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certification to the Secretary. The Social Security Act requires any such withholding be based on <br />the unemployment rate in the state or territory as of the date of the certification. <br />Under the interim final rule, Treasury provided that it would withhold 50 percent of the <br />amount allocated from any state that had an unemployment rate less than two percentage points <br />above its unemployment rate in February 2020 as of the date the state submitted its initial <br />certification for payment of funds pursuant to section 602(d)(1) of the Social Security Act. Based <br />on data available at the time of the issuance of the interim final rule, this threshold was expected <br />to result in a majority of states being paid in two tranches. Treasury did not split the payments of <br />any territories. <br />Public Comment: One commenter asked Treasury to allow a state to request release of <br />the portion of the state's second tranche payment after the state could demonstrate that it had <br />allocated the entirety of the first tranche, a need to continue ongoing programs, and a desire to <br />avoid borrowing costs. Another commenter asked Treasury to clarify whether states that received <br />half their funding in the first payment would receive their second half payment within 12 <br />months. Similarly, some recipients requested clarification on whether they could obligate second <br />tranche funds before receipt or use second tranche funds for costs incurred prior to receipt. <br />Treasury Response: The final rule maintains the approach in the interim final rule with <br />two modifications. As described in the interim final rule, splitting payments for most states <br />provides consistency with payments to local governments and encourages states to adapt their <br />use of funds to developments that arise in the course of the economic recovery. Moreover, <br />SLFRF funds may be used for costs incurred during the period of performance. Recipients may <br />use their jurisdiction's budgeting and procurement practices and laws to determine how and <br />when second tranche funds may be obligated. <br />349 <br />