U.S. Treasury Issues Final Rule Allowing ARP Fund Recipients More Flexibility

Story by Tom Wickham, State and Local Policy, U.S. Chamber of Commerce

Last week, the Department of Treasury released a final rule giving state and local recipients of American Rescue Plan funds more flexibility in the spending of those funds. The final rule, released on January 6, provides additional information that focuses primarily on capital expenditures, employee pay, and water, sewer, and broadband projects. It also provides a key change for small communities by allowing those governments an option to allocate up to $10 million of the funds toward revenue losses – giving additional flexibility for broad expenditures without the cumbersome administrative burdens of earlier versions of the program.

With the passage of the American Rescue Plan Act (ARP) in 2021, $350 billion in financial aid was extended to all 50 states at the statewide, county, and metropolitan levels.  ARP and subsequent rule-making specified broad categories of eligible activities for funding including: (1) responding to the pandemic (health and economic); (2) “premium pay” for “essential” work during the health crisis; (3) water, sewer and broadband projects and (4) replenishing for government revenue losses due to the pandemic. As each region of the country faces unique local challenges in its COVID-19 response and recovery, aid was offered with the intent that it would be used flexibly to enable states and localities to apply funds to best help their economies recover from the economic downturn.

Since that bill’s enactment, the U.S. Chamber’s State and Local Initiative has tracked the uses of these funds and encouraged best practices on the part of the recipients. The Initiative has advocated for programs which invigorate the economy, incentivize workers to rejoin the workforce, provide workforce training, and make much-needed investments in infrastructure. By issuing this final rule, the Department responded to valuable stakeholder input and has included additional flexibility to meet the needs of the recipients.

The final rule takes effect on April 1, 2022, though the Treasury has advised that recipients can and should take advantage of the flexibility and simplifications immediately. The rule does not alter the ARP tax mandate being challenged by multiple states and the U.S. Chamber.