Food Stamp Program: Noncitizen Eligibility, and Certification Provisions of Pub. L. 104-193, as Amended by Public Laws 104-208, 105-33 and 105-185

DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Parts 272, 273, 274, and 277

[Amendment No. 388]

RIN 0584-AC40

Food Stamp Program: Noncitizen Eligibility, and Certification Provisions of Pub. L. 104-193, as Amended by Public Laws 104-208, 105-33 and 105-185

AGENCY:

Food and Nutrition Service, USDA.

ACTION:

Final rule.

SUMMARY:

This rule finalizes a proposed rule published February 29, 2000, amending Food Stamp Program (Program) regulations to implement several provisions of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA), and subsequent amendments to these provisions made by the Omnibus Consolidated Appropriations Act of 1996 (OCAA), the Balanced Budget Act of 1997 (BBA), and the Agricultural Research, Extension, and Education Reform Act of 1998 (AREERA). This action finalizes options related to matching activities, fair hearings and recipient services. This action finalizes provisions which would increase State agency flexibility in processing applications for the Program and allow greater use of standard amounts for determining deductions and self-employment expenses. This action also finalizes revisions to the requirements for determining alien eligibility and the eligibility and benefits of sponsored aliens, and requires certain transitional housing payments and most State and local energy assistance to be counted as income, excludes the earnings of students under age 18 from income, and requires proration of benefits following any break in certification.

Other provisions of this final action establish ground rules for implementing the Simplified Food Stamp Program, allow State agencies options to issue partial allotments for households in treatment centers, count all, part, or, in some cases, none of the income of an ineligible alien in determining the benefits of the rest of the household, issue combined allotments to certain expedited service households, and certify elderly or disabled households up to 24 months and other households up to 12 months. The action also finalizes several changes to existing regulations in response to the President's reform initiative to remove overly prescriptive, outdated, and unnecessary regulatory provisions.

The rule also makes final the proposals to add vehicles to the assets which may be covered under the inaccessible resources provisions of the Food Stamp Act of 1977, clarifies the procedures for shortening or lengthening a certification period, and makes a change to exclude from income on-the-job training payments received under the Summer Youth Employment and Training Program as required by Section 702 of the Workforce Investment Act (Pub. L. 102-367, originally known as the Job Training Reform Amendments of 1992).

DATES:

Effective Date:

This final rule is effective January 20, 2001, except for the amendment to § 273.2(b)(4)(iv) which is effective August 1, 2001, and the amendments specified in items 2 and 3 below which are not effective until Office of Management and Budget (OMB) approval of an associated information collection burden. The Food and Nutrition Service will publish a document in the

Federal Register

announcing the effective date of these amendments after approval of the information collection requirements by OMB.

Implementation Dates:

1. State agencies may implement the following amendments at their discretion at any time on or after the effective date: § 272.8; § 272.11(a); § 273.2(f)(9)(i); § 273.2(f)(10); § 273.2(j)(2)(ii); § 273.9(d)(6)(i); § 273.9(d)(6)(iii)(E); § 273.11(a)(3)(v); § 273.12(a)(1)(vii); § 273.25; and § 277.4(b).

2. State agencies may implement the following amendment at their discretion at any time on or after the effective date established by OMB approval of the associated information collection burden: § 273.12(f)(4).

3. State agencies must implement the following amendments no later than 180 days after the effective date established by OMB approval of the associated information collection burden for all households newly applying for Program benefits. State agencies must convert current caseloads no later than the next recertification following the implementation date: § 273.2(c)(2)(i), § 273.2(e)(1), § 273.2(e)(2)(i), § 273.2(e)(2)(ii), § 273.2(e)(3), § 273.4(c)(3)(iv); and § 273.12(c)(3).

4. State agencies must implement the amendment to § 273.2(b)(4)(iv) no later than August 1, 2001, for all households newly applying for Program benefits.

5. State agencies must implement all other amendments no later than June 1, 2001, for all households newly applying for Program benefits. State agencies must convert current caseloads no later than the next recertification following the implementation date.

FOR FURTHER INFORMATION CONTACT:

Patrick Waldron, Program Analyst, Certification Policy Branch, Program Development Division, Food and Nutrition Service, USDA, 3101 Park Center Drive, Room 800, Alexandria, Virginia, 22302, (703) 305-2805 or e-mail at Patrick.Waldron@fns.usda.gov.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This final rule has been determined to be economically significant and was reviewed by the Office of Management and Budget in conformance with Executive Order 12866.

Executive Order 13132

Federalism Summary Impact Statement

Executive Order 13132 requires Federal agencies to consider the impact of their regulatory actions on State and local governments. FNS has considered the impact on State agencies. For the most part, this rule deals with changes required by law, and implemented by law in 1996. However, the Department has made discretionary changes to preserve client protections that existed in the regulations prior to the effective date of this rule and to facilitate the participation of eligible low-income households, particularly households with wage earners. These changes primarily affect food stamp recipients. The effects on State agencies are moderate. In some instances, the changes relieve State agencies of administrative burdens. In other instances, the changes result in modest increases in administrative burdens. However, we balanced these increases in State agency burden against the need to preserve and enhance Program access to eligible low-income families and individuals. This rule is intended to have preemptive effect on any State law that conflicts with its provisions or that would otherwise impede its full implementation. Generally, PRWORA and other federal statutes required many of the changes made in this rule, and made most of them effective on enactment and all of them effective prior to the publication of this rule. FNS is not aware of any case where the discretionary provisions of the rule would preempt State law.

Prior Consultation With State Officials

Before drafting this rule, we received input from State agencies at various times. Because the Program is a State-administered, federally funded program,

our regional offices have formal and informal discussions with State and local officials on an ongoing basis. These discussions involve implementation and policy issues. This arrangement allows State agencies to provide feedback that forms the basis for many discretionary decisions in this and other Program rules. In addition, FNS officials attend regional, national, and professional conferences to discuss issues and receive feedback from State officials at all levels. Lastly, the comments on the proposed rule from State officials were carefully considered in drafting this final rule.

Regulatory Flexibility Act

This rule has been reviewed with regard to the requirements of the Regulatory Flexibility Act of 1980 (5 U.S.C. 601-612). Shirley R. Watkins, Under Secretary for Food, Nutrition and Consumer Services, has certified that this rule will not have a significant economic impact on a substantial number of small entities. State and local welfare agencies will be the most affected to the extent that they administer the Program.

Paperwork Reduction Act

The information collection requirements affected by the issuance of this final rule are or will be contained within the following OMB numbers, 0584-0064, 0584-0083, and 0584-0496. Some requirements are already approved. There are others about which we are seeking comment. Those will not become effective until approved by OMB.

Current Information Burden (ICB) Approval

The information collection requirements governing State agency administration and management described in the final rule at Part 272 have been eliminated, made optional or significantly modified as a result of implementation of certain provisions of the PRWORA amending the Program. Therefore, current reporting and record keeping burden associated with Part 272, previously approved by OMB and assigned control numbers 0584-0064 and 0584-0083, either remains the same or there is no longer an information collection burden associated with the provisions discussed in the preamble to this rule. OMB 0584-0064 also includes information collection burden associated with Part 273.

The information collection requirements described in § 273.2, § 273.12, § 273.14(b), and § 273.21 of this final rule governing the application, certification, and ongoing eligibility of food stamp households have been approved under OMB No. 0584-0064. The information collection requirements described in § 273.9(d) and § 273.11(b) of this final rule governing administration of the homeless shelter deduction, establishing and reviewing standard utility allowances, and establishing methodologies for offsetting the cost of producing self-employment income have been approved under OMB No. 0584-0496.

Results From 60 Day Comment Period

FNS has submitted the above-noted ICB packages to OMB for renewal and they will remain in effect until further notice. We received no comments on the ICB mentioned in the proposed rule. As discussed below, the final rule contains additional reporting burden which must receive OMB approval before the regulatory amendments become effective. The associated amendments are § 273.2(c)(2)(i), § 273.2(e)(1), § 273.2(e)(2)(i), § 273.2(e)(2)(ii), § 273.2(e)(3), § 273.4(c)(3)(iv); § 273.12(c)(3), and § 273.12(f)(4).

Additional Burden

As a result of the numerous public comments on the proposed rule, proposals to Part 273 in the rule were either modified or withdrawn. These changes affect the ICB approved under OMB No. 0584-0064 and add new collection burdens not previously published. The additional ICB identified as a result of this final rule includes: (1) Notice of Missed Interview; (2) the determination of indigence for eligible sponsored aliens subject to deeming of sponsor income; (3) the notification of households about face-to-face interview waivers; (4) notifications to households that apply to both food stamps and TANF that (A) time limits of other programs do not apply to the Food Stamp Program; and (B) households are encouraged to continue the food stamp application process even if the application for TANF benefits is withdrawn; (5) the State agency's responsibility to forward misfiled applications; (6) the Transition Notice for use in States electing to provide the Transitional Benefits Alternative; and (7) the Request for Contact. The number of initial food stamp applications and recertifications received in 1999 according to the FNS National Databank (8,139,774 and 9,992,025 respectively) will be used for these estimates. The combined total of the received applications is therefore 18,131,799 for 1999.

In accordance with the Paperwork Reduction Act of 1995, FNS is submitting for public comment the change in the ICB that results from the adoption of the rule associated with the application, certification, and ongoing eligibility of food stamp households. FNS is incorporating the additional data collection activities governing the application, certification, and ongoing eligibility of food stamp households in OMB No. 0584-0064.

We invite comments on: (a) Whether the collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (b) the accuracy of the agency's estimate of the burden of the collection of information including the validity of the methodology and the information to be collected; and (c) ways to minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology.

