COVID-19 Federal Assistance e311


Lost Revenue & Revenue Replacement

Funding Source

American Rescue Plan Act, CARES Act, FEMA

Can a municipality deduct federal aid (e.g., FEMA funds) for COVID relief from revenue totals in 2020?

Yes, a municipality can deduct federal aid for COVID relief from revenue totals in 2020. The U.S. Department of the Treasury’s (“Treasury”) Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) Final Rule discusses the topic of federal aid and COVID-19 relief funds in the context of the definition of “general revenue” for the purpose of revenue loss calculations.

The Final Rule’s definition of “general revenue” states in pertinent part that the term excludes “intergovernmental transfers from the Federal Government, including transfers made pursuant to section 9901 of the American Rescue Plan Act.”[1] Treasury indicated that it was “maintaining the exclusion of all payments from the Federal Government (including payments for services) from general revenue in order to avoid substantial dilution of the definition of revenue, particularly in light of extraordinary fiscal support provided during the pandemic.”[2] To properly calculate revenue loss, municipalities should exclude funds received from the federal government.

However, municipalities should note that according to the Final Rule, “Treasury is maintaining the inclusion of intergovernmental transfers other than from the federal government” in its definition of general revenue, so any funds received from state and local governments should not be deducted from revenue totals.[3]

Treasury is currently revising its Frequently Asked Questions (“FAQ”) for the Final Rule. As of January 2022, the FAQs further state that “[g]eneral revenue also includes intergovernmental transfers between state and local governments, but excludes intergovernmental transfers from the Federal government, including Federal transfers made via a state to a locality pursuant to the CRF or the [CSLFRF].”[4]

In summary, the Final Rule and other Treasury guidance indicates that states and municipalities should deduct intergovernmental transfers from the federal government, including federal aid such as FEMA disaster assistance, in their calculation of revenue losses.

Last Updated: March 4, 2022

[1] Treas. Reg. 31 CFR Part 35 at 408 (emphasis added), available at:

[2] Id., at 246.

[3] Id.

[4] U.S. Department of the Treasury Coronavirus State and Local Fiscal Recovery Funds Frequently Asked Questions (as of January 2022) – FAQ #3.1, at 13, available at: