
clarification on the eligibility of a
particular use that would indirectly
address lead pollution. For example, a
commenter requested the ability to fund
remedial actions, such as filtration and
plumbing procedures to help address
lead pollution. One commenter
requested that private wells be eligible
for funding to address contamination
with substances such as lead. Other
commenters requested that Treasury
allow replacement of lead pipes as an
eligible use of funds.

Treasury Response: Recipients may
make a broad range of water
infrastructure investments under section
602(c)(1)(d) and 603(c)(1)(d), which can
include lead service line replacement
and other activities to identify and
remediate lead in water. These uses are
discussed in greater detail in section
Water and Sewer Infrastructure of this
Supplemental Information.

Treasury has further determined that
several of the services identified by
commenters are appropriate responses
to address health disparities in
disproportionately impacted
households. These services were eligible
under the interim final rule and
continue to be so under the final rule.

These services include remediation to
address lead -based public health risk
factors, outside of lead in water,
including evaluation and remediation of
lead paint, dust, or soil hazards; testing
for blood lead levels; public outreach
and education; and emergency
protection measures, like bottled water
and water filters, in areas with an action
level exceedance for lead in water in
accordance with the Environmental
Protection Agency's Lead and Copper
Rule.188
Further, Treasury had determined that
certain capital expenditures, including
improvements to existing facilities to
remediate lead contaminants (e.g.,
removal of lead paint), are eligible
responses, although this does not
187 See, e.g., Centers for Disease Control and
Prevention, Community Health Worker (CHW)
Toolkit, https://www.cdc.gov/dhdsp/pubs/toolkits/
chw-toolkit.htm (last visited November 9, 2021).
188 Environmental Protection Agency, 40 CFR
141.80(c)(1), https://www.ecfr.gov/current/title-40/
chapter-I/subchapter-D/part-141/subpart-I/section-
141.80.
include construction of new facilities
for the purpose of lead remediation.

Recipients should make sure that all
capital expenditures adhere to the
standards and presumptions detailed in
section Capital Expenditures in General
Provisions: Other.
c. Medical facilities. Treasury
received a few comments from
recipients seeking to use SLFRF funds
to build new medical facilities, such as
hospitals or public health clinics, to
serve disproportionately impacted
communities. Given the central role of
access to high -quality medical care in
reducing health disparities and
addressing the root causes that led to
disproportionate impact COVID-19
health impacts in certain communities,
the final rule recognizes that medical
equipment and facilities designed to
address disparities in public health
outcomes are eligible capital
expenditures. This includes primary
care clinics, hospitals, or integrations of
health services into other settings.

Recipients should make sure that all
capital expenditures adhere to the
standards and presumptions detailed in
section Capital Expenditures in General
Provisions: Other.

2. Housing vouchers and assistance
relocating. In addition to other housing
services, the interim final rule permitted
a variety of rental assistance approaches
to support low-income households in
securing stable, long-term housing,
including housing vouchers, residential
counseling, or housing navigation
assistance to facilitate household moves
to neighborhoods with high levels of
economic opportunity and mobility for
low-income residents. Examples could
include SLFRF-funded analogues to
Section 8 Housing Choice vouchers;
other kinds of rent subsidies, including
shallow subsidies; and programs to help
residents move to areas with higher
levels of economic mobility.189 Treasury
did not receive public comments on
these enumerated eligible uses.

Treasury Response: Treasury
maintains the eligibility of vouchers and
relocation assistance in the final rule.

3. Building strong, healthy
communities through investments in
neighborhoods. While the interim final
rule included a category of enumerated
eligible uses for "building stronger
communities through investments in
housing and neighborhoods," the
examples of services provided generally
focused on housing uses. In response to
questions following release of the
interim final rule, Treasury issued
189 See, e.g., Opportunity Insights, Creating Moves
To Opportunity (August 2019), https://
opportunityinsights.org/policy/cmto/.
further guidance clarifying that
"investments in parks, public plazas,
and other public outdoor recreation
spaces may be responsive to the needs
of disproportionately impacted
communities by promoting healthier
living environments."
Public Comment: General: A
significant theme across many public
comments was the importance of
neighborhood environment to health
and economic outcomes and the
potential connections between
residence in an underserved
neighborhood and disproportionate
impacts from the pandemic. Many
commenters highlighted the connection
between neighborhoods and health
outcomes, including citing public health
research linking neighborhood traits to
health outcomes. For example, the CDC
states that "neighborhoods people live
in have a major impact on their health
and well-being." 190 As such, CDC
identifies "neighborhoods and built
environment" as one of five key social
determinants of health 191 and includes
"creat[ing] neighborhoods and
environments that promote health and
safety" as one of the agency's goals for
social determinants of health outcomes.
a. Neighborhood features that
promote improved health and safety
outcomes.

Public Comment: Commenters argued
that neighborhoods impact physical
health outcomes in several ways. First,
some commenters reasoned that the
physical environment and amenities in
a community 192 influence a person's
level of physical activity, with features
like parks, recreation facilities, and safe
sidewalks promoting increased physical
activity that improves health outcomes.

Conversely, commenters argued that a
lack of these features in a neighborhood
could dampen physical activity and
contribute to health conditions like
obesity that are risk factors for more
severe COVID-19 health outcomes.

Second, some commenters also
suggested that access to healthy food in
a neighborhood impacts health
outcomes. These commenters reasoned
198 U.S. Department of Health and Human
Services, Neighborhood and Built Environment,
https://health.gov/healthypeople/objectives-and-
data/browse-objectives/neighborhood-and-built-
environment#citl (last visited November 9, 2021).
191 Social determinants of health are "the
conditions in the places where people live, learn,
work, and play that affect a wide range of health
risks and outcomes." Centers for Disease Control
and Prevention, About Social Determinants of
Health (SDOH), https://www.cdc.gov/social
determinants/about.html (last visited November 9,
2021).
192 In public health, this is referred to as "built
environment," or the man-made physical aspects of
a community (e.g., homes, buildings, streets, open
spaces, and infrastructure).

Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4373 that lacking adequate access to
affordable, healthy food or living in a
"food desert" may contribute to
disparities in diet that influence health
outcomes, including contributing to pre-
existing conditions that increased risk
for severe COVID-19 outcomes. These
commenters cited public health research
finding "clear evidence for disparities in
food access in the United States by
income and race." 193
Some commenters also suggested that
neighborhood environment is connected
to other public health outcomes, like
mental health and public safety. For
example, some research suggests that
living in neighborhoods with green
space and tree cover correlates with
improved mental health outcomes.194
Finally, some commenters argued that
activities like installing streetlights,
greening or cleanup of public spaces or
land, and other efforts to revitalize
public spaces would support improved
public safety.195196
These commenters recommended that
Treasury include as an enumerated
eligible use in disproportionately
impacted communities projects to
develop neighborhood features that
promote improved health and safety
outcomes, such as parks, green spaces,
recreational facilities, sidewalks,
pedestrian safety features like
crosswalks, projects that increase access
to healthy foods, streetlights,
neighborhood cleanup, and other
projects to revitalize public spaces.

Background: Investments in
neighborhood features, including parks,
recreation facilities, sidewalks, and
healthy food access, can work to
improve physical and mental health
outcomes. Allowing people access to
nature, including parks, has been
connected to decreased levels of
193J Beaulac, E Kristjansson, S Cummins, A
systematic review of food deserts, 1966-2007, Prev
Chronic Dis 2009;6(3):A105, http://www.cdc.gov/
pcd/issues/2009/jul/08_0163.htm.
194 See, e.g., Yijun Zhang et al. The Association
between Green Space and Adolescents' Mental
Well -Being: A Systematic Review. International
journal of environmental research and public health
vol. 17,18 6640 (Sep. 11 2020), doi:10.3390/
ijerph17186640; EC South, BC Hohl, MC Kondo, JM
MacDonald, CC Branas, Effect of Greening Vacant
Land on Mental Health of Community -Dwelling
Adults: A Cluster Randomized Trial, JAMA Netw
Open. 2018;1(3):e180298 (2018), available at:
doi:10.1001/jamanetworkopen.2018.0298.
195 See, e.g., Yanqing Xu, Cong Fu, Eugene
Kennedy, Shanhe Jiang, Samuel Owusu-Agyemang,
The impact of street lights on spatial -temporal
patterns of crime in Detroit, Michigan, Cities,
Volume 79, Pages 45-52, ISSN 0264-2751 (2018),
https://doi.org/10.1016/j.cities.2018.02.021 .
196 A. Chalfin, B. Hansen, J. Lerner et al.,
Reducing Crime Through Environmental Design:

Evidence from a Randomized Experiment of Street
Lighting in New York City, Journal of Quantitative
Criminology (2021), https://doi.org/10.1007/s10940-
020-09490-6.
mortality and illness and increased
well-being.197 Urban park use during
the COVID-19 pandemic may have
declined among lower -income
individuals.198 Encouraging physical
activity can also play a role in health
outcomes, as a sedentary lifestyle is a
risk factor for chronic diseases and more
severe COVID-19 outcomes.199 Parks,
recreation facilities, and sidewalks can
promote healthier living environments
by allowing for safe and socially
distanced recreation during the COVID-
19 pandemic.

Additionally, food insecurity rates,
which are higher among lower -income
households and households of color,
doubled among all households and
tripled among households with children
during the onset of COVID-19 from
February 2020 to May 2020.200
Improving healthy food access supports
public health, particularly among lower -
income households and households of
color that face disproportionate
outcomes.

Treasury Response: Treasury
recognizes the connection between
neighborhood built environment and
physical health outcomes as discussed
in the research and analysis provided by
commenters, including risk factors that
may have contributed to
disproportionate COVID-19 health
impacts in low-income communities.

The final rule also recognizes that the
public health impacts of the pandemic
are broader than just the COVID-19
disease itself and include substantial
impacts on mental health and public
safety challenges like rates of violent
crime, which are correlated with a
neighborhood's built environment and
features. As such, neighborhood features
that promote improved health and
safety outcomes respond to the pre-
existing disparities that contributed to
COVID-19's disproportionate impacts
on low-income communities.
197 See, e.g., American Public Health Association,
Improving Health and Wellness through Access to
Nature (November 5, 2013), https://www.apha.org/
policies-and-advocacy/public-health-policy-
sta tem en is/policy-database/2014/07/08/09/18/
improving -health -and -wellness -through -access -to - nature.
198 LR Larson et al., Urban Park Use During the
COVID-19 Pandemic: Are Socially Vulnerable
Communities Disproportionately Impacted?, Front.

Sustain. Cities 3:710243 (2021), https://doi.org/

10.3389/frsc.2021.710243.
199 JP Despres, Severe COVID-19 outcomes —the
role of physical activity. Nat Rev Endocrinol 17,
451-452 (2021). https://doi.org/10.1038/s41574-
021-00521-1.
209 Caroline George and Adie Tomer, Beyond
'food deserts': America needs a new approach to
mapping food, Brookings Institution (August 17,
2021), https://www.brookings.edu/research/beyond-
food-deserts-america-needs-a-new-approach-to-
mappingfood-insecurity/.

The final rule includes enumerated
eligible uses in disproportionately
impacted communities for developing
neighborhood features that promote
improved health and safety outcomes,
such as parks, green spaces, recreational
facilities, sidewalks, pedestrian safety
features like crosswalks,201 projects that
increase access to healthy foods,
streetlights, neighborhood cleanup, and
other projects to revitalize public
spaces. Recipients seeking to use funds
for capital expenditures should refer to
the section Capital Expenditures in
General Provisions: Other, which
describes additional eligibility
standards that apply to uses of funds for
capital expenditures.
b. Vacant or abandoned properties.

As discussed above, the interim final
rule included enumerated eligible uses
for building stronger communities
through investments in housing and
neighborhoods in disproportionately
impacted communities. The interim
final rule also posed a question of
whether other potential uses in this
category, specifically "rehabilitation of
blighted properties or demolition of
abandoned or vacant properties,"
address the public health or economic
impacts of the pandemic.

Public Comment: Several commenters
argued that programs or services to
address vacant or abandoned property
would respond to the public health and
negative economic impacts of the
pandemic in disproportionately
impacted communities. Some
commenters cited research suggesting
that living near such property is
correlated with worse physical health
and mental health outcomes, noted that
such properties pose an environmental
hazard, or argued that such properties
present a barrier to economic recovery.

These commenters suggested that
renovation or demolition of vacant or
abandoned property could benefit
community health and raise property
values. Other commenters
recommended that Treasury include an
enumerated eligible use for the
operation of land banks that redevelop
or renew vacant properties and land.

Treasury Response: As noted
throughout the final rule, the pandemic
underscored the importance of safe,
affordable housing and healthy
201 However, Treasury cautions recipients that
general infrastructure development, including street
or road construction, remains a generally ineligible
use of funds under the final rule. Sidewalks and
pedestrian safety should be the predominant
component of uses of funds in this category. While
projects may include ancillary construction needed
to execute the predominant component, a project
that predominantly involves street construction or
repair to benefit vehicular traffic would be
ineligible.

4374 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 /Rules and Regulations neighborhood environments to public
health and economic outcomes.

Treasury agrees with commenters that
high rates of vacant or abandoned
properties in a neighborhood may
exacerbate public health disparities, for
example through environmental
contaminants that contribute to poor
health outcomes or by contributing to
higher rates of crime. As such, certain
services for vacant or abandoned
properties are eligible to address the
public health and negative economic
impacts of the pandemic on
disproportionately impacted households
or communities. Eligible activities
include:
• Rehabilitation, renovation,
maintenance, or costs to secure vacant
or abandoned properties to reduce their
negative impact
• Costs associated with acquiring and
securing legal title of vacant or
abandoned properties and other costs to
position the property for current or
future productive use
• Removal and remediation of
environmental contaminants or hazards
from vacant or abandoned properties,
when conducted in compliance with
applicable environmental laws or
regulations
• Demolition or deconstruction of
vacant or abandoned buildings
(including residential, commercial, or
industrial buildings) paired with
greening or other lot improvement as
part of a strategy for neighborhood
revitalization
• Greening or cleanup of vacant lots,
as well as other efforts to make vacant
lots safer for the surrounding
community
• Conversion of vacant or abandoned
properties to affordable housing
• Inspection fees and other
administrative costs incurred to ensure
compliance with applicable
environmental laws and regulations for
demolition, greening, or other
remediation activities
Vacant or abandoned properties are
generally those that have been
unoccupied for an extended period of
time or have no active owner.202 Such
202A state or locality may use its existing
classifications of what is considered vacant or
abandoned property under state law and local
ordinances, as well as any corresponding processes
for demolition, for these eligible uses. A recipient
without a definition of vacant or abandoned
property may refer to definitions used in the
Department of Housing and Urban Development's
Neighborhood Stabilization Program (available at
the citations below); however, recipients should be
aware that other federal, state, or local requirements
may apply such as compliance with the Uniform
Relocation Act (see U.S. Department of Housing and
Urban Development, Real Estate Acquisition and
Relocation Overview in HUD Programs, https://
www.hudexchange.info/programs/relocation/
properties may be in significant
disrepair (e.g., major structural defects;
lack of weather tight conditions; or lack
of useable plumbing, kitchen facilities,
electricity, or heating infrastructure (not
to include utilities currently out of
service or disconnected but able to be
reconnected and used)), or may be
declared unfit for inhabitants by a
government authority.