Send one copy of comments and/or request for copies of this information collection to: Patrick Waldron, Program Analyst, Certification Policy Branch, Program Development Division, Food and Nutrition Service, 3101 Park Center Drive, Alexandria, VA 22302-1594, 703.305-2805. Comments may also be faxed to Mr. Waldron at 703.305.2486. FNS prefers to receive comments in the electronic medium. Our Internet address is

FSPHQ-WEB@fns.usda.gov.

In the subject box, please indicate “NCEP ICB comments”. Only comments received prior to 5:00 p.m. EST on January 19, 2001, will be given consideration.

Title:

Notice of Missed Interview.

OMB Number:

0584-0064.

Expiration Date:

Three (3) years from date of approval.

Type of request:

New data collection.

Abstract:

Current rules require State agencies to reschedule missed interviews. We are removing the requirement that the State agency reschedule a missed interview. However, we are adding a requirement to § 273.2(e)(3) that the State agency must send a notice to a household that misses its interview appointment indicating that it missed the scheduled interview and informing the household that it is responsible for rescheduling the interview.

Number of Additional Respondents:

We are asking that States provide reasonable estimates regarding the number of missed interviews in any given time frame. Our initial inclination was to suggest that 25 percent of all initial applications and recertifications miss an interview. Comments and/or

data regarding this estimated percentage are encouraged.

Estimated Number of Responses per Respondent:

We are asking that States provide reasonable estimates regarding this burden estimate. We also assume that the same 25 percent receive one response per respondent per year.

Estimate of Burden:

Household burden—It is difficult to estimate the burden to the household, since the manner in which the household responds to the notice will vary considerably. The household may call the local food stamp office to reschedule, arrive in person at the office to reschedule, write a reply or send an e-mail. The amount of burden time on the household depends on the manner in which the household responds and the manner in which the State will accept responses to the Notice of Missed Interview (NOMI). Therefore, we estimated the household burden at approximately 10 minutes per notice. In addition, some households will not respond to the notice of a missed interview. We estimate that 25 percent will not respond to the notice. We request that States provide information regarding the approximate number of missed interviews per month or per year. State burden—due to the automation of most State agencies, we assume the estimated burden to issue a NOMI will be 15 seconds per notice plus a one-time adjustment of forms, which is estimated at 20 hours per form.

Estimated Total Annual Burden on Respondents:

Household burden—We estimate that the total annual burden will be 75,575 hours (1,813,799 total applications × 0.25 × 10 min/60 min = 75,575 hours). State burden—Since we do not know the estimated number of missed interviews per State, we are requesting comments from the State agencies to provide a better picture of the burden such a notice will cause. To issue a notice, we are calculating the 10 seconds to equal 0.00277 hours. (10 seconds = 10 sec/60 sec per min = 0.16667 min/60 min per hour = 0.00277 hours). The estimated total annual burden on the States would be 1,256 hours (1,813,799 total applications × 0.25 × 0.00277 hours = 1,256 hours).

In addition, we anticipate a one-time adjustment of forms for the State agencies. Due to computerized systems, we anticipate each State agency will require an additional 20 work hours to revise the forms. The total burden would then be 1060 hours (20 hours × 53 State agencies = 1,060 hours).

The anticipated total burden on the State agencies would then be 2,316 hours (1,256 + 1,060 = 2,316).

Title:

Determination of Indigence.

OMB Number:

0584-0064.

Expiration Date:

Three (3) years from date of approval.

Type of request:

New data collection.

Abstract:

Under the final rule, § 273.4(c)(3)(iv) exempts certain eligible sponsored aliens from the provisions requiring deeming of sponsor income and resources if the sponsored alien is indigent. Under the final rule, an eligible sponsored alien is indigent if the sum of all the sponsored alien's household's income and any assistance the sponsor or others provide (cash or in-kind) is less than or equal to 130 percent of the poverty income guideline. To comply with the statute, and unlike a normal determination of income for food stamp eligibility purposes, the indigence determination includes an estimation of the value of in-kind assistance the sponsor and others provide. The State agency would determine the amount of income and other in-kind assistance provided in the month of application. Each indigence determination is good for 12 months and is renewable for additional 12-month periods. If the sponsored alien is indigent, then the normal food stamp budgeting process would begin. The State agency counts in the food stamp budget whatever actual cash contributions the sponsor and others provide.

Number of Additional Respondents:

We are asking that States provide reasonable estimates regarding the number of indigent sponsored aliens in any given time frame. The Department believes this is a small group and data have not been collected to determine the exact number of individuals involved. We believe that only eligible lawful permanent residents who are Hmong or Highland Laotians or individuals who have a U.S. military connection are potentially subject to the sponsor deeming provisions of the Program. In as much as the provision applies only to sponsored aliens who are sponsored by an individual, and not an organization, and for whom an affidavit of support was executed on or after December 19, 1997, we believe there may be less than 500 individuals who are subject to this provision and who are food stamp eligible.

Estimated Number of Responses per Respondent:

We anticipate only one response per respondent per year.

Estimate of Burden:

Household burden—We believe that the burden on the household will not change. State burden—We estimate the burden on the State to be approximately 10 minutes for collecting additional information to determine the value of in-kind assistance provided by the sponsor and/or others and to determine the indigence of the applicant household.

Estimated Total Annual Burden on Respondents:

Household burden—We believe no additional burden is added to the household. State burden—We estimate the total burden to be (10 min/60 min × 500 × 1/year) 83 additional burden hours per year. Comments and/or data regarding this estimated percentage are encouraged.

Title:

The Notification of Households About Face-to-Face Interview Waivers.

OMB Number:

0584-0064.

Expiration Date:

Three (3) years from date of approval.

Type of request:

One time requirement to modify forms.

Abstract:

Under the final rule the eligibility worker must advise each applicant of the possibility waiving a face-to-face interview for a telephone interview. Under the previous rule, applicant households had to request information on the possibility of waiving the face-to-face interview.

Number of Additional Respondents:

We are asking that States provide reasonable estimates regarding this burden. Comments and/or data regarding this estimated percentage are encouraged. We are initially estimating that each household that applies for food stamps or applies for recertification will be affected. In 1999, there were 8,139,774 initial applications and 9,992,025 recertification applications. Combined, the total number of applications in 1999 was 18,131,799. Therefore, our initial estimate in the number of respondents affected is 18,131,799.

Estimated Number of Responses per Respondent:

We estimate one response per application, for a total estimate of 18,131,799 per year.

Estimate of Burden:

Household burden—We believe this does not affect the burden on the household. State burden: We estimate 10 seconds to notify each applicant household.

Estimated Total Annual Burden on Respondents:

Household burden:—We believe this will not affect the burden on the applying households. State burden—This totals to 50,366 hours per year for the States [(10 seconds/60)/60 × 18,131,799].

Title:

Notification of Households That Apply for Both Food Stamp Benefits and TANF That: Time Limits of Other Programs do not Apply to the Food Stamp Program; and the Encouragement of Households To Continue the Food Stamp Application Process Despite Requirements for Other Programs and/or Actions of Other Programs.

OMB Number:

0584-0064.

Expiration Date:

Three (3) years from approval date.

Type of request:

New data collection.

Abstract:

Time limits—The final rule requires the State agency to inform households that receiving food stamps will have no bearing on any other program's time limits. The interviewer must advise households that are also applying for or receiving PA benefits that time limits and other requirements that apply to the receipt of PA benefits do not apply to the receipt of food stamp benefits; and that households which cease receiving PA benefits because they have reached a time limit, have begun working, or for other reasons, may still qualify for food stamp benefits. Encouragement—The final rule provides that if the State agency attempts to discourage households from applying for cash assistance, it shall make clear that the disadvantages and requirements of applying for cash assistance do not apply to food stamps. In addition, it shall encourage applicants to continue with their application for food stamps. The State agency shall in no way try to discourage households from applying for food stamps. The State agency shall inform households that receiving food stamps will have no bearing on any other program's time limits that may apply to the household.

Number of Additional Respondents:

This provision applies only to applicants who apply for both TANF and food stamps.

Estimated Number of Responses per Respondent:

We estimate one response per household that applies for both Food Stamp benefits and TANF.

Estimate of Burden:

Household burden—We believe there is no burden to the household for this provision. State burden—We estimate 10 seconds to notify of the two issues to each applicant household that has applied to both TANF and food stamps.

Estimated Total Annual Burden on Respondents:

Household burden—We believe there is no burden to the household in this provision. State burden—We are requesting comments from the State agencies on the burden this provision imposes on the State agencies. The National Databank indicated 2.8 million households were receiving food stamp benefits and PA benefits in January 1999. Therefore, we estimate that the total annual burden is 7,917 hours (2,800,000 × .00277 hours + 7,917) [10/60 = .16667 min. = .16667/60 = .00277 hours].

Title:

The State Agency Responsibilities for Misfiled Food Stamp Applications.

OMB Number:

0584-0064.

Expiration Date:

Three (3) years from date of approval.

Type of request:

New responsibility.

Abstract:

This provision of the final rule would: (1) Continue to allow the State agency to require households to file an application at a specific certification office or allow them to file an application at any certification office within the State or project are; (2) require that if an application is received at an incorrect office, the State agency advise the household of the address and telephone number of the correct office (3) require the State agency to forward an application received at an incorrect office to the correct office not later than the next business day; and (4) remove the requirement currently located in the third sentence of § 273.2(c)(2)(ii) that the State agency inform the household that its application will not be considered filed and the processing standards must not begin until the application is received by the appropriate office.

