CARES Act – Establishing an Economic Support Grant Program for Tribal Businesses

05/07/20

Several weeks after the enactment of the CARES Act[1], the Treasury Department has finally begun distributing a portion of Tribal Governments' $8 billion share of the Title V Coronavirus Relief Funds. These funds can be used by Tribal Governments for "necessary expenditures" incurred between March 1 and December 30, 2020 due to the COVID-19 public health emergency. Those expenditures must be unaccounted for in the tribe's 2020 budget. The CRF is administered and funds have started to be distributed by the Department of Treasury.

Treasury has issued a CRF Guidance to state, local, territorial and Tribal Governments and related Frequently Asked Questions. This guidance and FAQs identify and answer questions about the various types of eligible expenditures for Tribal Governments, including "expenditures related to the provision of grants to small businesses to reimburse the costs of business interruption caused by required closures." According to the FAQs, "Governments have discretion to determine what payments are necessary. A program that is aimed at assisting small businesses with the costs of business interruption caused by required closures should be tailored to assist those businesses in need of such assistance. The amount of a grant to a small business to reimburse the costs of business interruption caused by required closures would also be an eligible expenditure under section 601(d) of the Social Security Act, as outlined in the Guidance."

Potential Grant Program Parameters for Tribal Owned or Tribal Member Owned Businesses
Tribes can use their Title V funding to provide direct financial support to tribal-owned or tribal-member owned businesses for costs of business interruption. In addition, given the other types of eligible costs incurred - such as personal protective equipment, social distancing implementation, disinfection and cleaning - such grant programs should also include additional start-up costs associated with complying with public health directives.

To leverage Title V funding for tribal businesses, a Tribal Council might consider adopting a grant program that includes the following parameters:

  • Eligibility criteria such as:
    • Ownership (tribal-owned, tribal-member owned, non-tribal owned);
    • Location (on or near the Tribe's reservation;
    • Size (the Tribe's definition of "small business")
  • Grant size limitations - whether to have a maximum grant size
  • Definition of "costs of business interruption" ("economic injury"[2])
    • Essential employee payroll costs
    • Rent / utilities
    • Additional security, legal, insurance, technology
    • Taxes
    • Debt coverage/other obligations
  • Definition of "startup costs"
    • Rehiring costs
    • Expenses for employment and training programs to bring back furloughed employees
    • New compliance costs (i.e., disinfectant, cleaning)
  • Definition of "compliance costs"
    • Expenses for acquisition and distribution of medical and protective supplies, including sanitizing products and personal protective equipment necessary in connection with the COVID-19 public health emergency.
    • Expenses for disinfection of business facilities in response to the COVID-19 public health emergency.
    • Expenses for technical assistance to business entities on mitigation of COVID-19 related threats to public health and safety.
    • Expenses for public safety measures undertaken in response to COVID-19.
    • Expenses to improve telework capabilities for public employees to enable compliance with COVID-19 public health precautions.
    • Expenses of providing paid sick and paid family and medical leave to employees to enable compliance with COVID-19 public health precautions.

Of course, each grant program and the parameters will be dependent on a Tribe's particular circumstances and the circumstances of its businesses and enterprises. While these suggestions are based primarily on the Treasury guidance, each Tribe should confer with legal counsel to determine which, if any, of these suggestions will work for the Tribe.

We also recommend that the Tribe approve the grant program by Council resolution, create an "application" process that captures the proposed uses and funds needed, and a review and approval process. This documented process should provide written support for the Tribe in the event of a future audit by the Treasury Department's Inspector General.

We are prepared to assist our Tribal Government and tribal enterprise clients with navigating the particular requirements of CRF funding and for developing tribal programs to use CRF funds consistent with Title V of the CARES Act and Treasury guidance. Please don’t hesitate to reach out to us if you have any further questions about Title V, or any other aspect of the CARES Act.

Please stay safe and continued good luck to your tribal community during this public health emergency.

This is a fluid and rapidly changing situation and these resources are current only as of the date of publication. We recommend that you contact your local Quarles & Brady attorney regarding the most up-to-date information or with any other questions regarding this subject matter, or contact Pilar Thomas: (520) 770-8744 / [email protected].


[1] The CARES Act was enacted to provide over $2.2 trillion in federal funding for loans and grants to support state, tribal and local governments; businesses; hospitals; citizens; and others who are impacted by the COVID-19 public health emergency. Business economic support in the CARES Act includes the Paycheck Protection Act and expansion of the Economic Injury Disaster Loan programs for small businesses, payroll tax deferral and tax credit programs, and loan programs for mid to large size businesses with reduced interest rates and other favorable terms.

[2] Under the SBA Economic Injury Disaster Loan program, "substantial economic injury" means "an economic harm to a business concern that results in the inability of the business concern—

(I) to meet its obligations as they mature;

(II) to pay its ordinary and necessary operating expenses; or

(III) to market, produce, or provide a product or service ordinarily marketed, produced, or provided by the business concern.