Using Federal Coronavirus Relief Funds for Small Business Support

<p>On May 6, 2020, the North Carolina Office of State Budget and Management delivered a letter to counties with the amount of federal funds that will be distributed to each county from the “Coronavirus Relief Fund” (CRF) pursuant to the federal CARES Act. Guidance from the U.S. Department of Treasury Department says that CRF can be used for local government expenditures related to COVID-19, and the list of examples includes grants and loans for businesses. The federal guidance merely offers examples and provides no separate authority for activities, and importantly it does not override state law (see NC Constitution, Article V, Section 7).</p> <p>The CRF is welcome news for local governments that have enacted loan programs in compliance with state law (as described in prior posts here and here). This means that local governments may receive reimbursements for capital outlays for loans. In addition, programs to aid individuals in need, which are also permitted under state law, can utilize CRF. Grants for businesses, however, remain legally and practically problematic for multiple reasons. This post explores state law surrounding these possible uses of CRF allocations. </p> What is the Coronavirus Relief Fund (CRF)? <p>The federal CARES Act (full text here) established the “Coronavirus Relief Fund” (CRF) and sets forth permitted uses of CRF in Section 5001 of the Act:</p> <p style="padding-left: 40px">(d) Use of funds.—A State, Tribal government, and unit of local government shall use the funds provided under a payment made under this section to cover only those costs of the State, Tribal government, or unit of [...]</p>