As noted above, demolition and
greening (or other structure or lot
remediation) of vacant or abandoned
properties, including residential,
commercial, or industrial buildings, is
an eligible use of funds. Treasury
encourages recipients to undertake these
activities as part of a strategy for
neighborhood revitalization and to
consider how the cleared property will
be used to benefit the disproportionately
impacted community. Activities under
this eligible use should benefit current
residents and businesses, who
experienced the pandemic's impact on
the community.

Treasury encourages recipients to be
aware of potential impacts of demolition
of vacant or abandoned residential
properties. Demolition activities that
exacerbate the pandemic's impact on
housing insecurity or lack of affordable
housing are not eligible uses of funds.

This risk is generally more acute in
jurisdictions with low or reasonable
vacancy rates and less acute in
jurisdictions with high or hyper-
vacancy.203
overview/#overview-of-the-ura (last visited
November 9, 2021) and other state and local
requirements like condemnation and code
enforcement. U.S. Department of Housing and
Urban Development, What is the definition of
vacant properties as referenced in NSP Eligible Use
E —Redevelop Demolished or Vacant Properties?
(October 2012), https://www.hudexchange.info/
faqs/programs/n eighborhood-stabilizati on -program -
n s p /redevelopment/what-i s -the -definition - o f-
vacan t-properties-as-referenced-in-nsp-eligible/.

U.S. Department of Housing and Urban
Development, What are the definitions of
abandoned and foreclosed? (October 2012), https://
www.hudexchange.infolfaqs/programs/
neighborh ood-stabiliza ti on-program-nsp/program-
req uirem en is/el igi bl a -a c ti vi ti es u s es/wh a t-are-th e - definitions -of -abandoned -and foreclosed/.
203 For analysis of vacancy rates considered low
or high, see, e.g., page 12 of Alan Mallach, The
Empty House Next Door, Lincoln Institute (May
2018), https://www.lincolninst.edu/publications/
policy-focus-reports/empty-house-next-door#
:--:text= %L''2 %80 %9CAlan %20Mallach %20is %20
the %2osage,through %20data %20and %20
model %20 practices. Recipients may determine the
appropriate geographic unit for which to analyze
vacancy rates (e.g., county, census tract) based on
their circumstances. As needed, recipients may
refer to the Current Population Survey/Housing
Vacancy Survey data series on Housing Vacancies
and Homeownership as one data source to assess
vacancy rates. See https://www.census.gov/housing/
hvs/index.html. Other data sources include the
American Community Survey five-year estimates,
for smaller geographic areas, or tabulations by the
Department of Housing and Urban Development
Treasury presumes that demolition of
vacant or abandoned residential
properties that results in a net reduction
in occupiable housing units for low- and
moderate -income individuals in an area
where the availability of such housing is
lower than the need for such housing
would exacerbate the impacts of the
pandemic on disproportionately
impacted communities and that use of
SLFRF funds for such activities would
therefore be ineligible. This includes
activities that convert occupiable
housing units for low- and moderate -
income individuals into housing units
unaffordable to current residents in the
community. Recipients may assess
whether units are "occupiable" and
what the housing need is for a given
area taking into account vacancy rates
(as described above), local housing
market conditions (including conditions
for different types of housing like multi-
family or single-family), and applicable
law and housing codes as to what units
are occupiable. Recipients should also
take all reasonable steps to minimize the
displacement of persons due to
activities under this eligible use
category, especially the displacement of
low-income households or longtime
residents.

Recipients engaging in these activities
and other construction activities with
SLFRF funds should be mindful of the
provisions of the Uniform Relocation
Assistance and Real Property
Acquisition Policies Act of 1970, as
amended, 42 U.S.C. 4601, and the
Department of Transportation's
implementing regulations, 49 CFR part
24, that apply to projects funded with
federal financial assistance, such as
SLFRF funds. Recipients should also be
aware of federal, state, and local laws
and regulations, outside of SLFRF
program requirements, that apply to this
activity. Recipients must comply with
the applicable requirements of the
Uniform Guidance regarding
procurement, contracting, and conflicts
of interest and must follow the
applicable laws and regulations in their
jurisdictions. Recipients must also
comply with all federal, state, and local
public health and environmental laws
or regulations that apply to activities
under this eligible use category,204 for
example, requirements around the
based on United States Postal Service Vacancy Data.

See, respectively, https://data.census.gov/cedsci/
table?q=DP04 &ti d=ACSDP5Y2019. DP04 &
hidePreview=true or https://www.huduser.gov/
portal/datasets/usps.html.
204 See U.S. Environmental Protection Agency,
Large -Scale Residential Demolition, https://
www.epa.gov/large-scale-residential-demolition
(last visited November 9, 2021) for a primer on
requirements that may apply.

Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 /Rules and Regulations 4375 handling and disposal of asbestos -
containing materials, lead paint, and
other harmful materials may apply, as
well as environmental standards for any
backfill materials used at demolition
sites. Treasury encourages recipients to
consult and apply best practices from
the Environmental Protection Agency as
well.

Recipients must evaluate each
subrecipient's risk of noncompliance
with federal statutes, regulations, and
the terms and conditions of the
subaward related to safely and properly
conducting activities under this eligible
use. This may include checking for any
past violations recorded by state or local
environmental, workplace safety,
licensing, and procurement agencies, as
well as regular reviews for suspensions,
debarments, or stop work orders.

Recipients must establish rigorous
oversight and internal controls
processes to monitor compliance with
any applicable requirements, including
compliance by subrecipients.

4. Addressing educational disparities.

The interim final rule included an
enumerated eligible use for addressing
educational disparities in
disproportionately impacted
communities and outlined some
enumerated eligible services under this
use. These enumerated uses included
early learning services, assistance to
high -poverty school districts to advance
equitable funding across districts and
geographies, and educational and
evidence -based services to address the
academic, social, emotional, and mental
health needs of students. Addressing the
many dimensions of resource equity —
including equitable and adequate school
funding; access to a well-rounded
education; well -prepared, effective, and
diverse educators and staff; and
integrated support services —can also
begin to mitigate the impact of COVID-
19 on schools and students and can
close long-standing gaps in educational
opportunity. As discussed above, in the
final rule, early learning services and
addressing the impacts of lost
instructional time for K-12 students are
enumerated eligible uses for impacted
communities, not just
disproportionately impacted
communities.

Public Comment: Treasury received
some comments in this category.

Generally, commenters expressed
agreement with the elements of the
interim final rule regarding use of funds
for addressing educational disparities.

Some commenters had questions about
whether a few specific uses of funds
qualified under this category. For
example, commenters inquired about
whether the funds could be used for
behavioral health in a school setting or
cultural language classes.

Treasury Response: Treasury is
maintaining these enumerated eligible
uses in the final rule, which are now
organized under the heading of
"services to address educational
disparities." Treasury reiterates that
these uses include addressing
educational disparities exacerbated by
COVID-19, including but not limited to:
increasing resources for high -poverty
school districts, educational services
like tutoring or afterschool programs,
summer education and enrichment
programs, and supports for students'
social, emotional, and mental health
needs. This also includes responses
aimed at addressing the many
dimensions of resource equity —
including equitable and adequate school
funding; access to a well-rounded
education; well -prepared, effective, and
diverse educators and staff; and
integrated support services —in order to
close long-standing gaps in educational
opportunity.

Further, Treasury is clarifying that
improvements or new construction of
schools and other educational facilities
or equipment are eligible capital
expenditures for disproportionately
impacted communities. Recipients
seeking to use funds for capital
expenditures should refer to the section
Capital Expenditures in General
Provisions: Other for additional
eligibility standards that apply to uses
of funds for capital expenditures.

Treasury notes that services to
promote healthy childhood
environments, including childcare,
early learning services, and home
visiting programs that serve infants and
toddlers, is a separate category of
enumerated eligible uses for households
impacted by the pandemic (see eligible
uses for "promoting healthy childhood
environments"). Similarly, education
services to address the impact of lost
instructional time during the pandemic
are a separate eligible use category for
households impacted by the pandemic;
when providing these services,
recipients may presume that any K-12
student who lost access to in -person
instruction for a significant period of
time has been impacted by the
pandemic and is thus eligible for
responsive services (see eligible uses for
"addressing the impact of lost
instructional time").

Proposed Additional Enumerated
Eligible Uses Not Incorporated
The interim final rule posed a
question on what other types of services
or costs Treasury should consider as
eligible uses to respond to the
disproportionate public health or
negative economic impacts of COVID-
19 on low-income populations and
communities.

In response, commenters proposed a
wide variety of additional
recommended enumerated eligible uses
to assist disproportionately impacted
households, ranging from general
categories of services (e.g., long-term
investments to remediate long-term
disparities) to highly specific examples
of services (e.g., a specific type of
healthcare equipment). As discussed
above, Treasury is including several
additional categories of enumerated
eligible uses in the final rule in response
to public comments.

Given the large number and diversity
of SLFRF recipients, Treasury's
approach to assistance to households in
disproportionately impacted
communities in the final rule aims to
provide enumerated eligible uses that
respond to disproportionate impacts of
the pandemic experienced widely in
many jurisdictions across the country
and are intended to simplify and clarify
these enumerated eligible uses. At the
same time, Treasury recognizes that the
impacts of the pandemic vary over time,
by jurisdiction, and by population; as
such, the final rule provides flexibility
for recipients to identify additional
disproportionate impacts to additional
households or classes of households and
pursue programs and services that
respond to those disproportionate
impacts.

In the final rule, Treasury has not
chosen to include as enumerated uses
all uses proposed by commenters; given
the significant range, and in some cases
highly specific nature, of the proposed
uses Treasury was not able to assess that
the proposed uses would respond to
disproportionate impacts experienced in
many jurisdictions across the country,
supporting an enumerated eligible use
available to all recipients
presumptively. However, the final rule
continues to provide a framework to
allow recipients to identify and respond
to additional disproportionate impacts
(for details, see section General
Provisions: Structure and Standards).

Some types of proposed additional
enumerated eligible uses for assistance
to households in disproportionately
impacted communities were
recommended by several commenters:
• Capital expenditures. Many
commenters recommended that capital
expenditures on many different types of
public and private facilities be
enumerated eligible uses. For clarity,
Treasury has addressed all comments on
the eligibility of capital expenditures on
property, facilities, or equipment in one

4376 Federal Register / Vol. 87, No. 18 /Thursday, January 27, 2022 /Rules and Regulations section (see section Capital
Expenditures in General Provisions:

Other).
• Equity funds. Several commenters
recommended that Treasury permit
SLFRF funds to be deposited into an
equity fund to support long-term racial
and economic equity investments. The
eligibility of such use would depend on
the specific structure and uses of funds.

Under the statute, SLFRF funds can
only support costs incurred until
December 31, 2024; see section
Timeline for Use of SLFRF Funds in
Program Administration Provisions.

Further, recipients may calculate the
cost incurred with respect to
investments in revolving loan funds
based on the methodology described in
section Treatment of Loans in Program
Administration Provisions. Projects
funded by a revolving loan fund using
SLFRF funds would also need to be
eligible uses of SLFRF funds.
• Environmental quality and climate
resilience. Several commenters
recommended eligible uses to enhance
environmental quality, remediate
pollution, promote recycling or
composting, or increase energy
efficiency or electrical grid resilience.

Whether these projects respond to the
disproportionate impacts of the
pandemic on certain communities
would depend on the specific issue they
address and its nexus to the public
health and economic impacts of the
pandemic.
b. Assistance to Small Businesses
Background
The pandemic has severely impacted
many businesses, with small businesses
hit especially hard. Small businesses
make up nearly half of U.S. private -
sector employment 205 and play a key
role in supporting the overall economic
recovery as they are responsible for two-
thirds of net new jobs.206 Since the
beginning of the pandemic, however,
400,000 small businesses have closed,
with many more at risk.207 Sectors with
a large share of small business
employment have been among those
with the most drastic drops in
205 Board of Governors of the Federal Reserve
System, Monetary Policy Report (June 12, 2020),
https://www.federalreserve.gov/monetarypolicy/
2020-06-m pr-summary.htm.
206 U.S. Small Business Administration, Office of
Advocacy, Small Businesses Generate 44 Percent of
U.S. Economic Activity (Jan. 30, 2019), https://
advocacy.sba.gov/2019/01 /30/small-businesses-
gen era to -44 -percent-o f- u -s-economic-activity/.
207 Joseph R. Biden, Remarks by President Biden
on Helping Small Businesses (Feb. 22, 2021),
https://www.whitehouse.gov/briefing-room/
speechesremarks/2021 /02/22/remarks-by-president-
bidenon-hel ping -small -businesses/.
employment.208 The negative outlook
for small businesses has continued: As
of November 2021, approximately 66
percent of small businesses reported
that the pandemic has had a moderate
or large negative effect on their
business, and over a third expect that it
will take over 6 months for their
business to return to their normal level
of operations.209
This negative outlook is likely the
result of many small businesses having
faced periods of closure and having seen
declining revenues as customers stayed
home.210 In general, small businesses
can face greater hurdles in accessing
credit,211 and many small businesses
were already financially fragile at the
outset of the pandemic.212
While businesses everywhere faced
significant challenges during the
pandemic, minority -owned and very
small businesses have faced additional
obstacles. Between February and April
2020, the number of actively self-
employed Black business owners
decreased by 41 percent.213 During that
same time period, Asian and Latino
business owners decreased by 26 and 32
percent, respectively, compared to a 17
percent decrease in white business
owners.214 Female business owners also
saw significant impacts, with businesses
owned by women falling by 25
percent.215
Many of the disparities in how
minority business owners experienced
208 Daniel Wilmoth, U.S. Small Business
Administration Office of Advocacy, The Effects of
the COVID-19 Pandemic on Small Businesses, Issue
Brief No. 16 (Mar. 2021), available at https://
cdn.advocacy.sba.gov/wp-content/uploads/2021/
03/02112318/GOVID-19-Impact-On-Sm all -
Business. pd f.
209 U.S. Census Bureau, Small Business Pulse
Survey, https://portal.census.gov/pulse/data/ (last
visited December 7, 2021).
21° Olivia S. Kim et al., Revenue Collapses and
the Consumption of Small Business Owners in the
Early Stages of the COVID-19 Pandemic (Nov.
2020), https://www.nber.org/papers/w28151 .
211 See, e.g., Board of Governors of the Federal
Reserve System, Report to Congress on the
Availability of Credit to Small Businesses (Sept.
2017), available at https://www.federalreserve.gov/
publications/2017-se p tem ber-availability-o f-cre di t- to-small-businesses.h tm.
212 Alexander W. Bartik et al., The Impact of
COVID-19 on small business outcomes and
expectations, PNAS 117(30): 17656-66 (July 28,
2020), available at https://www.pnas.org/content/
117/30/17656.
213 Robert Fairlie, The impact of COVID-19 on
small business owners: Evidence from the first
3 months after widespread social -distancing
restrictions, Journal of economics & management
strategy (August 27, 2020), https://doi.org/10.1111/
jems.12400.
214 U.S. Small Business Administration, The
Effects of the COVID-19 Pandemic on Small
Businesses (March 2021), https://cdn.advocacy .
sba.gov/wp-content/uploads/2021/03/02112318/
COVID-19-Impact-On -Small -B u sin ess. p d f.
215 Robert Fairlie, supra note 213.
the pandemic are rooted in systemic
issues present even before the
pandemic. For example, before the
economic downturn, only 12 percent of
Black -owned businesses and 19 percent
of Hispanic -owned businesses had
annual earnings of over $1 million
compared to 31 percent of white -owned
businesses.216 Minority -owned
businesses were also overrepresented in
industries hit hardest by the economic
downturn (e.g., services, transportation
and warehousing, healthcare and social
assistance, administrative and support
and waste management, and
accommodation and food services).217
Approximately 22 percent of all
minority -owned business fell into the
hardest hit industries compared to 13
percent of nonminority-owned
businesses.218
Although disparities in annual
revenue are not a direct indication of a
business's ability to weather an
economic downturn, they do highlight
other disparities that make it more
challenging for these businesses to
survive the effects of the pandemic.

Black -owned startups, for example, face
larger challenges in raising capital,
including securing business loans.219
Summary of the Interim Final Rule and
Final Rule Structure
Summary of Interim Final Rule: As
discussed above, small businesses faced
significant challenges in covering
payroll, mortgages or rent, and other
operating costs as a result of the public
health emergency and measures taken to
contain the spread of the virus. Under
Sections 602(c)(1)(A) and 603(c)(1)(A),
recipients may "respond to the public
health emergency or its negative
economic impacts," by, among other
things, providing "assistance to . . .
small businesses." Accordingly, the
interim final rule allowed recipients to
provide assistance to small businesses
to address the negative economic
impacts faced by those businesses. A
216 Federal Reserve Bank of Atlanta. 2019. Small
Business Credit Survey 2019 Report on Minority -
Owned Firms. December. fedsmallbusiness.org/
survey/2019/report-on-minority-owned-firms.
217Ding, Lei, and Alvaro Sanchez. 2020. What
Small Businesses Will Be Impacted by COVID-19?
Federal Reserve Bank of Philadelphia.
philadel phiafed.org/covid-19/covid-19-equity-in-
recovery/what-small-businesses-will-be-impacted.
216 Lucas Misera, An Uphill Battle: COVID-19's
Outsized Toll on Minority -Owned Firms, Federal
Reserve Bank of Cleveland (October 8, 2020),
https://www.cleveland fed. org/newsroom-and-
events/publications/community-development-
bri e fs/d b-20201008-mi s era -re p ort. as px.
219 Robert Fairlie, A. Robb, D. Robinson, Black
and White: Access to Capital among Minority -
Owned Startups, NBER Working Paper 28154
(November 2020), https://www.nber.org/papers/
w28154.

Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4377
"small business" is defined as a
business concern or other organization
that:
(1) Has no more than 500 employees
or, if applicable, the size standard in
number of employees established by the
Administrator of the Small Business
Administration for the industry in
which the business concern or
organization operates; and
(2) Is a small business concern as
defined in section 3 of the Small
Business Act (15 U.S.C. 632).

Specifically, the interim final rule
provided that recipients may provide
assistance to small businesses to adopt
safer operating procedures, weather
periods of closure, or mitigate financial
hardship resulting from the COVID-19
public health emergency, including:
• Loans or grants to mitigate financial
hardship such as declines in revenues
or impacts of periods of business
closure;
• Loans, grants, or in -kind assistance
to implement COVID-19 prevention or
mitigation tactics; and
• Technical assistance, counseling, or
other services to assist with business
planning needs.

The interim final rule further
provided that recipients may consider
additional criteria to target assistance to
businesses in need, including small
businesses. Such criteria may include
businesses facing financial insecurity,
substantial declines in gross receipts
(e.g., comparable to measures used to
assess eligibility for the Paycheck
Protection Program), or other economic
harm due to the pandemic, as well as
businesses with less capacity to weather
financial hardship, such as the smallest
businesses, those with less access to
credit, or those serving underserved
communities. The interim final rule also
indicated that recipients should
consider local economic conditions and
business data when establishing such
criteria. Finally, the interim final rule
posed a question on whether there are
other services or costs that Treasury
should consider as eligible uses to
respond to the disproportionate impacts
of COVID-19 on low-income
populations and communities.

Final Rule Structure: Consistent with
the interim final rule approach, the final
rule provides a non -exhaustive list of
enumerated eligible uses for assistance
to small businesses that are impacted or
disproportionately impacted by the
pandemic. Further, within Assistance to
Small Business, a recipient may also
identify a negative economic impact
experienced by small businesses and
design and implement a response to that
negative economic impact, beyond the
uses specifically enumerated in the final
rule, according to the standard
described in the section Standards:

Identifying a Negative Economic Impact.

A recipient may also identify small
businesses that have been
disproportionately impacted by the
public health emergency and design and
implement a program that responds to
the source of that disproportionate
impact.

Consistent with other eligible use
categories to respond to the public
health and economic impacts of the
pandemic, recipients may identify and
serve small businesses that experienced
a negative economic impact or
disproportionate impact due to the
pandemic, as described in the section
Standards for Identifying Other Eligible
Populations. For example, to identify
impacted small businesses, a recipient
may consider whether the small
businesses faced challenges in covering
payroll, mortgage or rent, or other
operating costs as a result of the public
health emergency and measures taken to
contain the spread of the virus. In order
to ease administrative burden, the final
rule presumes that small businesses
operating in QCTs, small businesses
operated by Tribal governments or on
Tribal Lands, and small businesses
operating in the U.S. territories were
disproportionately impacted by the
pandemic.

Reorganizations and Cross -
References: As detailed above, Treasury
has re -categorized some uses of funds in
the final rule to provide greater clarity.

For discussion of assistance to small
businesses and impacted industries to
implement COVID-19 mitigation and
prevention strategies, see section
COVID-19 Mitigation and Prevention in
Public Health.

Small Businesses Eligible for Assistance
Public Comment: Treasury received
many comments about the general
benefits or drawbacks of use of SLFRF
funds to provide assistance to small
businesses. Some commenters suggested
that SLFRF funds should be available to
assist all small businesses, rather than
only businesses that experienced direct
negative economic impacts due to the
public health emergency. Other
commenters argued that aid to small
businesses should be narrowed in the
final rule, asserting that SLFRF funds
should instead focus on assistance to
households or building public sector
capacity.

Treasury also received comments
requesting clarification of the types of
small businesses eligible for assistance.

For example, some commenters
requested clarification about whether
microbusinesses were included in the
definition of small business. Comments
also suggested that self-employed
individuals and Tribal enterprises be
classified as small businesses,
respectively. Commenters argued that
these types of small businesses are more
common among low-income and
minority businessowners and serve as
important institutions in underserved
communities.

Finally, some commenters suggested
that Treasury permit broader
enumerated eligible uses to assist small
businesses in disproportionately
impacted communities and generally
strengthen economic growth in these
communities. These commenters
recommended that Treasury presume
small businesses operating in QCTs are
disproportionately impacted and
eligible for broader enumerated uses.

Treasury Response: As discussed in
the section Designating a Negative
Economic Impact, in the final rule,
recipients must identify an economic
harm caused or exacerbated by the
pandemic on a small business or class
of small businesses to provide services
that respond.

As discussed above, programs or
services in this category must respond
to a harm experienced by a small
business or class of small businesses as
a result of the public health emergency.

To identify impacted small businesses
and necessary response measures,
recipients may consider impacts such as
lost revenue or increased costs,
challenges covering payroll, rent or
mortgage, or other operating costs, the
capacity of a small business to weather
financial hardships, and general
financial insecurity resulting from the
public health emergency.

Recognizing the difficulties faced by
small businesses in certain
communities, the final rule presumes
that small businesses operating in QCTs,
small businesses operated by Tribal
governments or on Tribal Lands, and
small businesses operating in the U.S.
territories were disproportionately
impacted by the pandemic. This
presumption parallels the final rule's
approach to assistance to households,
reflecting the more severe pandemic
impacts in underserved communities
and creating a parallel structure across
different categories of eligible uses to
make the structure simpler for
recipients to understand and navigate.

Treasury notes that recipients may
also designate a class of small
businesses that experienced a negative
economic impact or disproportionate
negative economic impact (e.g.,
microbusinesses, small businesses in
certain economic sectors), design an
intervention to fit the impact, and

4378 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 /Rules and Regulations document that the individual entity is a
member of the class. Additional
information about this framework is
included in the section General
Provisions: Structure and Standards.

Further, Treasury is maintaining the
interim final rule definition of "small
business," which used the Small
Business Administration's (SBA)
definition of fewer than 500 employees,
or per the standard for that industry, as
defined by SBA. This definition
includes businesses with very few
employees, self-employed individuals,
and Tribally owned businesses.220
Finally, Treasury notes that recipients
may award SLFRF funds to many
different types of organizations,
including small businesses, to function
as a subrecipient in carrying out eligible
uses of funds on behalf of a recipient
government. In this case, a small
business need not have experienced a
negative economic impact in order to
serve as a subrecipient. See section
Distinguishing Subrecipients versus
Beneficiaries for more detailed
discussion of interactions with
subrecipients, in contrast to
beneficiaries of assistance.

Enumerated Eligible Uses for Assistance
to Small Businesses
Public Comment: Treasury received
comments requesting clarification of the
types of assistance available to small
businesses. For example, one
commenter suggested that outdoor
dining be an eligible use for SLFRF
funds as assistance to small businesses.

Other commenters asked for
clarification about how SLFRF funds
could be used to support new
businesses and start-ups.

Several commenters requested
clarification of whether and how
recipients may provide services to
business districts or downtown areas,
particularly those that exist in whole or
in part within a QCT, and requested
reduced documentation of the specific
negative economic impact for the
businesses operating within those areas.

These commenters argued in favor of
allowing redevelopment or other
support, including capital investments,
in business districts that were
220 In regard to counting employees, businesses
owned and controlled by a Tribal government are
not considered affiliates of the Tribal government
and are not considered affiliates of other businesses
owned by the Tribal government because of their
common ownership by the Tribal government or
common management, as described in 13 CFR
121.103(b)(2). This definition is consistent with the
Small Business Administration (SBA) HUBZone
definition of a "small business concern" relating to
Tribal governments as well as how Tribal
enterprises are defined for the State Small Business
Credit Initiative (SSBCI).
negatively impacted by COVID-19.

Several commenters also argued that
funds should be available to support
and grow microbusinesses, or
businesses with five or fewer
employees, which are more likely to be
owned by women and people of color.

Treasury Response: In the final rule,
Treasury is maintaining and clarifying
the enumerated eligible uses of funds
for assistance to small businesses that
are impacted or disproportionately
impacted by the pandemic.

Impacted small businesses.

Specifically, Treasury is maintaining
enumerated eligible uses from the
interim final rule for assistance to
impacted small businesses. These
include but are not limited to:
• Loans or grants to mitigate financial
hardship such as declines in revenues
or impacts of periods of business
closure, for example by supporting
payroll and benefits costs, costs to retain
employees, mortgage, rent, or utilities
costs, and other operating costs;
• Loans, grants, or in -kind assistance
to implement COVID-19 prevention or
mitigation tactics (see section Public
Health for details on these eligible uses);
and
• Technical assistance, counseling, or
other services to assist with business
planning needs.

Treasury acknowledges a range of
potential circumstances in which
assisting small businesses could be
responsive to the negative economic
impacts of COVID-19, including for
small businesses startups and
microbusinesses and individuals
seeking to start small or
microbusinesses. For example:
• As noted above, a recipient could
assist small business startups or
microbusinesses with additional costs
associated with COVID-19 mitigation
tactics; see section Public Health for
details on these eligible uses.
• A recipient could identify and
respond to a negative economic impact
of COVID-19 on new small business
startups or microbusinesses; for
example, if small business startups or
microbusinesses in a locality faced
greater difficulty accessing credit than
prior to the pandemic or faced increased
costs to starting the business due to the
pandemic or if particular small
businesses or microbusinesses had lost
expected startup capital due to the
pandemic.
• The interim final rule also
discussed, and the final rule maintains,
eligible uses that provide support for
individuals who have experienced a
negative economic impact from the
COVID-19 public health emergency,
including uses that provide job training
for unemployed individuals. These
initiatives also may support small
business start-ups, microbusinesses, and
individuals seeking to start small or
microbusinesses.

Disproportionately impacted small
businesses. Additionally, Treasury
agrees with commenters that
disproportionately impacted small
businesses may benefit from additional
assistance to address the sources of that
disparate impact.

As such, the final rule provides a
broader set of enumerated eligible uses
for disproportionately impacted small
businesses and/or small businesses in
disproportionately impacted business
districts. Recipients may use SLFRF
funds to assist these businesses with
certain capital investments, such as
rehabilitation of commercial properties,
storefront improvements, and facade
improvements. Recipients may also
provide disproportionately impacted
microbusinesses additional support to
operate the business, including
financial, childcare, and transportation
supports.

Recipients could also provide
technical assistance, business
incubators, and grants for start-ups or
expansion costs for disproportionately
impacted small businesses. Note that
some of these types of assistance are
similar to those eligible to respond to
small businesses that experienced a
negative economic impact ("impacted"
small businesses). However, because the
final rule presumes that some small
businesses were disproportionately
impacted, these enumerated eligible
uses can be provided to those
businesses without any specific
assessment of whether they individually
experienced negative economic impacts
or disproportionate impacts due to the
pandemic.