Number of Additional Respondents:

We are asking that States provide reasonable estimates regarding this burden. Comments and/or data regarding this estimated percentage are encouraged. Since most project areas have only one office, we believe the new rule will affect only large project areas with multiple offices. Further, within that group of project areas, only those which limit applications taken to a specific geographic area or a specific caseload characteristic will come under the rule. Therefore, we are estimating approximately 30 misfiled applications per month in each of the 100 counties. This totals approximately 36,000 misfiled applications per year.

Estimated Number of Responses per Respondent:

We believe this occurs once per year per misfiled application.

Estimate of Burden:

Household burden—We do not believe this incurs additional burden on the household. State burden—This burden time is dependent on the method in which the misfiled application is forwarded. We believe this burden would take the State approximately 10 minutes per misfiled application if the State agency faxed the application one page at a time.

Estimated Total Annual Burden on Respondents:

Household burden—We believe there is no burden to the household for this provision. State burden—This would take an additional 6,000 burden hours per year (10 min/60 min × 36,000 = 6000 hours).

Title:

The Transition Notice.

OMB Number:

0584-0064.

Expiration Date:

Three (3) years from date of approval.

Type of request:

New data collection.

Abstract:

The final rule provides an optional procedure for providing TANF leavers with “transitional food stamp benefits,” much in the same way families receive transitional Medicaid after leaving TANF rolls. Under the new policy the State agency would freeze food stamp benefits of households leaving TANF rolls for up to 3 months, depending on the period of time since the household's last certification. Near the close of the transition period, the State agency would act on information collected from the household, either adjusting the benefit level, or closing the household's food stamp case because it is no longer eligible or it has failed to provide sufficient information to continue its eligibility for the Program. In some cases, the State agency would have to conduct a full recertification of eligibility, if it was not possible to extend the household's certification period beyond the statutory maximum for its circumstances. This provision in the final rule will require State agencies to develop a new form; however, State agencies may modify existing forms to comply with the requirement.

Number of Respondents:

This provision in the final rule only affect families leaving TANF. Those affected households would receive a “Transition Notice” (TN) advising the household that due to the closure of cash assistance, the food stamp allotment is frozen at the pre-TANF closure amount. In addition, the TN must advise the household that to continue participating in the Program, they must report changes to the State agency within a specified time frame, or report to a recertification interview, as directed in the TN.

Estimated Number of Responses per Respondent:

Household burden—We believe there is no additional burden to the household for this provision. State burden—We do not anticipate additional burden on the State agencies in issuing this Transitional Notice since this burden replaces that of the Notice of Expiration (NOE) in such cases.

We estimate that about 15 State agencies will implement TBA in the next 3 years. The total annual burden on the State for developing the form is estimated to be a one-time adjustment of 20 hours to develop the form and process. This totals 300 hours (20 × 15 State agencies = 300.

Title:

The Request for Contact.

OMB Number:

0584-0064.

Expiration Date:

Three (3) years from date of approval.

Type of request:

New data collection.

Abstract:

Another new provision in the final rule requires the State agency

to obtain information or clarify information from the household during the certification period. The new form, request for contact (RFC), is necessary in situations where the household has reported a change, but the information is so unclear that the State agency cannot readily determine its effect on the household's benefit amount. The final rule places the burden of clarifying an issue on the household. The RFC informs the household of the information needed to continue its current certification. Since the State agency cannot readily determine a household's benefit amount without the clarification or missing information, then the information is considered necessary. The State agency must issue a written RFC that clearly advises the household of the verification it must provide or the actions it must take to clarify its circumstances. The RFC affords the household at least 10 days to respond, either by telephone or by correspondence, as the State agency directs. The RFC also indicates the consequences if the household fails to respond to the RFC. Depending on the household's response to the RFC, the State agency must take appropriate action, if necessary, to close the household's case or adjust the household's benefit amount. This is a new form and will be added to the burden package calculation.

Number of Additional Respondents:

We estimate that 25 percent of the change reports (12,375,185 × 0.25 = 343,796) will result in a request for contact.

Estimated Number of Responses per Respondent:

We also estimate that on average, one request for contact will be issued in a 12-motnth period.

Estimate of Burden:

Household burden—It is difficult to estimate the burden to the household, since the manner in which the household responds to the RFC varies. The household may call the local food stamp office to report information, arrive in person at the office to report, write a reply or send an email. The amount of burden time on the household depends on the manner in which the household responds and the manner in which the State will accept. Therefore, we estimated the household burden at approximately 10 minutes per notice. In addition, some households will not respond to the RFC. We estimate 25 percent will not respond to the notice. State burden—Due to the automation capabilities of most State agencies, we estimate the burden on the State to issue the RFC approximately 2 minutes per request. We do not anticipate additional burden on the State agencies in issuing this RFC since this burden is already calculated as part of the NOAA process.

The total annual burden on the State for developing the form is estimated at a one-time adjustment of 20 hours to develop the form and process.

Estimated Total Annual Burden on Respondents:

Household burden—We estimate that 25 percent of the change reports (1,375,185 × 0.25 = 343,796) will result in a request for contact. Since we believe 25 percent will not respond to the RFC, the remaining households who do respond are anticipated to be approximately 75 percent of the RFCs issued. We calculate the estimated total annual burden to the households will be 42,975 hours (343,796 RFC/year × 0.75 × 10 min/60 min per hour = 42,975 hours). State burden—We estimate the annual burden would be 11,460 hours (343,796 × 1 × 2/60) to issue the RFC, assuming that it will take on average 2 minutes or 0.0333 hours to issue the RFC.

Added to the annual burden are the 20 hours per form for each State agency to create the forms. This totals 1,060 hours (20 × 53 = 1,060 hours). Therefore, the combined total of the annual burden on the State totals 12,520 hours (1,060 + 11,460 = 12,520 hours).

Executive Order 12988

We have reviewed this rule under Executive Order 12988, Civil Justice Reform. This rule is intended to have preemptive effect with respect to any State or local laws, regulations or policies which conflict with its provisions or which would otherwise impede its full implementation. We do not intend this rule to have retroactive effect unless so specified in the “Dates” paragraph of this preamble. Challengers must exhaust all applicable administrative procedures, prior to any judicial challenge to the provisions of this rule or the application of its provisions.

Unfunded Mandate Analysis

Title II of the Unfunded Mandate Reform Act of 1995 (UMRA), Pub. L. 104-4, establishes requirements for Federal agencies to assess the effects of their regulatory actions on State, local, and tribal governments and the private sector. Under section 202 of the UMRA, the Department generally must prepare a written statement, including a cost-benefit analysis, for proposed and final rules with “Federal mandates” that may result in expenditures to State, local, or tribal governments, or to the private sector in the aggregate of $100 million or more in any one year. When such a statement is needed for a rule, section 205 of the UMRA generally requires the Department to identify and consider a reasonable number of regulatory alternatives and adopt the least costly, more cost-effective or least burdensome alternative that achieves the objectives of the rule.

This rule contains no Federal mandates (under the regulatory provisions of Title II of the UMRA) which impose costs on State, local, or tribal governments or to the private sector of $100 million or more in any one year. Thus, this rule is not subject to the requirements of sections 202 and 205 of the URMA.

Civil Rights Impact Analysis

FNS has reviewed this final rule in accordance with the Department Regulation 4300-4, “Civil Rights Impact Analysis” to identify and address any major civil rights impacts the rule might have on minorities, women, and persons with disabilities. After a careful review of the rule's intent and provisions, and the characteristics of food stamp households and individuals participants, FNS has determined that there is no way to soften their effect on any of the protected classes. FNS has no discretion in implementing many of these changes. The changes required to be implemented by law, have been implemented.

All data available to FNS indicate that protected individuals have the same opportunity to participate in the Food Stamp Program as non-protected individuals. FNS specifically prohibits the State and local government agencies that administer the program from engaging in actions that discriminate based on race, color, national origin, gender, age, disability, marital or family status. Regulations at 7 CFR 272.6 specifically state that “State agencies shall not discriminate against any applicant or participant in any aspect of program administration, including, but not limited to, the certification of households, the issuance of coupons, the conduct of fair hearings, or the conduct of any other program service for reasons of age, race, color, sex, handicap, religious creed, national origin, or political beliefs.” Discrimination in any aspect of program administration is prohibited by these regulations, the Food Stamp Act of 1977 (Food Stamp Act or the Act), the Age Discrimination Act of 1975 (Pub. L. 94-135), the Rehabilitation Act of 1973 (Pub. L. 93-112, section 504), and title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d). Enforcement action may be brought under any applicable Federal law. Title VI complaints must be processed in accordance with 7 CFR part 15. Where State agencies have

options, and they choose to implement a certain provision, they must implement it in such a way that it complies with the regulations at 7 CFR 272.6.

