Our March 30, 2020, Client Alert, New Financial Support Programs for Businesses, States, and Municipalities in CARES Act, outlined features of the $150 billion “Coronavirus Relief Fund” (Relief Fund) to aid States and local governments. On April 22, 2020, the Treasury Department issued Coronavirus Relief Fund Guidance for State, Territorial, Local, and Tribal Governments (Guidance). On May 4, 2020, Treasury issued Coronavirus Relief Fund Frequently Asked Questions (FAQs) supplementing the Guidance. Treasury maintains a general webpage for the Relief Fund.
The Guidance first summarizes the three requirements for the use of payments from the Relief Fund to cover costs that:
- are necessary expenditures incurred due to the public health emergency with respect to the Coronavirus Disease 2019 (COVID–19);
- were not accounted for in the budget most recently approved as of March 27, 2020 (the date of enactment of the CARES Act) for the State or government; and
- were incurred during the period that begins on March 1, 2020, and ends on December 30, 2020.
The Guidance then elaborates on each of these three requirements in order by describing (1) necessary expenditures incurred due to the public health emergency; (2) costs not accounted for in the budget most recently approved as of March 27, 2020; (3) costs incurred during the period that begins on March 1, 2020, and ends on December 30, 2020; (4) nonexclusive examples of eligible expenditures; and (5) nonexclusive examples of ineligible expenditures.
The FAQs “supplements” the Guidance by answering a long series of questions about Eligible Expenditures and a shorter list of questions about the Administration of Fund Payments.
While the FAQs should be consulted for specific questions, in general it gives a broad reading to “eligible expenditures,” explaining that this can include reimbursing state unemployment insurance funds depleted from the the surge in unemployment insurance filings following governmental actions in response to COVID-19, a broad range of payroll expenses related to COVID-19 responses, workers’ compensation claims related to COVID-19, and even (potentially) such costs as “a stipend to employees to improve telework capabilities,” tenant eviction protection programs, homeless assistance, or assistance to small businesses that experience reduced customer demand even in the absence of a “stay at home” order or other governmental mandate.
The FAQs also explains that payments from the Relief Fund may (but are not required to) be redirected to local governmental units or private hospitals to pay COVID-19 related expenses.
The FAQs, however, explains that payments from the Relief Fund can not be used for “government revenue replacement.” This means, for example, payments from the Relief Fund can not be used to assist property owners with the payment of property taxes (because that would be “assistance to meet tax obligations”) or to cover unpaid utility bills, but could potentially be used to make “subsidy payments to electricity account holders.”