Agenda - Council Work Session - 03/08/2022

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Federal Register/Vol. 87, No. 18/Thursday, January 27, 2022/Rules and Regulations 4405 appropriate to calculate the reduction in burdensome on recipients and that presumption that all losses are revenue by source. financial data as of the end of the fiscal attributable to the public health Public Comment:Treasury received year is audited and therefore more emergency. Treasury also sought many comments stating that revenue reliable. Commenters also argued that comment on whether to take into loss should be calculated on a source- recipients' fiscal years are structured account other factors,including actions by-source basis. Some commenters around the timing of major revenue taken by the recipient as well as the argued that a source-by-source approach sources,and that the Census Bureau expiration of the COVID-19 public would be administratively simpler. uses fiscal years in its Annual Survey. health emergency,in determining Other commenters argued that Treasury also received comments whether to presume that revenue losses calculating revenue loss source-by- about the use of multiple calculation are "due to"the COVID-19 public source would better reflect the impact of dates. Several Tribal governments stated health emergency. the COVID-19 pandemic on their ability that they would not see ongoing revenue to fund government services because losses due to the COVID-19 public Public Comment:Treasury received revenue gains in one source cannot health emergency and asked to be able many comments in support of the always be used to make up for losses in to determine revenue loss as of the first presumption,as well as some opposed. another. For similar reasons, other calculation date. Several commenters Some commenters argued that the commenters asked that revenue loss be asked whether revenue loss is presumption eases the administrative calculated on a fund basis. determined independently for each burden on recipients because,without Treasury Response:Treasury year, so that a gain in one year does not it,it would be difficult to identify which considered alternative methods (e.g., offset a loss in another, or whether losses are attributable to the COVID-19 source-by-source, fund-by-fund)but revenue loss is cumulative from the public health emergency.Many ultimately determined to maintain the beginning of the pandemic. commenters also argued that Treasury calculation of revenue loss in the Treasury Response:In the final rule, should maintain the presumption aggregate.The pandemic has had Treasury has made adjustments to give because recipients are likely to different effects on recipients (and their recipients more flexibility with respect experience losses due to the public revenues), and Treasury recognized that to calculation dates and to clarify health emergency even after the end of one particular type of revenue or one certain elements. Specifically,the final the public health emergency. Treasury particular source may have experienced rule provides recipients the option to also received comments asking that it a greater amount of loss for some choose whether to calculate revenue adjust any revenue loss calculation to recipients.However,the statute refers loss on a fiscal year or calendar year account for tax changes enacted by the only to the reduction in revenue of basis,though they must choose a such State,local government,or Tribal consistent basis for loss calculations recipient. In particular, some government."The statute is thus clear throughout the period of performance. commenters noted that some recipients that Treasury is to refer to the aggregate Treasury has also clarified in the final had increased taxes in order to meet revenue reduction of the recipient due rule that revenue loss is calculated additional demands for government to the public health emergency.Further, separately for each year such that the services or to address declines in this provision is designed to address calculation of revenue lost in one year revenue due to the pandemic. These tax declines in the recipients' overall ability does not affect the calculation of increases have in some cases offset some to pay for governmental services, and revenue lost in prior or future years. or all of the actual revenue loss calculating revenue loss on an aggregate Presumption That Revenue Loss Is Due attributable to the public health basis provides a more accurate to the Pandemic emergency. Because the interim final representation of the effect of the rule calculates revenue loss by reference pandemic on overall revenues and the As stated above, sections 602(c)(1)(C) to actual revenue collected, commenters fiscal health of the recipient. In many and 603(c)(1)(C) of the Social Security argued that the calculation of revenue circumstances,recipient governments Act provide that SLFRF funds may be loss "due to"the public health have flexibility to use revenues from an used"for the provision of government emergency needs to take into array of sources and offset declines in services to the extent of the reduction in consideration the effects of tax increases some sources with gains in others. revenue of such. . . government due to by deducting the effect of these tax While the details and configuration of the COVID-19 public health emergency increases from actual revenue collected. this flexibility vary widely across relative to revenues collected in the recipient governments, calculating most recent full fiscal year of the . Treasury Response:In the final rule, government prior to the emergency."As Treasury has maintained the revenue loss on a source-by-source or g p presumption that a reduction in a fund-by-fund basis would not capture discussed in the interim final rule, how recipient governments balance although revenue may decline for recipient's revenue is due to the public their budgets in the regular course of reasons unrelated to COVID-19,in order health emergency with certain business. Accordingly,the final rule to minimize the administrative burden adjustments to respond to comments maintains the requirement that revenue on recipients in calculating revenue loss and to better account for revenue loss loss is to be calculated on an aggregate and take into consideration the "due to the COVID-19 public health basis. devastating effects of the COVID-19 emergency.� The final rule makes public health emergency, any reduction adjustments to the presumption to take Calculation Dates in revenue relative to the counterfactual into account certain government actions Public Comment:Under the interim estimate was presumed in the interim to change tax policy. In particular, final rule,recipients calculate revenue final rule to be considered revenue lost Treasury is adjusting the presumption to loss as of the end of the calendar year. due to the pandemic. account for changes to tax policy by Treasury received many comments Treasury stated in the Supplementary providing that changes in revenue that requesting that recipients be permitted Information to the interim final rule that are caused by tax increases or decreases to calculate revenue loss as of the end it was considering when,if ever, during adopted after the issuance of the final of their fiscal year. Commenters argued the period of performance it would be rule will not be treated as due to the that doing so would be simpler and less appropriate to reevaluate the public health emergency.