Regulatory Impact Analysis

Need for Action

We need to take this action with respect to the Program to implement provisions of Pub. L. 104-193 (PRWORA) and subsequent amendments, which would: (1) Remove specific requirements for State agency processing of food stamp applications; (2) revise requirements for determining the eligibility of aliens; (3) count as income certain State and local energy assistance; (4) allow State agencies to count all or part, or none of an alien's income in determining the benefits of the rest of the household; (5) allow State agencies to certify households consisting entirely of elderly or disabled members up to 24 months; (6) exclude the earnings of students under age 18; (7) make use of a homeless shelter deduction optional; (8) allow State agencies to mandate use of a standard utility allowance if they have at least one standard that includes heating and cooling costs and one that does not; (9) eliminate the exclusion for vendored transitional housing payments for homeless households; (10) allow use of standard amounts in determining self-employment expenses; (11) make optional the issuance of combined allotments to expedited service households that apply after the 15th of the month; (12) allow State agencies to issue partial allotments to households in treatment centers; (13) require proration of benefits following any break in certification; (14) allow State agencies to accept an oral withdrawal from the household for a fair hearing; (15) revise requirements for producing or displaying nutritional education materials; (16) eliminate mandated training standards; (17) eliminate the requirement for reviewing and reporting on office hours; (18) revise mail issuance requirements in rural areas; (19) prohibit Federal reimbursement for recruitment activities from being approved as part of a State agency's optional Outreach plan; (20) make optional rather than mandatory the use of the Income Eligibility and Verification System and the Systematic Alien Verification for Entitlements match programs; and (21) establish ground rules for implementing the Simplified Food Stamp Program (SFSP). In addition, we need to take this action to implement Departmental initiatives to revise the policy for counting the resource value of licensed vehicles, to provide an optional transitional benefit for TANF leavers, to provide an optional alternative reporting system of semi-annual reporting for households with earnings, and to make a change to exclude from income on-the-job training payments received under the Summer Youth Employment and Training Program as required by Section 702 of the Workforce Investment Act.

Legislative Provisions

Budget Impact

This rule implements provisions from two laws, PRWORA and AREERA. Using assumptions from the 2001 Budget Agency Mid-session estimate, we estimate the total Food Stamp Program budget impact of this rule in Fiscal Year (FY) 2000 to be −$617 million. We estimate the 5 year budget impact for FY 2000 through FY 2004 to be −$1.932 billion.

The legislative provisions have a budget impact in FY 2000 of −$622 million and a 5 year budget impact for FY 2000 through FY 2004 of −$3.002 billion.

The legislative savings primarily stem from the provisions of PRWORA that make many aliens ineligible to participate (section 402) and the provision that requires counting as income for food stamp purposes most State and local energy assistance (section 808). The Program realizes smaller savings from the following provisions of PRWORA: section 807, earnings of children; section 809, standard utility allowances; section 811, transitional housing payments; and section 827, proration of benefits at recertification. The SFSP authorized under section 854 may result in savings or increased Program costs with respect to individual households; however, the net impact of SFSP implementation must be cost neutral.

Provisions in the rule that have negligible budget impact are not discussed in this analysis.

Section 402—Alien Eligibility

Section 402 of the PRWORA significantly reduces the number of legal aliens who are eligible for food stamps. Effective August 22, 1996, for applicants and August 22, 1997, for current recipients, many aliens legally admitted for permanent residence who were previously eligible became ineligible. The exceptions are those admitted as refugees, asylees, Cubans, Haitians, Amerasians, and those who have had removal withheld who retain eligibility for the first 5 years (later changed to 7 years by AREERA) after admission; lawful permanent residents who have earned or been credited with at least 40 quarters of coverage as defined by the Social Security Administration; and those who are serving or have served in the U.S. armed forces and their spouses and children. Effective November 1, 1998, AREERA made certain Hmong, Highland Laotians, and American Indians born outside of the U.S. eligible for food stamps. It also made aliens who were lawfully living in the U.S. on August 22, 1996, eligible for food stamps if they are under 18, or are disabled, or were age 65 or older on August 22, 1996.

Those aliens who lost eligibility will contribute to smaller State agency caseloads. However, determining the eligibility of individuals will be more complicated. For certain categories of aliens, State agencies will have to determine when the individuals were admitted. For other categories, State agencies will have to obtain information regarding the applicant's work history. Thus, there may be no significant savings in caseworker time.

In FY 2000, without taking into account the cost of restoring benefits to selected aliens through AREERA, we estimate that the budget impact would have been −$440 million. The budget impact for the 5-year period FY 2000-FY 2004 is −$2.275 billion. We estimate that in 1998, approximately 838,000 participants lost eligibility with an average benefit loss of $23 a month and another 950,000 people remained eligible but lost an average of $31 a month. About 80,000 people living in households with ineligible aliens received a slightly larger per person benefit for those still eligible and participating in the Program, on average $12 per month. This is because of economies of scale in the allotment tables which are by household size,

i.e.,

a two-person household based on no income would receive a larger per person allotment than a three-person household based on no income. It is important to realize that all of these “gainers” lived in households where the total food stamp benefit available to the household declined.

Based on information from a simulation model using 1996 Food Stamp Quality Control data, together with information from the Immigration and Naturalization Service (INS) on immigration and naturalization patterns and the Survey of Income and Program Participation (SIPP) on the work histories of aliens, we estimate that 20 percent of permanent residents meet the 40-quarters work exemption. Using information from the Current Population Survey on the veteran status

of aliens, we estimate that less than 1 percent meet the veteran's exemption. Moreover, because applications for naturalization have increased dramatically over the last 2 years, we anticipate that naturalizations will increase through FY 2001, reducing somewhat the number of persons losing eligibility and benefits through that time period compared to FY 1998.

The enactment of AREERA on November 1, 1998 restored benefits to an estimated 175,000 legal immigrants when fully implemented in FY 2002, with a budget impact of $85 million in 2000 and $665 million for the five-year period 2000-2004. At the time of AREERA's passage, the estimate of immigrants that would receive restored benefits was higher (225,000), but changes in the economy have caused us to revise those estimates downward.

PRWORA does not address how or whether to count the income or resources of the aliens made ineligible by PRWORA for purposes of determining eligibility or allotment amounts for the rest of the household. Alternatives were considered including counting ineligible aliens' resources and all income; counting resources and a pro-rated share of income; not counting the ineligible aliens' income, but capping the resulting allotment for the eligible members at the allotment a similarly situated all citizen household would receive; or counting neither income nor resources. The alternative chosen under the proposed rule would be to allow the State agency to pick one State-wide option for determining the eligibility and benefit level of households with members who are aliens made ineligible under PRWORA. State agencies may either: (1) Count the resources and a pro-rated share of the ineligible aliens' income; or (2) count the resources, not count the ineligible aliens' income, but cap the resulting allotment for the eligible members at the allotment amount the household would receive were it not for the PRWORA eligibility restrictions.

Using a simulation based on the 2000 baseline version of the 1996 QC Minimodel, we estimate that the option of excluding the income of PRWORA-ineligible aliens increases costs by an estimated $2 million for FY 2001 and $23 million for FY 2000 through FY 2004. (This cost is included in the total for Departmental initiatives.) These estimates take into account current State practices and an expected shift of some States from the first option.

Section 807—Earnings of Children

This provision revises the current exclusion from income of the earnings of elementary or secondary school students under age 22 to exclude the earnings of these students only if they are under 18. Based on the 1996 Quality Control data, it is estimated that the benefits of approximately 2,700 students will be reduced an average of $62 per month. FY 2000 budget impact is estimated at −$2 million and a 5-year budget impact of −$12 million.

Section 808—Energy Assistance

This provision eliminates the exclusion from income of most State and local energy assistance payments. Federal, State, or local one-time payments for weatherization and replacement or repair of heating or cooling devices are excluded. All federal energy assistance payments are excluded, except those provided under Title IV-A of the Social Security Act. State agencies are required to count as income the portion of the public assistance grant previously excluded as energy assistance. Using 1996 food stamp QC data on the number of AFDC/FSP households in each State and 1996 Green Book data on the average AFDC disregard for state-provided energy assistance, we estimated that benefits for approximately 3.959 million participants will be reduced, with each person losing an average of $4.42 a month. This results in a budget impact of −$210 million for FY 2000 and a 5-year budget impact of −$1.05 billion.

Section 811—Transitional Housing Payments

This provision removes the statutory exclusion from consideration as household income any State PA or GA payments made to a third party on behalf of a household residing in transitional housing for the homeless. State agencies may continue to exclude PA housing payments from income if they are emergency or special payments over and above the regular grant or are provided for migrant or seasonal farmworker households while they are in the job stream. GA housing payments may be excluded if they are provided by a State or local housing authority, are emergency or special payments, or the assistance is provided under a program in a State in which no GA payments may be made directly to the household in the form of cash. State agencies will have to notify affected households that their benefits will be reduced.

Several States had been renting hotels to house PA households and the additional value of this “welfare hotel” benefit was being excluded from income in determining food stamp benefits. Based on estimates derived from data on AFDC and shelter payments made to the number of food stamp households estimated to be living in welfare hotels, approximately 76,000 recipients will lose benefits, for a budget impact of −$10 million in FY 2000 and a 5-year budget impact of −$50 million. The average benefit loss per person is about $11 a month.

Section 809—Standard Utility Allowances

This provision allows State agencies to mandate use of a standard utility allowance that includes heating or cooling costs, provided the State agency has another standard allowance that does not include heating or cooling costs and the mandatory standards will not increase Program costs. The PRWORA also provides that in a State that does not choose to make standards mandatory, households are allowed to switch between actual expenses and a standard only at recertification.

The rule provides requirements for a nonheating/cooling standard and would require State agencies to provide FNS with sufficient data to determine whether or not the State agency's proposed standards are cost-neutral. The rule also provides that elderly or disabled households certified for 24 months may switch at the 12-month point when the State agency is required to contact the household. The State agency would be required to allow households a choice between using actual expenses or a standard when they move and incur shelter expenses. The rule also would allow households in private rental housing to use a standard allowance that includes heating or cooling costs if they incur an expense for heating or cooling separately from their rent. Many of these households are currently entitled to the standard because they receive Low-Income Home Energy Assistance (LIHEAP) payments. Households in public rental housing that incur only the cost of excess usage are prohibited by the Food Stamp Act from receiving a heating or cooling standard.

The provision of the PRWORA allowing mandatory utility standards would increase State agency flexibility and reduce the time needed to calculate the shelter expenses of households which previously claimed actual costs. Savings result from two factors: (1) If a State mandates a standard, households with shelter costs higher than the SUA would no longer be allowed to claim actual costs; and (2) households will no longer be allowed to switch between the SUA and actual costs one additional time during each 12-month period.

Using a simulation model based on 1994 data from the Survey of Income

and Program Participation (SIPP), and adjusting for the fact that only five States (Delaware, Louisiana, Michigan, North Dakota, and Wyoming) with only seven percent of the caseload initially implemented this option, we estimate that the benefits of approximately 141,000 people were reduced in 1998 for an average loss of a little more than $5 a month, and 833 people lost eligibility for an average monthly loss of a little more than $11. We estimated the total budget impact for these States to be −$10 million.

We assume that more States will implement this provision, once they turn their attention from implementing TANF. We estimate that in 5 years, States that account for 28 percent of total benefit issuance will have opted for required use of the SUA. Under these assumptions, the total budget impact is −$20 million in FY 2000 and −$155 million over 5 years. By FY 2004, slightly over 3,000 people may lose eligibility.

Section 818—Treatment of the Income of Ineligible Aliens

This rule would implement the provision which allows State agencies to elect to count either all or part of an ineligible alien's income if the alien is in a category that was ineligible

prior

to PRWORA when calculating the eligibility and benefits of the other individuals in the household. These aliens are primarily aliens admitted under color of law, those without documentation to establish eligible status, and those temporarily residing in the country legally, such as diplomats and students. (Treatment of the income and resources of the classes of aliens made ineligible by PRWORA is different, and it is discussed above.)

In order not to give preferential treatment to households with ineligible aliens in classes that were ineligible prior to PRWORA over citizen households, the rule allows State agencies a further option to count all of the income for purposes of applying the gross income test, but use a prorated share to determine eligibility and level of benefits. For example, a household consisting of an undocumented alien and a citizen may have an income which would place the household over the maximum income limit if all of it is counted. However, if the undocumented alien is excluded from the household and only a prorated share of his or her income is counted, the remaining citizen member could be eligible. This option would allow the State agency to count all of the undocumented alien's income for purposes of determining if the household's gross income is below the gross income limit but only counting a prorated share for determining the household's allotment level. The State agency will need to consider if the number of cases affected will warrant two different income computations. Whatever option the States selects will have to be applied to all ineligible aliens in the same class.

Prior to the enactment of PRWORA, States were required to prorate only a share of the ineligible alien's income to the household. For example if a household consisted of one ineligible alien and two eligible participants, under prorating, two-thirds of the income of the ineligible alien would be counted as income available to the food stamp household. Under the 100 percent option, all of that ineligible alien's income would be counted.

Of the two States electing to count 100 percent of the income of ineligible aliens, only one State has continued this policy. The budget assumes only that one State will continue to opt for the 100 percent option. Deeming 100 percent of the income of an ineligible household member increases the countable income of food stamp households. Some households lose eligibility if deeming 100 percent of the ineligible aliens' income causes their countable income to exceed the thresholds. Other households remain eligible, but with a higher net income, qualify for smaller benefits.

Using a simulation based on 1996 Food Stamp Quality Control data adjusted to reflect rules in place in FY 1999, we estimate that under the provision allowing States to count 100 percent of the income of aliens ineligible prior to enactment of PRWORA, approximately 1,000 people remained eligible but lost an average of $95 a month in benefits and 1,000 recipients became ineligible losing $190 a month in benefits. We estimate the budget impact at −$5 million for FY 2000 and −$25 million for FY 2000 through FY 2004.

Section 827—Proration of Benefits at Recertification

This provision requires that provisions for prorating benefits at recertification revert to those in place before enactment of the Mickey Leland Childhood Hunger Relief Act of 1993. Except for migrant and seasonal farmworker households, State agencies must prorate benefits if there is any break in certification. The law affects State agencies to the extent that they have to reprogram computers and revise guidance to staff. Based on a 1989 GAO study on recertification, entitled

Participants Temporarily Terminated for Procedural Noncompliance,

we estimate that the benefits of approximately 1.23 million people will be reduced, for a budget impact of −$20 million in FY 2000 and −$100 million over 5 years. Those losing benefits lose an estimated average of less than $1.50 a month.

Departmental Initiatives

Budget Impact

The Departmental initiatives to revise the policy for counting the resource value of licensed vehicles, revise somewhat the treatment of some income, to provide an optional transitional benefit for TANF leavers, and to provide an optional alternative reporting system of semi-annual reporting for households with earnings produce a cost which slightly lowers the total savings from this rule. The cost of the Departmental initiatives is $5 million in FY 2000 and sums to $1.070 billion for the 5-year period FY 2000-FY2004.

Inaccessible Resources and Vehicles

The final rule allows some households with licensed vehicles of moderate value to participate in the program, if they are otherwise eligible and have little equity in the vehicle. The amendment to 7 CFR 273.8(e)(18) expands the list of inaccessible resources to include vehicles which if sold, would realize the seller a net proceed of no more than $1,500. Moreover, we are greatly simplifying the vehicle resource determination for households by eliminating the equity test for most vehicles. We will completely exclude vehicles used to produce income, used as a home, used to transport a disabled household member, used to carry fuel or water, or unlikely to produce a return exceeding $1,500. For each adult household member, we will exempt from the equity test one licensed vehicle not totally excluded and count that vehicle to the extent that the fair market value exceeds $4,650. For each household member under 18 years of age, we will exempt from the equity test one licensed vehicle not totally excluded which the minor drives to work, school or training, or to look for work. Any vehicles not exempted from the equity test are subject to resource evaluation at the higher of the excess fair market value or the equity value.

The proposed rule set the limit on inaccessible resources for most households at $1,000. With publication of the proposed rule, FNS granted waivers to States to implement that policy. As a result, the FY 2000 cost for

inaccessible resources, which reflects a $1,000 limit and the number of States which requested and received waiver authority, rounds to less than $5 million. Comments received on this provision urged FNS to increase the limit to $1,500, which FNS has accepted. This new policy will take effect in FY 2001 and, therefore, the FY 2001 through FY 2004 costs reflect a $1,500 limit.

State agencies are affected by this provision because it greatly simplifies the treatment of vehicles. It is expected to reduce payment errors based on incorrect application of the resource tests.

Expanding the definition of inaccessible resources costs $5 million in fiscal year 2000, $85 million in fiscal year 2001, $170 million in fiscal year 2002, $165 million in fiscal year 2003, $145 million in fiscal year 2004, with a five year total of $570 million. In fiscal year 2001, when the $1,500 limit goes into effect, 80,000 people gain, with an average monthly benefit of $88.78.

Also, eliminating the equity test for most, but not all, vehicles costs $0 million in fiscal year 2000, $30 million in fiscal year 2001, $55 million in fiscal year 2002, $40 million in fiscal year 2003, and $25 million in fiscal year 2004, with a five year total of $150 million. In fiscal year 2001, 27,000 people gain, with an average benefit of $92.65.

On October 28, 2000, the President signed the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriation Act of 2001 (Public Law 106-387). This law includes a provision to allow States to substitute their TANF vehicle rules for the food stamp vehicle rules, where doing so would result in a lower attribution of resources. The cost of the vehicle changes in this regulation, described above, capture the additional budgetary impact that these regulatory changes have in broadening food stamp eligibility after allowing for the expected impact of the new law.

Optional Transitional Benefits for TANF Leavers

Several advocacy groups put forth a suggestion for providing TANF leavers “transitional food stamp benefits,” much in the same way families receive transitional Medicaid after leaving TANF rolls. The new policy allows State agencies to freeze food stamp benefits of households leaving TANF rolls for up to 3 months, depending on the period of time since the household's last certification. Near the close of the transition period, the State agency would act on information collected from the household, either adjusting the benefit level, or closing the household's food stamp case because it is no longer eligible or it has failed to provide sufficient information to continue its eligibility for the Program. In some cases, the State agency would have to conduct a full recertification of eligibility if it is not possible to extend the household's certification period due to the statutory limitation on the length of certification periods. As the household would have no reporting requirement during the transitional period, the State agency would incur no QC liability for unreported changes in household circumstances during the period of time benefits are frozen.

While the Department encourages State agencies to offer the Transitional Benefits Alternative (TBA) to households leaving the TANF rolls, in order to ease the transition from PA, serve as an important transitional work support, and reinforce the fact that food stamps are not dependent upon eligibility for TANF, we did not offer this procedure in the NPRM. State agencies had no opportunity to comment, either to raise objections or to provide suggestions. For this reason, the final rule establishes TBA as a State agency option, not a mandatory provision of the regulations.

Families generally leave TANF when they go to work, exceed the income or asset limit (due to employment or other factors), fail to comply with the behavioral or procedural requirements of TANF, reach the Federally or State-defined time limit, lose technical eligibility, or leave voluntarily to “bank” their TANF months. For State agencies electing the TBA, the Department has structured the final rule to allow maximum flexibility in deciding which families leaving TANF would be eligible for TBA. The final rule requires such State agencies, at a minimum, to provide TBA to all families with earnings who leave TANF. If the household is losing income as a result of leaving TANF, the State agency must adjust the food stamp benefit amount

before

freezing the benefit amount. For example, such treatment might be appropriate when a TANF family leaves cash assistance because it has reached the time limit for such assistance and has gained no source of income which would replace the lost cash assistance. On the other hand, under the final rule State agencies may not provide TBA to households which are leaving TANF because: a household member has violated a TANF provision and the State is imposing a concomitant food stamp sanction in accordance with sections 819, 829, or 911 of PWRORA; a household member has violated a food stamp work requirement; a household member has committed an intentional Program violation; or the TANF case is closing because the State agency is taking action in response to information indicating the household failed to comply with Food Stamp reporting requirements,

e.g.,

the State agency discovered unreported income or assets through computer matching indicating noncompliance with Food Stamp reporting requirements.

Using data on TANF caseloads from the Department of Health and Human Services and data from TANF research by many sources, we derived estimates of the number of cases expected to leave TANF.

Using 1998 QC data, an average FSP benefit for TANF households was inflated to 2001 and beyond. In general, the transitional benefit policy provides two additional months of benefits to each case that leaves (the current system provides one month due to the processing requirements and the requirement to issue a notice of adverse action). We then multiply the monthly number of eligible leavers by the average benefit by 2 months of additional benefits by 12 monthly sets of leavers in a year to get the cost.

Further reductions to this cost were made to account for: (1) The likelihood that some of these cases would return to the TANF program within the transition period, thereby reducing the cost of transitional benefits because they no longer are eligible for them, (2) the fact that many households with TANF have 12 month certification periods, and (3) the fact that some households are not eligible for transitional food stamps, including households sanctioned off of TANF that receive a comparable Food Stamp sanction in accordance with sections 812, 829 and 911 of PRWORA. Current FSP law states that households may not receive benefits beyond 12 months without recertification, so those households in the 10th, 11th, or 12th month of their certification periods do not receive benefits for the entire transition period.

Finally, we apply a phase-in to account for State take-up rates. We begin with the cost if all States were to adopt the option, and then estimate that States will take up this option such that 5 percent of the cost is incurred in fiscal year 2001, 10 percent in fiscal year 2002, 15 percent in fiscal year 2003, and 25 percent in fiscal year 2004. Ultimately we expect that up to 60 percent of the benefits that could be issued via TBA will be issued by fiscal year 2007, based on assumptions regarding how many States will

implement this policy. We adopt these phase-in assumptions based on what has been learned thus far from the State response to the quarterly reporting option, and the fact that States will need to implement computer systems changes, which take time. As a result, we expect in fiscal year 2001 about 3,000 cases each month to leave TANF and receive two additional months of transitional food stamp benefits of about $226 per month (this is the weighted average for all types of cases) for a total cost of $15 million. By fiscal year 2004 the cost will rise to $73 million, affecting 14,000 cases per month, with a total cost for fiscal years 2001 to 2004 of $162 million.

Optional Semi-annual Reporting for Households with Earnings

Because the Department is aware that State agencies are reluctant to assign working households long certification periods because of potential vulnerability for quality control errors resulting from unreported changes, the Department is adopting in this final rule an optional reporting system for these households. Under this option, households with earned income assigned a six-month certification period may be required to report changes in income that result in their gross monthly income exceeding 130 percent of the poverty level a month, in lieu of the requirement to report changes in the amount of gross monthly income that exceed $25. These households would not be subject to the remaining reporting requirements in 7 CFR 273.12(a)(1). The State agency shall act on changes reported by the household that increase benefits in accordance with 7 CFR 273.12(c) and on changes in public assistance and general assistance grants and other sources that are considered verified upon receipt by the State agency. In order to adopt this option, State agencies must assign these households certification periods of 6 months or longer. State agencies may opt to waive every face-to-face interview in accordance with 7 CFR 273.2(e).

Using SIPP data covering one year, a simulation was run which counted all income changes (minus TANF changes, since it is assumed the State would know and act upon all of these changes) and how many times a household changed composition during the first six months of the year and all of the changes during the last six months of the year. All of the income increases were summed together and all of the income decreases were summed together and a net figure was calculated. This income figure was changed to a benefit figure by applying the average benefit reduction rate and by adjusting for the impact of household composition changes on benefit levels. Using the total benefits from QC data, the percent of monthly benefits not captured during the 6 month certification period was calculated.

To get the cost of this policy, this percentage was multiplied by the FY 2001 Mid-Session baseline benefits. Several adjustments were made to incorporate assumptions on reporting behavior and the policy requirements for when States must act on reported changes.

Finally, a State phase-in rate is applied. This rate is based on expectations of what States will select given all reporting options. We believe that the phase-in will be low in the first year (4 percent, for a FY 2001 cost of $3 million) as States decide which option to implement, but that it will increase rapidly and reach the maximum of 70 percent by 2005.

The cost in FY 2001 is $3 million and rises to $51 million in FY 2004, with a total cost from FY 2000 to FY 2004 of $105 million. When fully implemented it will affect nearly 1.5 million households per month.

Allow the Self-Employed to Deduct the Principal on Capital Expenditures

Current policy precludes allowing the cost of capital assets in determining self-employment income. We are revising this policy to allow capital costs in determining self-employment income. We believe that this change recognizes that capital costs are a legitimate expense in producing self-employment income and that the change will support the self-employed working poor.

We turned to Internal Revenue Service statistics to determine the potential size of the new deduction. We obtained information on the size of the depreciation deduction taken by all non-farm industries and the size of net income after all deductions for these industries. The depreciation deduction is 16 percent net income. Using this as a proxy for the size of the new food stamp deduction, we multiplied it times the average monthly self-employed income in the 1998 Characteristics of Food Stamp Households ($336). Next we adjusted it for the earned income deduction and the 30 percent benefit reduction. On average, food stamp benefits will increase by $13 per month. Multiplying by the expected number of households with self-employment income (about 100,000) produces an estimate of $15 million as the cost in each year. The sum from FY 2001 to FY 2004 is $60 million.

Plain Language

We have written this rule under the plain language guidelines to make it clearer and easier to read. We have edited wording that we preserved from the proposed rule to comply with those guidelines, using simpler words and phrases where appropriate, and changing sentences from passive to active voice. We did not change the meaning of any of the language brought from the proposed rule.

Part 272—Requirements for Participating State Agencies

Bilingual Requirements—Access to Households With Language Barriers—7 CFR 272.4 and 7 CFR 272.6

Legal aid organizations, advocacy groups, and State agencies commented on the current bilingual standards at 7 CFR 272.4(b). As prescribed by Section 11(e)(1)(B) of the Food Stamp Act (7. U.S.C. 2020(e)(1)(B)), the current rules require State agencies to use appropriate bilingual personnel and printed materials in areas in the State in which a substantial number of members of low-income households speak a language other than English. To determine if a substantial number of non-English speaking household resides in an area, the current rules specify the methodology for estimating the size of non-English speaking households and thresholds that trigger mandatory bilingual services. Bilingual services also must be provided during periods of seasonal influx, such as the influx of migrant or seasonal workers into project areas for a short period of time.

While most comments indicate general support for the current standards at 7 CFR 272.4(b), many commenters recommended additional regulatory controls to ensure State agencies are in compliance with Title VI of the Civil Rights Act of 1964, Section 11(c) of the Food Stamp Act (7 U.S.C. 2020 11(c)) and corresponding Food Stamp Program regulations at 7 CFR 272.6. Specifically, these commenters recommended that the regulations be amended to ensure non-English speaking households have access to the FSP by requiring State agencies to provide bilingual services to all non-English speaking households seeking food stamp assistance, regardless of the size of the low-income non-English speaking population in the service area or of how obscure the language may be.

Conversely, a State agency commenting on current bilingual standards asserts that PRWORA amendments under Section 835 provide State agencies with flexibility in establishing appropriate bilingual

standards and that the Department was remiss in not proposing amendments that would either remove or substantially reduce requirements at 7 CFR 272.4(b). The State agency further stated that revision of the current regulatory bilingual standards is required by the President's reform initiative to remove overly prescriptive, outdated and unnecessary regulations.

Even though Section 835 of PRWORA amends Section 11(e)(2) of the Food Stamp Act to provide State agencies with flexibility to determine certain processes that best serve eligible households within the State, it does not extend this flexibility to services required by law, such as bilingual services.

The Department appreciates the comments received on both sides of this issue. However, because of the strongly divergent views offered by commenters, the Department has decided to make no changes at this time to the current regulations. Although no regulatory changes will be made at this time, we would like to advise the public through this preamble of the August 11, 2000 Executive Order 13166 entitled,

Improving Access to Services For Person With Limited English Proficiency.

Executive Order 13166 directs Federal agencies to ensure that recipients of Federal financial assistance, such as the State agencies administering the Food Stamp Program, are providing persons with limited English proficiency (LEP) a meaningful opportunity to participate in Federal programs and activities. Providing a meaningful opportunity to LEP persons to participate in the Food Stamp Program ensures that State agencies are in compliance with Title VI of the Civil Rights Acts of 1964. State agencies failing to provide meaningful access would be in violation of Title VI of the Civil Rights Act, which prohibits discrimination on the basis of national origin.

The Department of Justice (DOJ) has issued guidance setting forth the standards that Federal agencies and the recipients of Federal funds must follow to ensure that LEP persons have meaningful access. Each Federal Agency, in consultation with the DOJ, must develop and implement guidance. USDA is working to develop guidelines in accordance with E.O. 13166 and the Department of Justice Guidance.

State Employee Training—7 CFR 272.4(d)

Section 836 of PRWORA deleted all Federal requirements for State employee training. To reflect this change in the law, the Department proposed to delete all the mandatory training requirements at 7 CFR 272.4(d). State agencies commenting on this section support the change. Some advocate and legal organizations requested that the Department withdraw the proposal and retain current standards to ensure that State agencies properly train employees, especially those making eligibility determinations, or rendering fair hearing decisions.

