The COVID-19 crisis has had a considerable impact on governments across the country in a short space of time. In some areas, tribal governments are among the hardest-hit by the health crisis and are struggling to maintain personnel and consistency in day-to-day financial operations. On top of this, the rapid speed of developments makes it harder for all governments to keep track of the latest rules and funding opportunities. While guidance from the federal government can be fleeting or minimal, it’s essential to confer with a trusted advisor when looking to understand the key matters facing your tribal government and the information provided by the U.S. Treasury and IRS.
What Funding is Available?
The most significant source of COVID-19 funding available to tribal governments comes from the CARES Act, with $8 billion of funds provided, including to Alaska Native regional and village corporations, based on population, employment, and expenditures. 60% of the total tribal funding will be distributed immediately based on population, and the remaining 40% will be distributed based on employment and expenditure data, which the Treasury intends to request from tribal governments soon. For more information on this allocation methodology, please visit the U.S. Treasury website.
The employment and expenditure data are to be provided electronically to the Treasury on a form which will be available on the Treasury’s website beginning the week of May 17, 2020. The required employment data includes the number of employees for each quarter of 2019, split by employees of the Tribal government and employees of entities majority-owned by the Tribal government—this should not include independent contractors. You can view the required expenditure information of the total governmental expenditures in the 2019 fiscal year here.
The minimum payment any tribe will receive from the population-based payment is $100,000, and only tribal governments with populations less than 37 people will receive the minimum amount. The Treasury is reviewing submissions from tribal governments, as well as payment allocations. Once these are finalized, they will be posted on the Treasury’s website.
The CARES Act also includes a separate pool of funding referred to as the Provider Relief Fund that is designated for healthcare providers. A total of $400 million from this fund has been designated for Indian Health Services.
In addition to the CARES Act funding, there are also various COVID-19-related grants available that tribal governments may be entitled to apply for, so thorough research is highly recommended. Examples of agencies providing some of the more significant amounts of additional COVID-19-related funding include the Department of Homeland Security/FEMA, HUD, the Department of Health and Human Services, and the Department of Education.
The Families First Coronavirus Response Act also designated $64 million to Indian Health Services as a means to cover the costs of COVID-19 diagnostic testing. Similarly, the Coronavirus Preparedness and Response Supplementation Appropriations Act allocated $40 million to tribes, tribal organizations, urban Indian health organizations, or health service providers to tribes.
What Expenditures Are Eligible?
As stated in the CARES Act, relief funds can be spent on expenditures that meet all of the following requirements:
(1) are considered necessary expenses incurred due to the public health emergency in regards to the novel coronavirus;
(2) were not accounted for in the budget most recently approved as of March 27, 2020, for the state or government; and
(3) were incurred during the period that begins on March 1, 2020, and ends on December 30, 2020.
The first requirement, that expenditures be “necessary expenditures incurred due to the public health emergency,” can potentially be subject to interpretation. The U.S. Treasury website has an FAQ document that explains which expenditures qualify as “necessary.” The Treasury specifies that, in addition to the direct costs of responding to the emergency (i.e., providing medical and public health services), the funding may also be spent addressing the second-order effects, such as providing economic support to those suffering unemployment or business interruptions.
The Treasury also provides examples of specific allowable expenditures, and they include the payroll of public safety and health care (and similar) employees; food delivery for vulnerable populations; distance learning expenses; sick leave for public employees to enable compliance with public health precautions; unemployment insurance costs; increases in workers compensation costs due to the public health emergency; maintaining prisons to allow compliance with public health precautions; care for homeless populations to enable compliance with public health precautions; recovery planning costs; training programs for furloughed employees, and small business grants to reimburse costs of required closures.
Concluding which expenses are considered allowable under the CARES Act can be confusing, so be sure to consult your CRI professional or the U.S. Treasury’s website for further details, before making those conclusions yourself.
What are the Tax Considerations?
Another significant aspect of the CARES Act that could be important for tribal governments is the employee retention tax credit, which is designed to encourage employers to maintain employment throughout the pandemic. This credit is worth 50% of up to $10,000 in qualified wages in the period from March 12, 2020, to January 1, 2021, for eligible employers who have had their operations fully or partially suspended by government orders due to COVID-19, or have had a significant decline in receipts. Tax-exempt organizations are included, and the credit can be applied against certain employment taxes. It is, however, important to note that there are other benefits made available in the CARES Act, and in some circumstances, if an employer applies one benefit, they could be excluded from taking another. It is vitally important that governments determine which benefits best suit their needs and take advantage of them accordingly. Other benefits include: paid sick leave and family leave refundable tax credit, employment tax deferral, and paycheck protection program loans.
A lot of information has been issued for tribal governments to discern in a short space of time, but the processes move quickly regardless, and organizations need to stay up-to-date with the latest guidelines. For more specific guideline detail or help in understanding the information issued from the Treasury, please reach out to your CRI professional.