Cross -References: Recipients
providing assistance to small businesses
for capital expenditures (i.e.,
expenditures on property, facilities, or
equipment) should also review the
section Capital Expenditures in General
Provisions: Other, which describes
eligibility standards that apply to capital
expenditures. Recipients should also
note that services to address vacant or
abandoned commercial or industrial
properties are addressed in section
Vacant or Abandoned Properties in
Assistance to Households.

Loans to Small Businesses
Public Comment: Treasury received
many comments requesting clarification
on using SLFRF funds to establish funds
that provide loans to small businesses.

For example, commenters sought
clarification of how eligible use

Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 /Rules and Regulations 4379
requirements and applicable dates for
SLFRF funds would apply to third party
organizations (like economic
development organizations) who receive
SLFRF funds in order to establish a loan
fund. In addition, commenters
requested clarification on what
requirements apply to loan programs
with available funds remaining after
December 31, 2024.

Treasury Response: SLFRF funds may
be used to make loans, including to
small businesses, provided that the loan
is an eligible use, and the cost of the
loan is tracked and reported in
accordance with Treasury's Compliance
and Reporting Guidance. Funds that are
unobligated after December 31, 2024
must be returned to Treasury. See
section Treatment of Loans for more
information about using SLFRF funds
for loan programs.
c. Assistance to Nonprofits
Background: Nonprofits have faced
significant challenges because of the
pandemic, including increased demand
for services and changing operational
needs.221 Prior to the pandemic, the
median U.S. nonprofit reported that it
had six months of cash on hand.222 This
varied by sector, however, with some
sectors like disaster relief organizations
reporting a median of 17 months cash
on hand, and others, like mental health
and crisis intervention organizations
reporting only three months.223
Evidence suggests that the pandemic
has damaged the financial health of
nonprofits, with small nonprofits,
which tend to rely more heavily on
donations than large nonprofits,
reporting relatively larger declines in
donations — 42 percent versus 29
percent, respectively.224 Among
nonprofits that collect fees for services,
the median revenue amount collected
from such fees fell by 30 percent from
2019 to 2020, with arts organization
experiencing a 50 percent decline.225
Nonprofits also experienced significant
job losses. While employment in the
nonprofit sector has recovered from its
low point in 2020, as of November 2021,
221 See, e.g., Federal Reserve Bank of San
Francisco, Impacts of COVID-19 on Nonprofits in
the Western United States (May 2020), https://
www.frbsf org/community-development/files/
impact-of-covid.
222 Philanthropy and COVID-19: Measuring one
year of giving, Candid and the Center for Disaster
Philanthropy. (2021), https://www.issuelab.org/
resources/38039/38039.pdf.
223 id.
224 Elizabeth T. Boris et al., Nonprofit Trends and
Impacts 2021, Urban Institute (October 7, 2021),
https://www.urban.org/research/publication/
non profit -trends -and -impacts -2021 /view/full_
report.
225 Id.
the sector remained 485,000 jobs below
its pre -pandemic leve1.226 In addition,
some nonprofits may have experienced
declines in volunteer staffing during the
pandemic.227
At the same time, nonprofits provide
a host of services for their communities,
including helping Americans weather
the multitude of challenges presented
by the pandemic. The ARPA and the
interim final rule recognized this
dichotomy —nonprofits as entities that
have themselves been negatively
impacted by the pandemic and as
entities that provide services that
respond to the public health and
negative economic impacts of the
pandemic on households and others
—by creating two roles for nonprofits.

First, under Sections 602(c)(1)(A) and
603(c)(1)(A), recipients may "respond to
the public health emergency or its
negative economic impacts," by, among
other activities, providing "assistance to
. . . nonprofits." The interim final rule
defined assistance to nonprofits to
include "loans, grants, in -kind
assistance, technical assistance or other
services, that responds to the negative
economic impacts of the COVID-19
public health emergency," and
"nonprofit" to mean a tax-exempt
organization under Section 501(c)(3) of
the U.S. Internal Revenue Code.228
Second, as discussed above, ARPA
and the interim final rule provided that
nonprofit organizations may also receive
funds as subrecipients of a recipient
government (Le., a government that
received SLFRF funds); subrecipients
carry out an eligible use of SLFRF funds
on behalf of a recipient government
(e.g., a recipient government that would
like to provide food assistance to
impacted households may grant funds
to a nonprofit organization to carry out
that eligible use). Recipients generally
have wide latitude to award funds to
many types of organizations, including
nonprofit or for-profit organizations, as
subrecipients to carry out eligible uses
of funds on their behalf. For further
information on distinguishing between
beneficiaries and subrecipients, as well
as the impacts of the distinction on
reporting and other requirements, see
section Transfers of Funds and section
Distinguishing Subrecipients versus
Beneficiaries under the Public Health
226 Chelsea Newhouse, COVID-19 JOBS UPDATE,
NOVEMBER 2021: Nonprofits add just 5,000 jobs in
November, Center for Civil Society Studies at Johns
Hopkins University (December 10, 2021), http://
ccss.jhu.edu/november-2021-jobs/.
227Elizabeth T. Boris et al. supra note 224 at p.

38. 225 § 35.3 Definitions.
and Negative Economic Impacts eligible
use category.229
Reorganization and Cross -References:

Under the interim final rule, assistance
to disproportionately impacted
communities was a separate, stand-
alone category. The final rule
reorganizes the disproportionate impact
analysis within the sections Assistance
to Households, Assistance to Small
Business, and Assistance to Nonprofits
to better articulate how recipients can
serve disproportionately impacted
beneficiaries in each of those categories.

As detailed above in the Public Health
subsection, in response to public
comments describing uncertainty on
which eligible use category should be
used to assess different potential uses of
funds, Treasury has re -categorized some
uses of funds in the final rule to provide
greater clarity. For discussion of
assistance to nonprofits to implement
COVID-19 mitigation and prevention
strategies, see section COVID-19
Mitigation and Prevention in Public
Health.

Recipients providing assistance via
nonprofits involving capital
expenditures (i.e., expenditures on
property, facilities, or equipment)
should also review the section Capital
Expenditures in General Provisions:

Other, which describes eligibility
standards for these expenditures.

Recipients providing assistances in the
form of loans should review the section
Treatment of Loans.

Public Comment: Eligible Assistance
to Impacted and Disproportionately
Impacted Nonprofits: A few
commenters asked Treasury to be more
explicit in the final rule that recipients
may use funds to provide relief directly
to nonprofit organizations and to
explain how nonprofits might qualify
themselves for assistance and what
expenses SLFRF funds may be used to
cover.23° Commenters requested that
Treasury note that the pandemic is
229 The ARPA also states under "Transfer
Authority" that a Recipient may transfer funds to
a private nonprofit organization such as those
defined in paragraph (17) of section 401 of the
McKinney-Vento Homeless Assistance Act (42
U.S.C. 11360(17). See 602 & 603(c)(3) of the Social
Security Act. See section Transfers of Funds for
additional information on other types of entities,
including other forms of nonprofits, that may
receive transfers.
236 While not stated specifically in the interim
final rule, the Department does not require or have
a preference as to the payment structure for
recipients that transfer funds to subrecipients (e.g.,
advance payments, reimbursement basis, etc.).

Ultimately, recipients must comply with the
eligible use requirements and any other applicable
laws or requirements and are responsible for the
actions of their subrecipients or beneficiaries.

4380 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 /Rules and Regulations leading to a changing financial
landscape for nonprofits.

Treasury Response: Eligible
Assistance to Impacted and
Disproportionately Impacted
Nonprofits: The interim final rule
provided for, and the final rule
maintains, the ability for recipients to
provide direct assistance to nonprofits
that experienced public health or
negative economic impacts of the
pandemic. Specifically, recipients may
provide direct assistance to nonprofits if
the nonprofit has experienced a public
health or negative economic impact as
a result of the pandemic. For example,
if a nonprofit organization experienced
impacts like decreased revenues or
increased costs (e.g., through reduced
contributions or uncompensated
increases in service need), and a
recipient provides funds to address that
impact, then it is providing direct
assistance to the nonprofit as a
beneficiary under Subsection (c)(1) of
Sections 602 and 603. Direct assistance
may take the form of loans, grants, in -
kind assistance, technical assistance, or
other services that respond to the
negative economic impacts of the
COVID-19 public health emergency.

A recipient may identify a negative
economic impact experienced by a
nonprofit, or class of nonprofits, and
design and implement a response to that
negative economic impact, see section
Standards: Designating a Negative
Economic Impact. The final rule
provides a non -exhaustive list of
enumerated eligible uses for assistance
to nonprofits that are impacted or
disproportionately impacted by the
pandemic.

A recipient may also identify a class
of nonprofits that have been
disproportionately impacted by the
public health emergency and design and
implement a program that responds to
the source of that disproportionate
impact. For example, a recipient may
determine that nonprofits offering after -
school programs within its jurisdiction
were disproportionately impacted by
the pandemic due to the previous in -
person, indoors nature of the work and
the nonprofits' reliance on fees received
for services (e.g., attendance fees). The
recipient might then design an
intervention to assist those nonprofits in
adapting their programming (e.g., to
outdoor or online venues), their revenue
structure (e.g., adapting the fee for
service structure or developing expertise
in digital donation campaigns), or both.

Additional information about this
framework is included in General
Provisions: Structure and Standards. In
order to ease administrative burden, the
final rule presumes that nonprofits
operating in QCTs, operated by Tribal
governments or on Tribal Lands, or
operating in the U.S. territories were
disproportionately impacted by the
pandemic.

To summarize, a recipient may
determine that certain nonprofits were
impacted by the pandemic or were
disproportionately impacted by the
pandemic and provide responsive
services.

Public Comment: Beneficiaries and
Subrecipients: As noted elsewhere in
this final rule, Treasury received
multiple comments expressing
uncertainty on how to categorize a
particular activity in the eligible use
categories. For instance, some
commenters requested that recipients be
able to use SLFRF funds for certain
expenses incurred by nonprofits (e.g.,
unemployment charges) as a response to
a public health or negative economic
impact to that nonprofit; others asked if
nonprofits providing certain services
(e.g., social services) made them eligible
for direct assistance. Commenters also
requested that Treasury acknowledge
that engagement directly with nonprofit
organizations in low-income
communities and communities of color
may allow the recipient to better assess
economic harms in these areas.

Treasury Response: Beneficiaries and
Subrecipients: Treasury recognizes that
many nonprofits play important roles in
their communities, and some may have
experienced public health or negative
economic impacts during the pandemic.

As such, under the interim final rule
and the final rule, nonprofits may be
impacted by the pandemic and receive
assistance as a beneficiary, as described
above, and/or be a subrecipient
providing services on behalf of a
recipient.231
Specifically, the interim final rule
also allowed for, and the final rule
maintains, the ability for the recipient to
transfer, e.g., via grant or contract, funds
to nonprofit entities to carry out an
eligible use on behalf of the recipient.

Treasury notes that recipients may
award SLFRF funds to many different
types of organizations to carry out
eligible uses of funds and serve
beneficiaries on behalf of a recipient
government (e.g., assisting in a
vaccination campaign, operating a job
training program, developing affordable
housing). When a recipient provides
funds to an organization to carry out
eligible uses of funds and serve
231 Note, this response is meant to clarify the
difference between nonprofits as beneficiaries and
nonprofits as subrecipients. It is not meant to limit
the types of relationships that a recipient may enter
into with a nonprofit as permitted under the
Uniform Guidance.
beneficiaries, the organization becomes
a subrecipient. In this case, a nonprofit
need not have experienced a negative
economic impact in order to serve as a
subrecipient.

In the context of SLFRF, nonprofits of
all types may be subrecipients. Treasury
is not restricting the types of nonprofits
that can operate as subrecipients, rather
allowing recipients to decide what form
best meets the needs of their
community. Therefore, a "nonprofit"
that is acting as subrecipient could
include, but is not limited to, a
nonprofit as that term is defined in
paragraph (17) of section 401 of the
McKinney-Vento Homeless
Assistance.232 See section
Distinguishing Subrecipients versus
Beneficiaries for further information.

Additional guidance on determining
subrecipient status may be found in the
Uniform Guidance.233
Recipients may transfer funds to
subrecipients in several ways, including
advance payments and on a
reimbursement basis. Ultimately,
recipients must comply with the eligible
use requirements and any other
applicable laws or requirements and are
responsible for the actions of their
subrecipients or beneficiaries.

As part of accepting the Award Terms
and Conditions for SLFRF, each
recipient agreed to maintain a conflict -
of -interest policy consistent with 2 CFR
200.318(c) that is applicable to all
activities funded with the SLFRF award.

Pursuant to this requirement, decisions
concerning SLFRF funds must be free of
undisclosed personal or organizational
conflicts of interest, both in fact and in
appearance. Recipients may avoid
conflicts of interest in providing
assistance to nonprofits or making
subrecipient awards by, inter alia,
making aid available to nonprofits on
generally applicable terms or utilizing a
competitive grant process, respectively.

A recipient may not use control over
SLFRF funds for their own private gain.

Furthermore, no employee, officer, or
agent may participate in the selection,
award, or administration of a contract
supported by a federal award if he or
she has a real or apparent conflict of
interest.

Public Comment: Definition of
Nonprofit: Treasury also received
several requests to expand the definition
of nonprofits so that other tax-exempt
entities (e.g., 501(c)(7)s, 501(c)(9)s,
501(c)(19)s, nonprofits with "historical
232 See sections 602(c)(3) and 603(c)(3) of the
Social Security Act. See also Section 401 of the
McKinney-Vento Homeless Assistance Act (42
U.S.C. 11360(17), which defines a "private
nonprofit organization."

Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 /Rules and Regulations 4381
significance") could be eligible for
direct assistance as beneficiaries.

Treasury Response: Definition of
Nonprofit: The final rule expands the
definition of nonprofits to mean
501(c)(3) organizations and 501(c)(19)
organizations.234 The 501(c)(3)
classification includes a wide range of
organizations with varying charitable or
public service -oriented goals (e.g.,
housing, food assistance, job training).

As discussed above, these nonprofit
organizations often experienced
hardship due to increased needs for
services combined with decreased
donations and other sources of funding.

In response to comments, Treasury has
expanded the definition of nonprofit to
include 501(c)(19) organizations, which
includes veterans' organizations, to
provide recipients more flexibility and
in alignment with the definition of
nonprofit adopted by the CARES Act,
wherein 501(c)(3)s and 501(c)(19)s were
eligible for assistance.235
Public Comment: Reporting
Requirements: One commenter asked
Treasury to clarify if nonprofits that
receive direct assistance as beneficiaries
are required to comply with guidelines
and reporting requirements.

Treasury Response: Reporting
Requirements: Nonprofits that receive
direct assistance as beneficiaries are not
subrecipients under SLFRF and are
therefore not required to comply with
SLFRF reporting requirements.