The final rule adopts the proposed rule at 7 CFR 272.4(d) as written. By eliminating training requirements, we are signaling our greater concern with the outcome of training, that is, high quality administration. However, we strongly encourage states to continue to provide quality training to their employees. Quality training strengthens Program administration and communicates a strong message to employees about the importance of a well run Food Stamp Program. Where program reviews indicate program problems caused by deficiencies in staff skills, we would expect State agencies to upgrade training efforts.

Hours of Operation—7 CFR 272.4(g)

Section 848 of PRWORA deleted previously designated Section 16(b) of the Food Stamp Act. That section required the Secretary of Agriculture to establish standards for the periodic review of food stamp office hours to ensure that employed individuals were adequately served by the FSP. It also required State agencies to submit regular reports specifying the administrative actions that the State planned to take to meet the standards prescribed in that section.

To implement Section 848 of PRWORA, the proposed rule specified that State agencies would be responsible for setting the hours of operation for their food stamp offices. However, in deciding the office hours to be offered, State agencies would be required to consider section 11(e)(2) of the Food Stamp Act, as amended by section 835 of PRWORA. The amendments made by section 835 of PRWORA require States to accommodate households with special needs, such as the elderly, working poor or households residing on Indian reservations. Finally, the proposed provision no longer required State agencies to assess or report on office hours.

In the preamble to the proposed rule, we requested suggestions for best serving or providing program access to eligible or potentially eligible working individuals. Commenters most often recommended expanded office hours. One State agency, the Ohio Department of Human Services, noted that State law requires each county department of human services to have hours of operation outside the county department's normal hours of operation. During these hours, the County department will accept applications from employed individuals for the programs administered by the County department and assist employed program applicants and participants with matters related to the programs. Another State agency stated that it improved its service accessibility by using the option of a quarterly reporting waiver for households with earnings. As of July 1999, FNS extended to all State agencies the option of requiring households with earnings to submit quarterly reports. Quarterly reporting is viewed as a method for simplifying reporting requirements and reducing contacts by working households to their local certification office.

We strongly support policies establishing office hours or other accommodations designed to facilitate working families and to ensure that working families have access to the FSP. Extended office hours are very successful in improving Program access and enhancing a household's ability to succeed in work because it allows working households to schedule appointments and complete the application process without missing work. Also, State agencies that establish alternate or extended hours may benefit by receiving bonus awards from the Department of Health and Humans Services (HHS). Under HHS final rules (65 FR 52814, August 30, 2000) entitled,

Bonus to Reward States for High Performance Under the TANF Program,

a portion of the TANF bonus funding to States will be based on their performances in providing food stamps to low-income working families.

Accordingly, the Department is adopting in this final rule the proposal at § 272.4(f) that requires State agencies to consider the special accommodation needs of populations they serve, including households containing a working person. Our regulatory focus is on the desired outcome rather than the means of achieving it. Recent data indicate the FSP is vital in helping families move to self-sufficiency and that participation in the FSP is crucial in ensuring that people working for low wages have the help they need.

Nutrition Education Materials—7 CFR 272.5(b)

Section 835 of PRWORA deleted section 11(e)(14) of the Food Stamp Act (7 U.S.C. 2020(e)(14)). This section of the Act, and corresponding regulations at 7 CFR 272.5(b), required FNS to supply State agencies with posters and

pamphlets containing information about nutrition and the relationship between diet and health. State agencies were required to display these posters and to make these pamphlets available at all food stamp and public assistance offices.

FNS proposed to implement the PRWORA amendment by removing the requirement that State agencies display USDA materials. As noted in the preamble to the proposed rule, the deletion of this language does not lessen FNS' commitment to nutrition education. The new paragraph shows FNS' commitment by encouraging State agencies to develop optional State Food Stamp Nutrition Education Plans as permitted under 7 CFR 272.2(d)(2) to educate households about the importance of a nutritious diet and the relationship between diet and health. As of FY 2000, 48 State agencies have approved nutrition education plans which call for the expenditure of about $200 million for nutrition education in the FSP, of which 50 percent is financed by Federal funds. Thus, the vast majority of State agencies actively support, promote and provide nutrition education to FSP clients.

Comments received from State agencies and organizations representing States were supportive of the nutrition education proposals at § 272.5. However, one commenter requested that FNS withdraw the proposal and another objected to FNS encouraging States to implement nutrition education plans. Another commenter noted that State agencies have committed millions of dollars in non-federal funds to food stamp program nutrition education.

The final rule adopts the proposed rule at 7 CFR 272.5(b), as written. It is a State option to implement and operate a nutrition education plan. FNS provides State agencies with comprehensive guidance and with broad flexibility in determining how it will provide nutrition education to food stamp recipients. This guidance is updated annually and reinforces FNS' commitment to nutrition education by stressing the relationship of Program regulations and Federal reimbursement of costs for State nutrition education activities that are necessary and reasonable to benefit Program applicants and participants. Finally, the FSP reimburses State agencies with approved Nutrition Education plans for 50 percent of their total allowable costs.

Optional Use of the Income and Eligibility Verification System (IEVS) and the Systematic Alien Verification for Entitlements (SAVE) Program—7 CFR 272.8, 272.11 and 273.2

Section 840 of PRWORA amended Section 11(e)(18) of the Food Stamp Act (7 U.S.C. 2020(e)) to make IEVS and SAVE State options. Thus, the proposed rule removed the requirement that State agencies operate either an IEVS or a SAVE system. For State agencies electing to use IEVS and SAVE, the proposed rule only required that the State agencies observe the requirements of the data exchange agreements with agencies from which data will be obtained or exchanged. The preamble in the proposed rule noted that quality control (QC) reviews would continue to use data obtained from IEVS and SAVE as a case analysis tool.

Numerous State agencies commented on this proposal and are supportive of the option use IEVS and SAVE requirements and of the proposed elimination of IEVS and SAVE requirements. State agencies which use IEVS and SAVE will continue to conduct data exchange agreements with Federal sources. The data exchange agreements, however, will no longer be required as part of the State's Plan of Operation. A number of State agencies objected to the continued use of IEVS and SAVE as part of QC reviews. Two State agencies commented that by using IEVS and SAVE as part of QC, State agencies in effect were not being given the option to use IEVS and SAVE and would need to continue with the matches.

Current rules at 7 CFR 275.12 identify the procedures State agencies and FNS must follow when reviewing active cases included in the QC active sample. Under 7 CFR 273.12(c), a State agency must conduct a full field review for all selected active cases and this investigation must include a review of any information pertinent to a particular case which is available through IEVS. This requirement is consistent with QC review procedures that mandate the verification of all elements affecting the households eligibility and benefit level in the sample month under review.

The Department decided to retain the current rules at 7 CFR 275.12 without change because available data indicate that IEVS data are generally useful means of improving payment accuracy. Their use by QC only reinforces long-standing policy that State adopt methods of administration that secure payment accuracy.

Under Section 840 of PRWORA, State agencies may, but are not required to, use IEVS and/or SAVE as part of their responsibility in determining eligibility and benefit levels for participating households. Those State agencies electing to use either IEVS and/or SAVE are provided flexibility in determining how best the IEVS and/or SAVE data should be used. The use of IEVS as an analysis tool does not diminish a State agency's option to use IEVS or SAVE outside of the QC process.

Accordingly, the Department is adopting the proposed amendments at 7 CFR 272.8, 7 CFR 272.11 and 7 CFR 273.2 in the final rule without change.

Part 273—Certification of Eligible Households

Application Processing—7 CFR 273.2

As explained in the Notice of Proposed Rulemaking (NPRM), section 835 of PRWORA amended sections 11(e)(2) and (e)(3) of the Act, 7 U.S.C. 2020(e)(2) and (e)(3) which govern the food stamp application and certification process. Section 11(e) now provides more flexibility for State agencies to tailor day-to-day operations of the Program to the needs of individual States while ensuring that households continue to receive timely, accurate and fair service. More specifically, section 835 removed the requirement that the Secretary design a uniform national food stamp application form and eliminated dictates concerning what information had to be included on the application form and in what particular location on the form. Section 11(e) of the Act now provides that State agencies must develop their own food stamp application form and establish their own operating procedures for local food stamp offices. States may now use electronic storage of applications and other information, including the use of electronic signatures. States must provide a method of certifying and issuing benefits to eligible homeless individuals.

While the language of amended Section 11(e) encourages personal responsibility and provides more State agency flexibility, it retains key specific provisions to protect a client's right to timely, accurate, and fair service. The Act continues to: (1) Require that applications be processed within 30 days; (2) permit households to apply for participation on the same day they first contact the food stamp office during office hours; (3) consider an application as “filed” on the date the applicant submits the application with the applicant's name, address, and signature (benefits are calculated based on the filing date of an application); (4) require that an adult representative certify the

truth of the information on the application, including citizenship or alien status of each member, and that such signature is sufficient to comply with any provision of Federal law requiring applicant signatures; and (5) require that the State agency provide each household, at the time of application, a clear written statement explaining what acts the household must perform to cooperate in obtaining verification and otherwise complete the application process.

In the NPRM, we proposed to amend 7 CFR 273.2, “Application processing,” to incorporate the new requirements of Section 11(e) of the Act, as amended by various sections of PRWORA. In addition, we proposed a major streamlining of the current regulations as part of a larger effort to reduce the volume of Federal regulation.

In the NPRM, we sought to achieve a new balance in the regulations between maintaining customer protections in the application process and providing States greater flexibility in administering the program. We received a large volume of comments on our proposed changes. Commenters representing State agencies generally supported the changes, but often requested additional streamlining which would provide even greater flexibility to States in operating the program. Commenters representing the advocacy community, however, strongly objected to many of the proposed changes on the grounds that we were removing important safeguards for applicants. These commenters requested that existing rules be restored and also sought the adoption of new provisions that would strengthen customer rights.

