The Department of the Treasury released an advanced copy of its new Coronavirus State and Local Fiscal Recovery Fund (“SLFRF”) Interim Final Rule, which implements new eligible uses for awards to States, local, Tribal and territorial governments under this $350 Billion program created in the American Rescue Plan Act of 2021 (“ARPA”).

New Expenditure Categories

The proposed interim rule covers new SLFRF program flexibilities Congress authorized in the Consolidated Appropriations Act, 2023, Pub. L. 117-238, which became law on December 29, 2022. State and local recipients of SLFRF funds may now cover expenditures (i) to provide emergency relief from natural disasters, (ii) to build critical infrastructure, including Surface Transportation projects administered by the Department of Transportation and eligible projects under Title I of the Housing and Community Development Act of 1974, and (iii) to fund initiatives that promote community development.

Compliance Requirements

The proposed interim rule incorporates new regulatory requirements for using funds to cover the added eligible categories. It also includes provisions to ensure continuation of activities under the SLFRF-program’s original four eligible types of activities. While the added flexibility is welcome news, the fact remains that all obligations must still be incurred no later than December 31, 2024. Additionally, all funds must be expended by December 31, 2026 or returned to Treasury.

With SLFRF funds now available to fund more long-term infrastructure projects, program compliance risk increases to the extent recipients need to contend with a new regulatory framework for SLFRF-funded Surface Transportation projects and Title I projects.

Treasury is adopting this rule through notice and comment rulemaking and has directed all interested parties to submit comments through the Federal eRulemaking Portal no later than sixty (60) days from the date the rule is published in the Federal Register.

For more information on the Coronavirus State and Local Fiscal Recovery Fund program, please contact Phillip Escoriaza at PEscoriaza@feldesman.com or 202.466.8960.