However, the recipient must comply
with SLFRF reporting requirements,
which would require reporting
obligations and expenditures for
assistance to nonprofits. The recipient
may also choose to establish other forms
of reporting or accountability as a part
of the recipient's direct assistance
program.

A nonprofit entity that receives a
transfer from a recipient is a
subrecipient. Per the Uniform Guidance,
subrecipients must adhere to the same
requirements as recipients. Therefore, a
nonprofit subrecipient may only receive
funds to carry out an eligible use of
SLFRF funds and must comply with any
reporting and compliance requirements.

Note that recipients are ultimately
responsible for reporting information to
Treasury and must collect any necessary
234 § 35.3 Definitions.
235 Treasury considered expanding the definition
of nonprofit to include 501(c)(6) organizations, as
Congress later did in the Coronavirus Response and
Consolidated Appropriations Act of 2021, but
ultimately decided to retain the original CARES Act
definition. To the extent impacted by the pandemic,
501(c)(6) organizations may be eligible to receive
funds to support eligible uses that align with their
overall purpose (e.g., tourism promotion in aid of
an impacted industry).
information from their subrecipients to
complete required reporting.
d. Aid to Impacted Industries
The interim final rule allowed for
"aid to tourism, travel, and hospitality,
and other impacted industries" that
responds to the negative economic
impacts of the COVID-19 public health
emergency. In designating other
impacted industries, Treasury specified
that recipients should consider the
"extent of the economic impact as
compared to tourism, travel, and
hospitality" and "whether impacts were
due to the COVID-19 pandemic, as
opposed to longer -term economic or
industrial trends unrelated to the
pandemic." 236 Treasury identified
declines in employment and revenue as
possible metrics to compare the
economic impact on a particular
industry relative to the tourism, travel,
and hospitality industries.

Treasury further provided that aid
should be limited to businesses,
attractions, business districts, and Tribal
development districts 237 that were
operating prior to the pandemic and
affected by required closures and other
efforts to contain the pandemic.

Examples of eligible aid include
assistance to implement COVID-19
mitigation and infection prevention
measures, aid to support safe reopening
of businesses in these industries, as well
as aid for a planned expansion or
upgrade of tourism, travel, and
hospitality facilities delayed due to the
pandemic. The interim final rule and
Treasury's subsequent Compliance and
Reporting Guidance also required
governments to publicly report
assistance provided to private -sector
businesses under this eligible use and
maintain records of their assessments to
facilitate transparency and
accountability.

Reorganization and Cross -References:

As detailed above, Treasury has re -
categorized some uses of funds in the
final rule to provide greater clarity. In
the interim final rule, aid to impacted
industries to implement COVID-19
mitigation and prevention strategies was
categorized under Aid to Impacted
Industries; the final rule addresses these
items under the section COVID-19
Mitigation and Prevention in Public
Health. Recipients should also be aware
of the difference between beneficiaries
236 Coronavirus State and Local Fiscal Recovery
Funds, 86 FR at 26795.
237 For a definition of "Tribal development
districts," please see FAQ 2.9 at the following:

Coronavirus State and Local Fiscal Recovery Funds,
Frequently Asked Questions, as of July 19, 2021;
https://home.treasmy.gov/system/files/136/
SLFRPFAQ.pdf.
of assistance and subrecipients when
working with impacted industries; for
further information, see section
Distinguishing Subrecipients versus
Beneficiaries.

Designating an Impacted Industry
Public Comment: Many commenters
requested greater clarity on how to
designate "other impacted industries"
within their jurisdiction. Commenters
requested greater specificity as to the
metrics used to measure impact, with
some suggesting metrics such as the
change in the size of an industry's
workforce due to the pandemic, as well
as consideration of whether and why
employees are choosing to return to
work at slower rates in certain
industries. One commenter asked if this
meant nearly every industry was
"disproportionately impacted." Some
commenters encouraged Treasury to
focus on industries most negatively
impacted by the pandemic, including
disallowing across-the-board business
subsidies to businesses that were not
negatively impacted by the pandemic
and saw revenue or profit growth. Other
commenters asked for flexibility for
recipients to determine impacted
industries based on their local
knowledge of the economic landscape.

Treasury Response: The final rule
maintains the interim final rule's
approach of allowing recipients to
designate impacted industries outside
the travel, tourism, and hospitality
industries, and, in response to
comments, provides greater clarity as to
how recipients may designate such
impacted industries.

Sections 602(c)(1)(A) and 603(c)(1)(A)
recognize that the tourism, travel, and
hospitality industries are severely
negatively impacted by the pandemic.

Under the final rule, recipients may
provide eligible aid (described in further
detail herein) to the tourism, travel, and
hospitality industries. Treasury
considers Tribal development districts,
which are commercial centers for Tribal
hospitality, gaming, tourism, and
entertainment and can include Tribal
enterprises, as part of the tourism,
travel, and hospitality industries that
have been severely hit by the pandemic.

Therefore, Treasury reaffirms that Tribal
development districts are considered
impacted industries and recipients may
provide eligible aid to them.

To identify other industries
comparably impacted to the tourism,
travel, and hospitality industries,
recipients should undertake a two-step
process: Identifying an industry and
determining whether that industry is
comparably impacted.

4382 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 /Rules and Regulations First, recipients should identify an
industry to be assessed. In identifying
this industry, the final rule provides
recipients the flexibility to define its
substantive or geographic scope.238
Recipients may identify a broad sector
that encompasses a number of sub-
industries, or they may identify a
specific sub -industry to be assessed. For
example, a recipient may identify
"personal care services" as an industry,
or they may identify a more specific
category within the "personal care
services" industry (e.g., barber shops) as
an industry. In defining the industry,
Treasury encourages recipients to define
narrow and discrete industries eligible
for aid. Recipients are not required to
follow, but may consider following,
industry classifications under the North
American Industry Classification
System (NAICS). Treasury notes that the
larger and more diverse the sector, the
more difficult it may be to demonstrate
that the larger and less specific sector is
negatively impacted in the same way
given the scale and diversity of
businesses within it.

State or territory recipients may also
define a constituent industry with
greater geographic precision than state
or territory -wide. For example, a state
may identify a particular industry in a
certain region of the state that was
negatively impacted by the pandemic,
even if the same industry in the rest of
the state did not see a meaningful
negative economic impact from the
pandemic. State recipients oversee large
and diverse industries, sometimes with
differences in economic activity
between geographic regions. Allowing
greater geographic precision allows
recipients to target aid to those that
need it most, ensuring that state
averages do not conceal hard-hit areas
in their state.

Second, to determine whether the
industry is "impacted," recipients
should compare the negative economic
impacts of the public health emergency
on the identified industry to the impacts
observed on the travel, tourism, and
hospitality industries.

1. Simplified test. An industry is
presumed to be impacted if the industry
experienced employment loss of at least
8 percent.

Specifically, a recipient should
compare the percent change in the
238 Once an industry is designated as impacted,
aid should be generally broadly available to
businesses in the industry that qualify. Recipients
should document how they defined the scope of
their industry and how they determined that the
industry was impacted. For states and territories,
this includes documenting their justification for
defining a constituent industry with greater
geographic precision than state or territory -wide.
number of employees of the recipient's
identified industry and the national
Leisure & Hospitality sector in the three
months before the pandemic's most
severe impacts began (a straight three-
month average of seasonally -adjusted
employment data from December 2019,
January 2020, and February 2020) with
the latest data as of the final rule release
(a straight three-month average of
seasonally -adjusted employment data
from September 2021, October 2021,
and November 2021).239 The national
Leisure & Hospitality sector largely
represents the national travel, tourism,
and hospitality industries enumerated
in the statute. According to the Bureau
of Labor Statistics, employment has
fallen by approximately 8 percent for
the national Leisure & Hospitality sector
when comparing the most recent three-
month period available as of the date of
adoption of the final rule to the three-
month period immediately before the
public health emergency. Therefore, if
the identified industry has suffered an
employment loss of at least 8 percent,
the final rule presumes the industry to
be an "impacted industry."
For parity and simplicity, smaller
recipients without employment data
that measure industries in their specific
jurisdiction may use data available for a
broader unit of government for this
calculation (e.g., a county may use data
from the state in which it is located; a
city may use data for the county, if
available, or state in which it is located)
solely for purposes of determining
whether a particular industry is an
impacted industry.

2. If simplified test is not met. If an
industry does not satisfy the test above
or data are unavailable, the recipient
may still designate the industry as
impacted by demonstrating the
following:
a. The recipient can show that the
totality of relevant major economic
indicators demonstrate that the industry
is experiencing comparable or worse
economic impacts as the national
tourism, travel, and hospitality
industries at the time of the publication
of the final rule, and that the impacts
were generally due to the COVID-19
public health emergency. Example
economic indicators include gross
output, GDP, net profits, employment
levels, and projected time to restore
employment back to pre -pandemic
levels. Recipients may rely on available
economic data, government research
239 National Leisure & Hospitality supersector
employment data can be found on the U.S. Bureau
of Labor Statistics website: U.S. Bureau of Labor
Statistics, Leisure and Hospitality, https://
www.bls.gov/iag/tgs/iag70.htm (last visited
December 7, 2021).
publications, research from academic
sources, and other quantitative sources
for this determination.

If quantitative data is unavailable, the
recipient can rely on qualitative data to
show that the industry is experiencing
comparable or worse economic impacts
as the national tourism, travel, and
hospitality industries, and the impacts
were generally due to the COVID-19
public health emergency. Recipients
may rely on sources like community
interviews, surveys, and research from
relevant state and local government
agencies.

As the public health emergency and
economic recovery evolves, recipients
should assess how industry impacts
shift over time. Impacted industries may
recover in a short period of time and no
longer face a negative economic impact;
in those circumstances, the recipient
should ensure that the extent and length
of aid is reasonably proportional to the
negative economic impact that is
experienced, as detailed further below
and in section General Provisions:

Structure and Standards. Recipients
may add to their list of impacted
industries by showing that the negative
economic impacts to the industry at the
time of the designation are comparable
to the negative economic impacts to the
national tourism, travel, and hospitality
sectors as of the date of the final rule
adoption, as detailed herein.

Eligible Aid
Public Comment: Commenters asked
for further clarification as to the
definition of eligible aid to an impacted
industry, with many requesting that a
broad range of aid be eligible. Examples
of aid that recipients asked to be
considered eligible include aid to
businesses to cover COVID-19
mitigation costs and planned
renovations or improvements to
tourism, travel, and hospitality
facilities, as well as marketing and in -
kind incentives to attract visitors.

Commenters also asked about the
eligibility of aid to broadly cover losses
incurred by facilities such as convention
centers and hotels due to the
pandemic's economic impact.

Commenters also asked for further
clarification about the requirements
related to private -sector reporting.

Further, some commenters asked for
clarification about eligible aid to
impacted industries owned and
operated by Tribal governments,
including for Tribal construction
projects that have been delayed due to
the pandemic's economic impacts, and
for deference to Tribal determinations of
negative economic impacts.

Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 /Rules and Regulations 4383 Treasury Response: In response to
commenters' requests for clarification
on eligible aid, the final rule requires
that aid to impacted industries,
including to Tribal development
districts, be designed to address the
harm experienced by the impacted
industry.

First, recipients should identify a
negative economic impact, i.e., an
economic harm, that is experienced by
businesses in the impacted industry.

Second, recipients should select a
response that is designed to address the
identified economic harm resulting from
or exacerbated by the public health
emergency. Responses must also be
related and reasonably proportional to
the extent and type of harm
experienced; uses that bear no relation
or are grossly disproportionate to the
type or extent of harm experienced
would not be eligible uses. Recipients
should consider the further discussion
of this standard provided in the sections
Standards: Designating a Public Health
Impact and Standards: Designating a
Negative Economic Impact.

These responses may take the form of
direct spending by recipients to promote
an industry or support for businesses
within an "impacted" industry that
experienced a negative economic impact
(e.g., through a grant program).

Examples of eligible responses include:
• Aid to mitigate financial hardship
due to declines in revenue or profits by
supporting payroll costs and
compensation of returning employees
for lost pay and benefits during the
COVID-19 pandemic, as well as support
of operations and maintenance of
existing equipment and facilities, such
as rent, leases, and utilities;
• Aid for technical assistance,
counseling, and other services to assist
with business planning needs; and
• Aid to implement COVID-19
mitigation and infection prevention
measures, such as vaccination or testing
programs, is broadly eligible for many
types of entities, including travel,
tourism, hospitality, and other impacted
industries. Recipients providing aid to
impacted industries for COVID-19
public health measures should review
the section Assistance to Businesses to
Implement COVID-19 Strategies in
Public Health, which describes types of
eligible uses of funds in this category.

To address the identified harms,
responses (e.g., aid through a grant
program) should be generally broadly
available to all businesses within the
impacted industry to avoid the risk of
self -dealing, preferential treatment, and
conflicts of interest.24O Treasury
encourages recipients to design aid
programs such that funds are first used
for operational expenses that are
generally recognized as ordinary and
necessary for the recipient's operation,
such as payroll, before being used on
other types of costs. As noted in the
section General Standards: Structure
and Standards, uses of funds that do not
respond to the negative economic
impacts of the pandemic, such as
excessive compensation to employees,
is ineligible.

The final rule maintains the interim
final rule's requirement that aid may
only be considered responsive to the
negative economic impacts of the
pandemic if it supports businesses,
attractions, and Tribal development
districts operating prior to the pandemic
and affected by required closures and
other efforts to contain the pandemic.

Further, to facilitate transparency and
accountability, the final rule maintains
the interim final rule's requirement that
recipients publicly report assistance
provided to private -sector businesses
under this eligible use, including
tourism, travel, hospitality, and other
impacted industries, and its connection
to negative economic impacts of the
public health emergency. Recipients
also should maintain records to support
their assessment of how businesses
receiving assistance were affected by the
negative economic impacts of the public
health emergency and how the aid
provided responds to these impacts.

Recipients providing aid to impacted
industries for capital expenditures (i.e.,
expenditures on property, facilities, or
equipment), including Tribal
governments providing aid to Tribal
development districts, should also
review the section Capital Expenditures
in General Provisions: Other, which
describes eligibility standards that are
applicable to these expenditures,
depending on the type of aid. Recipients
providing assistance in the form of loans
should review the section Treatment of
zoo As part of accepting the Award Terms and
Conditions for SLFRF, each recipient agreed to
maintain a conflict -of -interest policy consistent
with 2 CFR 200.318(c) that is applicable to all
activities funded with the SLFRF award. Pursuant
to this policy, decisions concerning SLFRF must be
free of undisclosed personal or organizational
conflicts of interest, both in fact and in appearance.

