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local governments, which would incentivize counties to augment funds to address the needs of <br />local governments. These commenters noted that counties are disincentivized to make transfers <br />under section 603(c)(3), as is currently allowed, as such transfers would require that counties <br />provide oversight and monitoring over its subrecipients. <br />Treasury Response: Section 603(c)(4), by its terms, applies only to transfers from local <br />governments to states. Accordingly, the final rule must maintain the interim final rule's <br />limitation of section 603(c)(4) transfers as applicable only to transfers from local governments to <br />states. Expansions of section 603(c)(4) transfer authority beyond transfers from local <br />governments to states were not explicitly authorized by Congress. As such, transfers under <br />section 603(c)(4) may only be made by local governments to the state in which they are located. <br />Congress enumerated two separate transfer provisions for local governments —section <br />603(c)(3) and section 603(c)(4) — that use different language and were intended to operate <br />differently. Section 603(c)(4) contains prefatory language ("Notwithstanding paragraph (1)" — a <br />reference to the eligible SLFRF uses) that section 603(c)(3) does not. In other words, section <br />603(c)(4) transfers are not required to constitute an eligible use of the funds from the perspective <br />of the transferor local government, but section 603(c)(3) transfers are required to constitute an <br />eligible use. A transfer to accomplish an eligible use fits within the recipient-subrecipient <br />framework. <br />Further, treating section 603(c)(3) transfers as leading to a cancellation of the award for <br />the transferor local government would result in scenarios that are inconsistent with the statutory <br />language. An award cancellation pursuant to a section 603(c)(3) transfer would result in either <br />(1) non -governmental entities becoming award recipients under the program, which would <br />contravene the purpose of SLFRF or (2) transfers to governmental and non -governmental entities <br />362 <br />