Recipients may avoid conflicts of interest in
awarding aid to impacted industries by, inter alia,
making aid available to businesses in the industry
on generally applicable terms or utilizing a
competitive grant process. A recipient may not use
control over SLFRF for their own private gain.

Furthermore, no employee, officer, or agent may
participate in the selection, award, or
administration of a contract supported by a federal
award if he or she has a real or apparent conflict
of interest.

Loans in Program Administration
Provisions.

4. General Provisions: Other
As noted above, the final rule
consolidates into a General Provisions
section several types of uses of funds; in
the interim final rule, the eligibility of
these uses of funds was discussed
within specific categories of eligible
uses for public health and negative
economic impacts. Treasury anticipates
that this re -organization will enhance
recipient clarity in assessing eligible
uses of funds. These General Provisions
apply across all uses of funds under
public health and negative economic
impacts.

Specifically, this section considers
eligible uses for:
• Public Sector Capacity and
Workforce, which includes several
separate and non -mutually exclusive
categories articulated in the interim
final rule: public health and safety staff;
rehiring state, local, and Tribal
government staff; expenses for
administering COVID-19 response
programs; expenses to improve the
efficacy of public health or economic
relief programs; and administrative
expenses caused or exacerbated by the
pandemic. Treasury recognizes that
these are closely related and frequently
overlapping categories. The final rule
treats them as a single purpose,
supporting public sector capacity, and
provides coordinated guidance on the
standards and presumptions that apply
to them.
• Capital Expenditures, which was
addressed only under Public Health in
the interim final rule. The final rule
moves this expense to General
Provisions and provides more clarity on
the eligibility of capital expenditures
across all aspects of the public health
and negative economic impacts eligible
use category.
• Distinguishing Subrecipients versus
Beneficiaries, which describes the
differences between these two
categories. Recipient governments
responding to the public health and
negative economic impacts of the
pandemic may provide assistance to
beneficiaries or execute an eligible use
of funds through a subrecipient; some
types of entities (e.g., nonprofits) could
fit into either category depending on the
specific purpose of the use of funds.
• Uses Outside the Scope of this
Category, which addresses uses of funds
that are ineligible or generally ineligible
under this eligible use category in the
interim final rule. These uses of funds
remain ineligible under the final rule,
but Treasury has re -categorized where
they are addressed, as described below.

4384 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations This section also addresses enumerated
eligible uses proposed by commenters
that Treasury has not incorporated into
the final rule.

Recipients should also note that the
Office of Management and Budget's
(OMB) Uniform Administrative
Requirements, Cost Principles, and
Audit Requirements for Federal Awards
(commonly called the "Uniform
Guidance") generally applies to SLFRF.
a. Public Sector Capacity and Workforce
Public Safety, Public Health, and
Human Services Staff
Summary of Interim Final Rule:

Under the interim final rule, funds may
be used for payroll and covered
benefits 241 for public safety, public
health, health care, human services, and
similar employees 242 of a recipient
government, for the portion of the
employee's time that is spent
responding to COVID-19. For
administrative convenience, the
recipient may consider public health
and safety employees to be entirely
devoted to responding to COVID-19,
and therefore their full payroll and
covered benefits eligible to be covered,
if the employee, or his or her operating
unit or division, is "primarily
dedicated" to responding to COVID-19,
meaning that more than half of the
employee, unit, or division's time is
dedicated to responding to COVID-19.

Recipients may consider other
presumptions for assessing the extent to
which an employee, division, or
operating unit is responding to COVID-

19. Recipients must periodically
reassess their determination and
maintain records to support their
assessment, such as payroll records,
attestations from supervisors or staff, or
regular work product or
241 In general, if an employee's wages and salaries
are an eligible use of SLFRF funds, recipients may
treat the employee's covered benefits as an eligible
use of SLFRF funds. For purposes of SLFRF funds,
covered benefits include costs of all types of leave
(vacation, family -related, sick, military,
bereavement, sabbatical, jury duty), employee
insurance (health, life, dental, vision), retirement
(pensions, 401(k)), unemployment benefit plans
(federal and state), workers compensation
insurance, and Federal Insurance Contributions Act
(FICA) taxes (which includes Social Security and
Medicare taxes). As described further in the section
Deposits into Pension Funds in Restrictions on Use,
that limitation on use does not apply to pension
contributions that are part of regular payroll
contributions for employees whose wages and
salaries are an eligible use of SLFRF funds.
242 Note that the interim final rule adapted prior
guidance issued for CRF that described these four
categories of employees; however, when listing the
specific occupations or types of employees in each
of these categories, the guidance collapses health
care and public health into one category titled
"public health." Therefore, the presumption
described around public health employees also
covers health care employees.
correspondence; recipients need not
track staff hours. The interim final rule
also posed a question on how long
recipients should be able to use funds
for staff responding to COVID-19 and
what other measures or presumptions
might Treasury consider to assess the
extent to which public sector staff are
engaged in COVID-19 response in an
easily administrable manner.

Treasury also provided further
guidance on the types of employees
covered by this category of eligible use,
specifically: "Public safety employees
would include police officers (including
state police officers), sheriffs and deputy
sheriffs, firefighters, emergency medical
responders, correctional and detention
officers, and those who directly support
such employees such as dispatchers and
supervisory personnel. Public health
employees 243 would include employees
involved in providing medical and other
health services to patients and
supervisory personnel, including
medical staff assigned to schools,
prisons, and other such institutions, and
other support services essential for
patient care (e.g., laboratory technicians,
medical examiner, or morgue staff) as
well as employees of public health
departments directly engaged in matters
related to public health and related
supervisory personnel. Human services
staff include employees providing or
administering social services; public
benefits; child welfare services; and
child, elder, or family care, as well as
others."
Public Comment: Measuring Time
Spent on COVID-19 Response: Treasury
received public comments on several
components of this eligible use category.

Many commenters argued that it poses
an administrative burden to identify the
extent to which staff are responding to
COVID-19 and to maintain records to
support that assessment. Largely citing
administrative burden in assessing
eligibility, several commenters
recommended revisions to the
administrative convenience that the full
payroll and covered benefits for public
health and safety staff "primarily
dedicated" to responding to COVID-19
may be paid with SLFRF funds. Some
commenters recommended presuming
that all public health and safety staff are
primarily dedicated to COVID-19
response, while others proposed that
public health and safety workers who
primarily serve QCTs or low- and
moderate -income areas be presumed to
be primarily dedicated to COVID-19
243 Note that this category encompasses both
public health and health care employees; both are
treated as public health employees for the purposes
of this eligible use category.
response, given the disproportionate
impacts of the pandemic in those
communities. Similarly, Tribal
communities recommended that their
public health staff be presumed eligible
due to the disproportionate impact of
the pandemic on their communities.

Some commenters proposed that they be
able to use the administrative
convenience for staff outside of public
health and safety that are responding to
COVID-19 (i.e., to be able to pay the full
payroll and covered benefits for any
staff "primarily dedicated" to COVID-
19 response).

Treasury Response: In the final rule,
Treasury is maintaining the approach in
the interim final rule, including
elaborations issued in further guidance,
but providing additional clarification on
its application, including methods to
apply the approach to minimize
administrative burden. Treasury notes
that recipients may assess the extent to
which staff are dedicated to responding
to COVID-19 through a variety of
means, including establishing
presumptions or assessing public health
and safety staff at the division or
operating unit level. For example, a
recipient could consider the amount of
time spent by employees in its public
health department's epidemiology
division in responding to COVID-19
and, if a majority of its employees are
dedicated to responding to COVID-19,
determine that the entire division is
primarily dedicated to responding to
COVID-19. Treasury also clarifies that
recipients may use reasonable estimates
to establish administrable
presumptions; for example, a recipient
could estimate, based on discussions
with staff, the general share of time that
employees in a specific role or type of
position spend on COVID-19 related
tasks and apply that share of time to all
employees in that position.

Recipients are generally required to be
able to support uses of SLFRF funds as
eligible, including, in this instance,
maintenance of records to support an
assessment that public health and safety
staff are primarily dedicated to
responding to COVID-19. As noted
above, recipients may use reasonable
estimates to implement this provision.

Recipients should maintain records on
how they developed these estimates and
need not track staff hours. Treasury
notes that records retained can include
payroll records (e.g., the number and
type of staff in various positions),
attestations from supervisors or staff
(e.g., self -attestation of share of time
spent on COVID-19), or regular work
product or correspondence (e.g.,
calendars, email correspondence,
documents, and other electronic

Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4385
records). Treasury anticipates that these
types of records are generally retained
in many government settings; recipients
should also consult the Award Terms
and Conditions for SLFRF funds for
requirements on length of record
retention. For example, a recipient
could establish a reasonable
presumption about the share of time
that an employee, division, or operating
unit is responding to COVID-19 and
simply retain those employees'
electronic records as a record to support
their assessment.

Public Comment: Public Health and
Safety Staff Primarily Dedicated to
COVID-19 Response: Some commenters
recommended expanding the
administrative convenience for public
health and safety staff primarily
dedicated to COVID-19 response to
further types of staff, to all public health
and safety staff, or to public health and
safety staff serving underserved areas.

Treasury Response: The interim final
rule recognized that COVID-19 response
continues to require substantial staff
resources and provides an
administrative convenience to make it
relatively simpler to identify the
eligibility of the types of workers —
public health and safety workers —
generally most involved in COVID-19
response. At the same time, many
public health and safety workers
perform roles unrelated to COVID-19;
coverage of all roles would be overbroad
compared to the workers responding to
COVID-19 in actuality. For this reason,
the final rule maintains the interim final
rule's approach to permitting SLFRF
funds to be used for public health and
safety staff primarily dedicated to
responding to COVID-19. Finally, to the
extent that a greater proportion of public
health and safety staff time is needed to
respond to COVID-19 in
disproportionately impacted
communities, the "primarily dedicated"
approach recognizes this increased
need.

Public Comment: Eligible Types of
COVID-19 Response: Some public
commenters also sought further
clarification on how to identify eligible
types of "COVID-19 response." For
example, commenters requested
clarification on delineating COVID-19
response from general public health
response and defining COVID-19
response for public safety employees.

Treasury Response: Treasury is
clarifying that "responding to" COVID-
19 entails work needed to respond to
the public health or negative economic
impacts of the pandemic, apart from the
typical pre -pandemic job duties or
workload of an employee in a
comparable role, if one existed. For
example, responding to COVID-19 for a
public safety worker may entail working
in an emergency operations center to
coordinate pandemic -related supply
distribution, responding to an increased
volume of 911 calls, or implementing
COVID-19 prevention and mitigation
protocols in a carceral setting.

Public Comment: Eligible Employees:

Some commenters requested
clarification on the types of eligible
employees or expansion of eligible
employees to include additional types
of staff, including in behavioral health;
administrative, management, or
financial management positions; social
services; morgue staff; and nonprofit
staff supporting projects to undertake
eligible uses of funds under SLFRF.

Treasury Response: Treasury
provided further guidance on eligible
types of employees following the
interim final rule, which expressly
included social services and morgue
staff, and incorporates that guidance
into the final rule. In addition, Treasury
is clarifying that public health
"employees involved in providing
medical and other health services to
patients and supervisory personnel"
includes behavioral health services as
well as physical health services.

Treasury also is clarifying that this
provision only addresses employees of
the recipient government responding to
COVID-19. For discussion of eligible
expenses to administer SLFRF,
including eligible costs for subrecipients
performing eligible activities on behalf
of a recipient government, see section
Administrative Expenses in Program
Administration Provisions.

Finally, Treasury is clarifying that
indirect costs for administrative,
management, and financial management
personnel to support public health and
safety staff responding to COVID-19 are
not permissible under this provision,
given the relatively greater challenge of
differentiating the marginal increase in
staff time and workload due to
pandemic response for indirect versus
direct costs.

Public Comment: Time Period:

Finally, some commenters made
recommendations on the time period
during which this eligible use should be
available. Some commenters
recommended eligibility begin before
March 3, 2021, the period when
Treasury's interim final rule permitted
recipients to begin to incur costs using
SLFRF funds; for discussion of this
topic, see section Timeline for Use of
SLFRF Funds in Program
Administration Provisions. As noted
above, Treasury also posed a question in
the interim final rule asking for how
long Treasury should maintain the
administrative convenience that SLFRF
funds may be used for the full payroll
and covered benefits of public health
and safety staff primarily dedicated to
COVID-19 response. Several
commenters recommended that
Treasury maintain this approach
throughout the program or through
December 31, 2024. Other commenters
requested clarification on whether
eligibility for this use of funds was tied
to the length of the state of emergency
or whether a jurisdiction has an active
state of emergency.

Treasury Response: In the final rule,
Treasury is clarifying that recipients
will be permitted to fund the full
payroll and covered benefits of public
health and safety staff primarily
dedicated to COVID-19 response
throughout the period of performance
for the SLFRF program, though
recipients should periodically reassess
their determination of primarily
dedicated staff, including as the public
health emergency and response evolves.

Government Employment and Rehiring
Public Sector Staff
The interim final rule permitted use
of funds for costs associated with
rehiring state, local, and Tribal
government staff in order to bolster the
government's ability to effectively
administer services. Specifically,
recipients may pay for payroll, covered
benefits, and other costs associated with
the recipient increasing the number of
its employees up to the pre -pandemic
baseline, or the number of employees
that the recipient government employed
on January 27, 2020.

Public Comment: Many commenters
requested greater flexibility and
additional clarification on the
provision's requirements, including the
pre -pandemic baseline and re -hiring
process. Some commenters requested
that the final rule allow for hiring above
the pre -pandemic baseline given
historic underinvestment in the public
sector workforce. Commenters suggested
a number of adjustments to the pre -
pandemic baseline, including adjusting
based on population or revenue growth,
while some recommended allowing
recipients to set their own hiring levels.

Others requested clarification on the
definition of the baseline and the re-
hiring process, including whether the
pre -pandemic baseline referred to
budgeted or filled positions and
whether new hires had to fill the same
roles as the previous hires. Commenters
also asked whether recipients need to
show if the reduction in number of
employees was due to the pandemic in
order to qualify for funding and
requested that workers dedicated to

4386 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 /Rules and Regulations COVID-19 response be exempted from
the calculation of number of employees.

Many commenters also requested an
expanded set of eligible uses beyond
restoring their workforce up to the pre -
pandemic baseline. Commenters
requested that funding be able to be
used to avoid layoffs, provide back pay,
retain employees through pay increases
and other retention programs, or
reimburse salaries and benefits already
paid. Some commenters also requested
clarification as to whether recipients
can fund re -hired positions through the
period of performance and on the
definition of payroll and benefits. Other
commenters requested preferential
hiring for workers laid off, a strong
commitment to equity, and a
requirement that funds would not be
used to pay for contract or temporary
replacement workers during a labor
dispute.

Treasury Response: The final rule
allows for an expanded set of eligible
uses to restore and support public sector
employment. Eligible uses include
hiring up to a pre -pandemic baseline
that is adjusted for historic
underinvestment in the public sector,
providing additional funds for
employees who experienced pay cuts or
were furloughed, avoiding layoffs,
providing worker retention incentives,
and paying for ancillary administrative
costs related to hiring.

Restoring pre -pandemic employment.

In response to comments and
recognizing underinvestment in public
sector employment, the final rule
expands the ability to use SLFRF funds
to restore pre -pandemic employment.

Treasury is also clarifying how, and the
extent to which, recipients may use
SLFRF funds to rehire public
employees.

The final rule provides two options to
restore pre -pandemic employment,
depending on recipient's needs. Under
the first and simpler option, recipients
may use SLFRF funds to rehire staff for
pre -pandemic positions that were
unfilled or were eliminated due the
pandemic without undergoing further
analysis. Under the second option, the
final rule provides recipients an option
to hire above the pre -pandemic baseline,
by adjusting the pre -pandemic baseline
for historical growth in public sector
employment over time, as well as
flexibility on roles for hire. Recipients
may choose between these options but
cannot use both.

To pursue the first option, recipients
may use SLFRF funds to hire employees
for the same positions that existed on
January 27, 2020 but that were unfilled
or eliminated as of March 3, 2021,
without undergoing further analysis. For
these employees, recipients may use
SLFRF funds for payroll and covered
benefit costs that are obligated by
December 31, 2024 and expended by
December 31, 2026, consistent with the
Uniform Guidance's Cost Principles at 2
CFR part 200 Subpart E. This option
provides administrative simplicity for
recipients that would simply like to
restore pre -pandemic positions and
would not like to hire above the pre -
pandemic baseline.

To pursue the second option,
recipients should undergo the analysis
provided below. In short, this option
allows recipients to pay for payroll and
covered benefits associated with the
recipient increasing its number of
budgeted full-time equivalent
employees (FTEs) up to 7.5 percent
above its pre -pandemic employment
baseline, which adjusts for the
continued underinvestment in state and
local governments since the Great
Recession. State and local government
employment as a share of population in
2019 remained considerably below its
share prior to the Great Recession in
2007, which presented major risks to
recipients mounting a response to the
COVID-19 public health emergency.

The adjustment factor of 7.5 percent
results from estimating how much larger
2019 state and local government
employment would have needed to be
for the share of state and local
government employment to population
in 2019 to have been back at its 2007
level and is intended to correct for this
gap.

Recipients should complete the steps
described below. Recipients may choose
whether to conduct this analysis on a
government -wide basis or for an
individual department, agency, or
authority.
• Step One: Identify the recipient's
budgeted FTE level on January 27, 2020.

This includes all budgeted positions,
filled and unfilled. This is called the
pre -pandemic baseline.
• Step Two: Multiply the pre -
pandemic baseline by 1.075 (that is, 1
+ adjustment factor). This is called the
adjusted pre -pandemic baseline.
• Step Three: Identify the recipient's
budgeted FTE level on March 3, 2021,
which is the beginning of the period of
performance for SLFRF funds.

Recipients may, but are not required to,
exclude FTEs dedicated to responding
to the COVID-19 public health
emergency.244 This is called the actual
number of FTEs.
244 Recipients may determine that a portion of an
FTE's time is dedicated to responding to the
COVID-19 public health emergency. Further, for
administrative convenience, the recipient may
• Step Four: Subtract the actual
number of FTEs from the adjusted pre -
pandemic baseline to calculate the
number of FTEs that can be hired and
covered by SLFRF funds.

Recipients may use SLFRF funds to
cover payroll and covered benefit costs
obligated by December 31, 2024, and
expended by December 31, 2026, up to
the number of FTEs calculated in Step
Four, consistent with the Uniform
Guidance's Cost Principles at 2 CFR part
200 Subpart E. Recipients may only use
SLFRF funds for additional FTEs hired
over the March 3, 2021 level of
budgeted FTEs (i.e., the actual number
of FTEs); note again that recipients may
choose whether to conduct the analysis
of FTEs that can be covered by SLFRF
funds on a government -wide basis or for
an individual department, agency, or
authority.

These FTEs must have begun their
employment on or after March 3, 2021,
which is the beginning of the period of
performance. For administrative
convenience, recipients do not need to
demonstrate that the reduction in
number of FTEs was due to the COVID-
19 pandemic, as Treasury assumes the
vast majority of employment reductions
during this time were due to pandemic
fiscal pressures on state and local
budgets. Recipients do not need to hire
for the same roles that existed pre -
pandemic.

For illustration, consider a
hypothetical recipient with 1,000
budgeted FTEs on January 27, 2020 (950
filled FTE positions and 50 unfilled FTE
positions). The recipient's pre -
pandemic baseline is 1000 FTEs; its
adjusted pre -pandemic baseline is 1,000
* 1.075 = 1075 FTEs. Now, assume that
on March 3, 2021, the recipient had 800
budgeted FTEs in total (795 filled FTE
positions and 5 unfilled FTE positions),
with 50 FTEs primarily dedicated to
responding to the COVID-19 public
health emergency. The recipient would
have the option of using either 800 FTEs
or 750 FTEs as its actual number of
FTEs for the calculation; assuming it
chooses the lower number, it would be
able to fund up to 325 FTEs with SLFRF
funds (that is, 1,075 — 750 = 325 FTEs).
consider public health and safety FTEs to be
entirely devoted to mitigating or responding to the
COVID-19 public health emergency if the FTE, or
his or her operating unit of division, is primarily
dedicated to responding to the COVID-19 public
health emergency. Recipients may also consider
other presumptions for assessing the extent to
which an FTE, division, or operating unit is
engaged in activities that respond to the COVID-19
public health emergency, provided that the
recipient reassesses periodically and maintains
records to support its assessment, such as payroll
records, attestations from supervisors or staff, or
regular work product or correspondence
demonstrating work on the COVID-19 response.

Federal Register / Vol. 87, No. 18 /Thursday, January 27, 2022 /Rules and Regulations 4387 Specifically, the recipient would be able
to use SLFRF to fund payroll and
covered benefits for up to 325 FTEs that
begin their employment on or after
March 3, 2021, for costs obligated by
December 31, 2024, and expended by
December 31, 2026, consistent with the
Uniform Guidance's Cost Principles, as
long as SLFRF funds are used for
additional FTEs hired over the
recipient's 750 FTE level (which is its
March 3, 2021 budgeted FTE level).

In hiring new employees, the final
rule encourages recipients to ensure a
diverse workforce. The final rule also
prohibits recipients from using funds to
temporarily fill positions during a labor
dispute, as this would not constitute
responding to the public health or
negative economic impacts of the
pandemic. Further, recipients must
ensure that its hiring practices do not
violate conflict -of -interest policies.245
Total compensation for a hired
employee that is substantially in excess
of typical compensation for employees
of their experience and tenure within
the recipient's government, without a
corresponding business case, may
indicate a potential conflict -of -interest
in fact or appearance.

Providing additional funding for
employees who experienced pay cuts
and furloughs. In recognition of the
economic hardship caused by pay cuts
and furloughs, additional funds may be
provided to employees who experienced
pay cuts or were furloughed since the
onset of the pandemic on January 27,
2020. Recipients must be able to
substantiate that the pay cut or furlough
was substantially due to the public
health emergency or its negative
economic impacts (e.g., fiscal pressures
on state and local budgets) and should
document their assessment. As a
reminder, this additional funding must
be reasonably proportional to the
negative economic impact of the pay cut
or furlough on the employee, which
would include taking into account
unemployment insurance (UI) benefits
that a furloughed employee may have
received during the furloughed period.

Treasury presumes that additional funds
beyond the difference in pay had the
245 As part of accepting the Award Terms and
Conditions for SLFRF, each recipient agreed to
maintain a conflict -of -interest policy consistent
with 2 CFR 200.318(c)112 that is applicable to all
activities funded with the SLFRF award. Pursuant
to this policy, decisions concerning SLFRF must be
free of undisclosed personal or organizational
conflicts of interest, both in fact and in appearance.

A recipient may not use control over SLFRF for
their own private gain. Furthermore, no employee,
officer, or agent may participate in the selection,
award, or administration of a contract supported by
a federal award if he or she has a real or apparent
conflict of interest.
employee not received a pay cut or been
furloughed would not be reasonably
proportional.

Recipients may also provide premium
pay to certain employees, as detailed
further in section Premium Pay.

Avoiding layoffs. Funds may be used
to maintain current compensation
levels, with adjustments for inflation, in
order to prevent layoffs that would
otherwise be necessary. Recipients must
be able to substantiate that layoffs were
likely in the absence of SLFRF funds
and would be substantially due to the
public health emergency or its negative
economic impacts (e.g., fiscal pressures
on state and local budgets) and should
document their assessment.

Retaining workers. Funds may be
used to provide worker retention
incentives, which are designed to
persuade employees to remain with the
employer as compared to other
employment options. Recipients must
be able to substantiate that the
employees were likely to leave
employment in the absence of the
retention incentive and should
document their assessment. For
example, a recipient may determine that
a retention bonus is necessary based on
the presence of an alternative
employment offer for an employee.

All worker retention incentives must
be narrowly tailored to need and should
not exceed incentives traditionally
offered by the recipient or compensation
that alternative employers may offer to
compete for the employees. Further,
because retention incentives are
intended to provide additional incentive
to remain with the employer, they must
be entirely additive to an employee's
regular rate of wages and other
remuneration and may not be used to
reduce or substitute for an employee's
normal earnings. Treasury will presume
that retention incentives that are less
than 25 percent of the rate of base pay
for an individual employee or 10
percent for a group or category of
employees are reasonably proportional
to the need to retain employees, as long
as the other requirements are met.

Ancillary administrative costs. Funds
may be used to pay for ancillary
administrative costs associated with
administering SLFRF-funded hiring and
retention programs detailed above,
including costs to publish job postings,
review applications, and onboard and
train new hires. For additional
information on administrative expenses,
see section Administrative Expenses in
Program Administration Provisions.

Effective Service Delivery:

Administrative Expenses
The interim final rule provided that
funds could be used for: "Expenses to
improve efficacy of public health or
economic relief programs:

Administrative costs associated with the
recipient's COVID-19 public health
emergency assistance programs,
including services responding to the
COVID-19 public health emergency or
its negative economic impacts, that are
not federally funded." In the final rule,
Treasury is clarifying that there are
several categories of eligible
administrative expenses.

First, recipients may use funds for
administrative costs to improve the
efficacy of public health or economic
relief programs through tools like
program evaluation, data analysis, and
targeted consumer outreach (see section
Effective Service Delivery: Program
Evaluation, Data, and Outreach).

Second, recipients may use funds for
administrative costs associated with
programs to respond to the public
health emergency and its negative
economic impacts, including programs
that are not funded by SLFRF or not
federally funded. In other words,
Treasury recognizes that responding to
the public health and economic impacts
of the pandemic requires many
programs and activities, some of which
are not funded by SLFRF. Executing
these programs effectively is a
component of responding to the public
health and negative economic impacts
of the pandemic.

Finally, recipients may use funds for
direct and indirect administrative costs
for administering the SLFRF program
and projects funded by the SLFRF
program. See section Administrative
Expenses in Program Administration
Provisions for details on this eligible use
category.

Effective Service Delivery: Program
Evaluation, Data, and Outreach
The Supplementary Information of
the interim final rule provided that
state, local and Tribal governments may
use SLFRF funds to improve the design
and execution of programs responding
to the COVID-19 pandemic and to
improve the efficacy of programs
addressing negative economic impacts.

The interim final rule included high-
level guidance about how SLFRF funds
could be used in this eligible use
category, including the use of targeted
consumer outreach, improvements to
data or technology infrastructure,
impact evaluations, and data analysis.

Since the publication of the interim
final rule, Treasury has also released

4388 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations supplementary information on data
analysis, evidence building, and
program evaluation in the Compliance
and Reporting Guidance.

Public Comment: Treasury received
positive comments about the
opportunity to invest in data and
technology upgrades with SLFRF funds.

For example, one commenter noted that
investing in technology for better
connectivity, coupled with software and
hardware upgrades, will allow the
workforce to be more productive.

Treasury also received comments
seeking clarification on using funds for
investments in data and technology,
including whether upgrading
government websites to improve
community outreach and investing in
technologies that support social
distancing were eligible uses.

Treasury Response: Governments
with high capacity to use data and
evidence to administer programs are
more likely to be responsive to the
needs of their community, more
transparent about their community
impact, and more resilient to
emergencies such as the pandemic and
its economic impacts.246 Treasury
recognizes that collecting high -quality
data and developing community -driven,
evidence -based programs requires
resources to hire and build the capacity
of staff, adopt new processes and
systems, and use new technology and
tools in order to effectively develop,
execute, and evaluate programs. As
such, Treasury is clarifying that
recipients may use SLFRF funds toward
the following non -exhaustive list of uses
to address the data, evidence, and
program administration needs of
recipients. Additional information may
be provided in the Compliance and
Reporting Guidance.
• Program evaluation and evidence
resources to support building and using
evidence to improve outcomes,
including development of Learning
Agendas 247 to support strategic
evidence building, selection of
evidence -based interventions, and
program evaluations including impact
evaluations (randomized control trials
248 Results for America, Invest in What Works
State Standard of Excellence (August 2020), https://
2020state.resul ts4america. org/2020_State-
Stan d and -o f-Excell en ce. p d f.
247 Learning Agendas are systematic plans to
identify, prioritize, answer important questions
about programs and policies using analytic
techniques that are appropriate to the type of
question asked. For more information on learning
agendas, please see OMB Memorandum M-19-23,
available at: https://www.whitehouse.gov/wp-
content/uploads/2019/07/M-19-23.pdfand OMB
Memorandum M-21-27, available at: https://
www.whitehouse.gov/wp-content/uploads/2021/06/
M-21-27.pdf.
and quasi -experimental designs) as well
as rapid -cycle evaluations, process or
implementation evaluations, outcome
evaluations, and cost -benefit analyses.

Recipients are encouraged to undertake
rigorous program evaluations when
practicable, assess the impact of their
programs by beneficiary demographics
(including race, ethnicity, gender,
income, and other relevant factors), and
engage with community stakeholders
(including intended beneficiaries) when
developing Learning Agendas and
designing evaluations to ensure that
programmatic, cultural, linguistic, and
historical nuances are accurately and
respectfully addressed.

Recipients are also encouraged to use
relevant evidence Clearinghouses,248
among other sources, to assess the level
of evidence for their interventions and
identify evidence -based models that
could be applied in their jurisdiction
(meaning models with strong or
moderate evidence; see Compliance and
Reporting Guidance for details on these
terms).
• Data analysis resources to gather,
assess, and use data for effective policy -
making and real-time tracking of
program performance to support
effective implementation of SLFRF-
funded programs and programs that
respond to the public health emergency
and its negative economic impacts, or
which households, small businesses, or
impacted industries are accessing
during the pandemic that are funded by
other sources. These resources include
but are not limited to data gathering,
data cleaning, data analysis, data
infrastructure, data management, data
sharing, data transparency, performance
management, outcomes -based
budgeting, outcomes -based
procurement, and other data needs.

Treasury encourages the disaggregation
of data to identify disparate program
impacts and the use of cross -
jurisdictional data sharing to better
measure and implement government
programs.
248 Evidence Clearinghouses are databases of
research in particular program areas. Frequently
these Clearinghouses identify evidence -based
programs, the strength of the evidence for those
programs, and provide contextual or supporting
information in easy to understand formats. Many
federal departments have developed rigorous and
helpful Clearinghouses that cover a wide range of
uses enumerated in this final rule as well as other
programs that may be responsive to public health
or negative economic impacts of the pandemic. For
more information on Clearinghouses, please see the
Compliance and Reporting Guidance: U.S.

Department of the Treasury, Recipient Compliance
and Reporting Responsibilities, as of November 5,
2021; https://home.treasury.gov/policy-issues/
coronavirus/assistance for-state-local-and-tribal-
governments/state-and-local fiscal -recovery funds/
recipient -compliance -and -reporting -responsibilities. • Technology infrastructure resources
to improve access to and the user -
experience of government information
technology systems, including upgrades
to hardware and software as well as
improvements to public -facing websites
or to data management systems, to
increase public access and improve
public delivery of government programs
and services (including in the judicial,
legislative, or executive branches).
• Community outreach and
engagement resources to support the
gathering and sharing of information in
ways that improve equity and effective
implementation of SLFRF-funded
programs and programs that respond to
the public health emergency and its
negative economic impacts, or which
households, small businesses, or
impacted industries are accessing
during the pandemic that are funded by
other sources. These methods include
but are not limited to community
meetings, online surveys, focus groups,
human -centered design activities,
behavioral science techniques, and
other community engagement tools.
• Capacity building resources to
support using data and evidence in
designing, executing, and evaluating
programs, including hiring public sector
staff, contractors, academics,
consultants, and others with expertise
in evaluation, data, technology, and
community engagement as well as
technical assistance support for public
sector staff, staff of subrecipients, and
community partners to support effective
implementation of SLFRF-funded
programs and programs that respond to
the public health emergency and its
negative economic impacts, or which
households, small businesses, or
impacted industries are accessing
during the pandemic that are funded by
other sources.

Administrative Needs Caused or
Exacerbated by the Pandemic
As described in guidance and the
interim final rule, SLFRF funds may be
used to address administrative needs of
recipient governments that were caused
or exacerbated by the pandemic.

Guidance following the interim final
rule included several examples of this,
for example, uses of funds to address
backlogs resulting from pandemic -
related shutdowns (e.g., backlogs in
court systems).249 This also includes
249 See FAQ 2.19. Coronavirus State and Local
Fiscal Recovery Funds, Frequently Asked
Questions, as of July 19, 2021; https://
home. treasury.gov/system/files/136/SLFRPFAQ. pd f.

In the case of courts specifically, this includes
"implementing COVID-19 safety measures to
facilitate court operations, hiring additional court
staff or attorneys to increase speed of case

Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations 4389 using funds for increased repair or
maintenance needs to respond to
significantly greater use of public
facilities during the pandemic (e.g.,
increased use of parks resulting in
damage or increased need for
maintenance). Some commenters
expressed support for the ability to use
funds for these purposes. Treasury is
maintaining these enumerated eligible
uses in the final rule and clarifying that
capital expenditures such as technology
infrastructure to adapt government
operations to the pandemic (e.g., video-
conferencing software, improvements to
case management systems or data
sharing resources), reduce government
backlogs, or meet increased
maintenance needs are eligible.
b. Capital Expenditures
The interim final rule expressly
permitted use of funds for a limited
number of capital expenditures that
mostly pertained to COVID-19
prevention and mitigation. These
included capital investments in public
facilities to meet pandemic operational
needs, such as physical plant
improvements to public hospitals and
health clinics; adaptations to public
buildings to implement COVID-19
mitigation tactics; ventilation
improvements in congregate settings,
health care settings, or other key
locations; assistance to small businesses
and nonprofits and aid to impacted
industries to implement COVID-19
prevention or mitigation tactics, such as
physical plant changes to enable social
distancing. For disproportionately
impacted populations and communities,
the interim final rule also expressly
permitted development of affordable
housing to increase the supply of
affordable and high -quality living units.

Public Comment: Many commenters
supported the interim final rule's
allowance of capital expenditures in
facilities to meet pandemic operational
needs but requested that the final rule
explicitly allow for a broader range of
capital expenditures. Commenters
expressed an interest in investing in
equipment, real property, and facilities
that they argued will yield lasting
benefits beyond the SLFRF period of
performance. Some commenters stated
that the approach in the interim final
rule limited the vast majority of capital
expenditures to governments that
experienced revenue loss under
Sections 602(c)(1)(C) and 603(c)(1)(C)
and that this approach may prevent
some governments from fully meeting
the needs of their residents. A few
resolution, and other expenses to expedite case
resolution are eligible uses."
commenters argued that Treasury
should limit use of funds on capital
expenditures not related to addressing a
direct pandemic harm, such as general
economic development or workforce
development, and some expressed
support for generally limiting capital
expenditures to those that address the
needs of low-income communities and
communities of color.

Many commenters requested that
capital expenditures related to direct
COVID-19 public health response be
included as enumerated eligible uses.

The requested types of expenditures
include improvements and construction
of hospitals and health clinics
(including behavioral health clinics), as
well as other health -related
infrastructure improvements, such as
improvements to medical equipment or
public health information technology.

These commenters stated that
investments in health and public health
systems are vital to ensuring critical
infrastructure necessary to respond to
continued impacts of COVID-19 or to
address disparities in health, due to lack
of access to health care, that contributed
to disproportionate impacts of COVID-
19 on some communities. Further, some
commenters requested that construction
or improvements of emergency
management and public safety facilities
be deemed eligible, citing that some of
these sites serve as remote vaccination
sites or are otherwise crucial to the
pandemic public health response.

Commenters also requested use of
funds for capital expenditures that
support community needs apart from
health care, such as new construction or
improvements to schools, affordable
housing (beyond presumed
disproportionately impacted
communities), childcare facilities, and
community centers; some suggested that
all types of projects permissible under
the Community Development Block
Grant Program should be eligible both
for policy and administrability reasons.

Further, some commenters also asked
for clarification as to whether parks and
recreational facilities are eligible if built
in certain disproportionately impacted
areas, as well as public transportation
infrastructure.

Finally, some commenters also
requested use of funds for capital
expenditures in government
administration buildings, such as public
courthouses, as well as technology
infrastructure that would allow for
remote delivery of public benefits.

Others also asked about whether funds
could be used to renovate vacant
business district buildings or
commercial spaces to spur economic
recovery.

Treasury Response: Capital
expenditures, in certain cases, can be
appropriate responses to the public
health and economic impacts of the
pandemic, in addition to programs and
services. Like other eligible uses of
SLFRF funds in this category, capital
expenditures should be a related and
reasonably proportional response to a
public health or negative economic
impact of the pandemic. The final rule
clarifies and expands how SLFRF funds
may be used for certain capital
expenditures, including criteria and
documentation requirements specified
in this section, as applicable.

Treasury provides presumptions and
guidelines for capital expenditures that
are enumerated earlier in sections
Public Health, Negative Economic
Impacts, and General Provisions: Other
under the Public Health and Negative
Economic Impact eligible use category
("enumerated projects"), along with
capital expenditures beyond those
enumerated by Treasury. In addition to
satisfying the two-part framework in
Standards: Designating a Public Health
Impact and Standards: Designating a
Negative Economic Impact for
identifying and designing a response to
a pandemic harm, Treasury will require
projects with total expected capital
expenditure costs of $1 million or
greater to undergo additional analysis to
justify their capital expenditure.

Increased reporting requirements will be
required for projects that are larger in
size, as well as projects that are not
enumerated as eligible by Treasury,
with certain exceptions for Tribal
governments discussed below. Smaller
projects with total expected capital
expenditures below $1 million will not
be required to undergo additional
analysis to justify their capital
expenditure, as such projects will be
presumed to be reasonably proportional,
provided that they are responding to a
harm caused or exacerbated by the
public health emergency. These
standards and documentation
requirements are designed to minimize
administrative burden while also
ensuring that projects are reasonably
proportional and supporting Treasury's
risk -based approach to overall program
management and monitoring.

This section provides (1) an overview
of general standards governing capital
expenditures; (2) presumptions on
capital expenditures, which help guide
recipients in determining whether the
expenditure meets the standards and the
associated documentation requirements;
and (3) additional standards and
requirements that may apply.

4390 Federal Register / Vol. 87, No. 18 / Thursday, January 27, 2022 / Rules and Regulations Overview of General Standards
In considering whether a capital
expenditure would be eligible under the
public health and negative economic
impacts eligible use category, recipients
must satisfy the requirements for all
uses under the public health and
negative economic impacts eligible use
category, including identifying an
impact or harm and designing a
response that addresses or responds to
the identified impact or harm.

Responses must be reasonably designed
to benefit the individual or class that
experienced the impact or harm and
must be related and reasonably
proportional to the extent and type of
impact or harm. Recipients should
consult further details on this standard
provided in the sections Standards:

Designating a Public Health Impact and
Standards: Designating a Negative
Economic Impact under General
Provisions: Structure and Standards.

In addition to the framework
described above, for projects with total
expected capital expenditures of $1
million or greater, recipients must
complete and meet the substantive
requirements of a Written Justification
for their capital expenditure, except for
Tribal governments as discussed below.

This Written Justification helps clarify
the application of this interpretive
framework to capital expenditures,
while recognizing that the needs of
communities differ. In particular, this
justification reflects the fact that the
time required for a large construction
project may make capital expenditures
less responsive to pandemic -related
needs relative to other types of
responses. In addition, as discussed in
section Timeline for Use of SLFRF
Funds of this Supplemental
Information, SLFRF funds must be
obligated by December 31, 2024 and
expended by December 31, 2026.

Capital expenditures may involve long
lead-times, and the Written Justification
may support recipients in analyzing
proposed capital expenditures to
confirm that they conform to the
obligation and expenditure timing
requirements. Further, such large
projects may be less likely to be
reasonably proportional to the harm
identified. For example, construction of
a new, larger public facility for the
purpose of increasing the ability to
socially distance generally would not be
considered a reasonably proportional
response compared to other less time -
and resource -intensive options that may
be available and would be equally or
more effective. Other solutions, such as
improvements in ventilation, could be
made more quickly and are typically
more cost effective than construction of
a new, larger facility. The needs of
communities differ, and recipients are
responsible for identifying uses of
SLFRF funds that best respond to these
needs. The Written Justification
recognizes this while also establishing
consistent documentation and reporting
to support monitoring and compliance
with the ARPA and final rule. Finally,
the Written Justification also reflects the
fact that infrastructure projects are
generally not within scope of this
eligible use category. See section Uses
Outside the Scope of this Category in
General Provisions: Other.

As noted above, Tribal governments
are not required to complete the Written
Justification for projects with total
capital expenditures of $1 million or
greater. Tribal governments generally
have limited administrative capacity
due to their small size and
corresponding limited ability to
supplement staffing for short-term
programs. In addition, Tribal
governments are already subject to
unique considerations that require
additional administrative processes and
administrative burden for Tribal
government decision making, including
capital expenditures. Tribal
governments generally are subject to a
jurisdictionally complex sets of rules
and regulations in the case of
improvements to land for which the title
is held in trust by the United States for
a Tribe (Tribal Trust Lands).25° This
includes the requirement in certain
circumstances to seek the input or
approval of one or more federal agencies
such the Department of the Interior,
which holds fee title of Tribal Trust
Lands.

As a result of their limited
administrative capacity and unique and
complex rules and regulations
applicable to Tribal governments
operating on Tribal Trust Lands, Tribal
governments would experience
significant and redundant
administrative burden by also being
required to complete a Written
Justification for applicable capital
expenditures. While Tribal governments
are not required to complete the Written
Justification for applicable capital
expenditures, the associated substantive
requirements continue to apply,
including the requirement that a capital
expenditure must be reasonably
designed to benefit the individual or
class that experienced the identified
impact or harm and must be related and
reasonably proportional to the extent
and type of impact or harm. Note that,
as a general matter, Treasury may also
25° See 25 U.S.C. 5108.
request further information on SLFRF
expenditures and projects, including
capital expenditures, as part of the
regular SLFRF reporting and
compliance process, including to assess
their eligibility under the final rule.

The Written Justification should (1)
describe the harm or need to be
addressed; (2) explain why a capital
expenditure is appropriate to address
the harm or need; and (3) compare the
proposed capital expenditure against
alternative capital expenditures that
could be made. The information
required for the Written Justification
reflects the framework applicable to all
uses under the public health and
negative economic impacts eligible use
category, providing justification for the
reasonable design, relatedness, and
reasonable proportionality of the capital
expenditure in response to the harm or
impact identified.

1. Description of harm or need to be
addressed: Recipients should provide a
description of the specific harm or need
to be addressed, and why the harm was
exacerbated or caused by the public
health emergency. When appropriate,
recipients may provide quantitative
information on the extent and type of
the harm, such as the number of
individuals or entities affected.

2. Explanation of why a capital
expenditure is appropriate: Recipients
should provide an independent
assessment demonstrating why a capital
expenditure is appropriate to address
the specified harm or need. This should
include an explanation of why existing
capital equipment, property, or facilities
would be inadequate to addressing the
harm or need and why policy changes
or additional funding to pertinent
programs or services would be
insufficient without the corresponding
capital expenditures. Recipients are not
required to demonstrate that the harm or
need would be irremediable but for the
additional capital expenditure; rather,
they may show that other interventions
would be inefficient, costly, or
otherwise not reasonably designed to
remedy the harm without additional
capital expenditure.

3. Comparison of the proposed capital
expenditure against alternative capital
expenditures: Recipients should provide
an objective comparison of the proposed
capital expenditure against at least two
alternative capital expenditures and
demonstrate why their proposed capital
expenditure is superior to alternative
capital expenditures that could be
made. Specifically, recipients should
assess the proposed capital expenditure
against at least two alternative types or
sizes of capital expenditures that are
potentially effective and reasonably