The significant disagreement among commenters over the discretionary provisions of the NPRM have caused us to reconsider the merit of many of the proposed changes. While existing regulations are highly detailed, they do provide a national standard of customer service that promotes the basic statutory purpose of providing timely, accurate and fair service to applicants for, and participants in, the Food Stamp Program. In addition, given the sharp decline in program participation among eligibles since the passage of PRWORA and acknowledged problems with program access in several areas, we must question the desirability at this time of removing many of the protections provided applicants and participants under current regulations. Given these considerations, we have decided not to finalize the discretionary provisions proposed in the NPRM. At this time, we are finalizing only those changes to current regulations necessitated by PRWORA. For the other sections of 7 CFR 273.2, we will be retaining current rules.

Title of Part 273.2

In the NPRM, we proposed to change the title of 7 CFR 273.2 from “Application processing” to “Office operations and application processing.” We received no comments on the proposal and are adopting it as final.

General Purpose—7 CFR 273.2(a)

In the NPRM, we proposed to replace current paragraph (a), entitled “General purpose,” with a new paragraph (a), “Office operations.” The new paragraph would incorporate into the regulations the new standards for operating food stamp offices contained in Section 11(e)(2)(a) of the Act, as amended by Section 835 of PRWORA. Specifically, new paragraph (a) would require the following: (1) That State agencies establish their own procedures governing office operations that the State agency determines best serve households in the State, including households with special needs; (2) that State agencies provide timely, accurate, and fair service as required by Section 835 of PRWORA; (3) that State agencies not impose a processing requirement for another assistance program as a condition of food stamp eligibility; and (4) that State agencies have a procedure in place for informing persons who wish to apply for food stamps about the application process and their rights and responsibilities.

The comments received on this proposal were all supportive of the proposed amendment. One commenter did fear that the prohibition on imposing processing requirements for other assistance programs as a condition of food stamp eligibility might prohibit States from utilizing household information obtained under the requirements of another program which may affect the household's food stamp eligibility. This is not correct. The State may consider household information obtained when a household applies for another public assistance program when determining a household's eligibility for food stamps. The State, however, may not require a household that is applying only for food stamps to answer questions on a joint application or submit any information that is not needed to complete a food stamp eligibility determination.

The change to 7 CFR 273.2(a) is necessary to reflect the new standards for operating food stamp offices contained in section 835 of PRWORA, so we are adopting the change as final. However, in the NPRM we had proposed to move many of the sentences in current paragraph (a) to other sections under 7 CFR 273.2. Since we are not finalizing many of the changes to the other parts of 7 CFR 273.2 proposed in the NPRM, we are restoring current paragraph (a) in the regulations. That paragraph will be renumbered (a)(2), and entitled “Application processing.”

Food Stamp Application—7 CFR 273.2(b)

Current paragraph (b) lists the requirements for the food stamp application form, including the mandatory content for each form and the requirement that deviations from the national application form be approved by FNS. In the NPRM, we proposed to amend paragraph (b) to reflect new requirements related to the food stamp application form in Sections 11(e) of the Act, as revised by section 835 of PRWORA. Section 835 amended section 11(e) of the Act to remove the list of mandatory application content requirements. It also amended Section 11(e)(2) to require that State agencies design their own application forms, and to provide that the application form may include the electronic storage of information and the use of electronic signatures.

Specifically, we proposed to amend 7 CFR 273.2(b) to require that State agencies design their own application forms, provide that the application form may include the electronic storage of information and the use of electronic signatures, and remove the requirement in current paragraph (b)(3) regarding the need for prior FNS approval of State-designed applications which deviate from the Federally designed application. We also proposed to add a new paragraph 7 CFR 273.2(b)(2) entitled “Application contents,” which would, among other things, replace the list of mandatory application content requirements with a general requirement that the application must contain all necessary information to comply with the Act and regulations. Finally, we proposed to add a new paragraph 7 CFR 273.2(b)(3) entitled “Jointly processed cases,” which would set forth requirements for the processing of joint applications used by States to determine an applicant's eligibility for other assistance programs in addition to the Food Stamp Program.

A number of commenters objected to the proposed changes to 7 CFR 273.2(b). Specifically, many opposed our decision to remove the existing mandatory application contents requirements relating to the right of a household to file an incomplete

application for food stamps. Under current regulations at 7 CFR 273.2(b)(1)(iv) through (vii), each application form must contain: (1) A place on the front page of the form where the applicant can write his/her name, address, and signature; (2) notification on or near the front page of the application of the household's right to immediately file the application as long as it contains his or her name, address and signature; (3) a description on or near the front page of expedited service requirements; and (4) notification on or near the front page of the application that benefits are provided from the date of application. Commenters felt that without these notifications, households may be unaware of their right under Section 11(e)(2)(B)(iv) of the Act to file an incomplete application, and would likely postpone applying for food stamps until they have time to complete the entire application form.

We agree with the commenters that much of the information currently required in 7 CFR 273.2(b) should be retained in the regulations. This information, though no longer specified in the Act, is necessary to meet the standard set by PRWORA for providing timely, accurate, and fair service to applicants for, and participants in, the Food Stamp Program. Therefore, we are withdrawing most of our proposals to amend 7 CFR 273.2(b) and will retain current regulations. However, we are making some changes to the existing rules at 7 CFR 273.2(b)(1). In response to comments, we are adding language to 7 CFR 273.2(b)(1)(iii) to make it clear that the applicant is certifying to the citizenship or eligible alien status of only those household members applying for benefits. We are adding a sentence to 273.2(b)(v) that regardless of the type of system a State agency uses (paper or electronic) it must provide a means for the applicant to immediately begin the application process with name, address and signature.

We are adding a new paragraph 273.2(b)(1)(viii) to incorporate the latest nondiscrimination statement appropriate for the Program. USDA Departmental Regulation (DR) 4300-3, Public Notification Policy, dated November 16, 1999, establishes the policy for ensuring positive and continued notification of the USDA equal opportunity policy to the public. DR 4300-3 provides for three nondiscrimination statements. These statements govern: (1) Federally-conducted programs; (2) Food Stamp Program recipient agencies; and (3) Special Nutrition Programs and other recipient agencies. Interested readers may visit the FNS web site (www.fns.usda.gov) and click on “Civil Rights” to learn more about FNS' nondiscrimination policy.

Finally, in new paragraph 273.2(b)(1)(ix), we are incorporating language from paragraph 273.2(b)(3) which requires that multi-program application forms clearly afford applicants the option of answering only those questions relevant to the program or programs for which they are applying. We are revising current paragraph (b)(3) in its entirety to incorporate changes necessitated by PRWORA. That paragraph, which requires States to seek prior FNS approval for State-designed applications which deviate from the Federally designed application, is no longer necessary because Section 835 of PRWORA eliminated the requirement that State agencies use a Federally-designed application. However, we are incorporating the language that was proposed at (b)(3) to address comments regarding improving access to the Program.

Several commenters expressed concern that the current practice of asking all household members for information regarding their citizenship, immigration status, and possession of social security numbers was a significant barrier to participation for certain eligible low-income individuals. U.S. citizen and eligible alien members of households containing undocumented aliens or legal aliens whose immigration status does not permit them to work may feel apprehensive about providing the State agency with sensitive information about the lack of documentation or social security numbers of certain household members. On September 21, 2000, this Department and the DHHS issued a letter to all State health and welfare officials, subject: “Policy Guidance Regarding Inquiries into Citizenship, Immigration Status and Social Security Numbers in State Applications for Medicaid, State Children's Health Insurance Program (SCHIP), Temporary Assistance for Needy Families (TANF), and Food Stamp Benefits” (the “Tri-Agency Letter”). Readers may visit the FNS web site (www.fns.usda.gov) and click on “Food and Nutrition Service”, then “Food Stamps,” and then “Joint Guidance on Citizenship, Immigration & SSNs.” The Tri-Agency Letter addressed the concerns of the immigrant community by providing an option to State agencies to structure application forms so that households are allowed to declare certain household members to be “non-applicants,” if they did not wish to answer questions about citizenship, immigration status, or the possession of a social security number. Any household member so designated would be determined to be an ineligible household member under § 273.11(c) and would not receive Program benefits. Further, such ineligible household members must otherwise cooperate fully by disclosing their income, resources, and any other information the State agency needs to determine the eligibility and benefit amount of the other household members.

If a state decides

not

to permit individual family or household members to decline to provide citizenship, immigration status or SSN information early in the application process, the state must still ensure that their applications forms promote enrollment of eligible families and eliminate the potential for discriminatory impact on eligible applicants based on national origin. Furthermore, even in those states that elect not to offer applicants early opportunity to decline to reveal citizenship, immigration status, or SSN information, long-standing policy directs that when a household member does not disclose his or her citizenship, provide or apply for an SSN, or establish satisfactory immigration status, the State agency must determine that household member ineligible for benefits, but cannot deny benefits to eligible citizen or immigrant household members simply because other household members fail to disclose such information.

Some commenters suggested that the final rule should require State agencies to make early declaration of “non-applicant” status available for individuals who know they do not have documents to prove their immigration status, or cannot possess social security numbers. In this regard, the Department is still very concerned that current State agency application forms and processes inadvertently may have the effect of deterring eligible applicants and recipients who live in immigrant households from enjoying equal participation and access to Program benefits based on their national origin, in violation of section 11(c) of the Food Stamp Act and Title VI of the Civil Rights Act of 1964. However, as the NPRM did not address this issue at all, we will not proceed further without consultation with all partners and stakeholders through a future rulemaking. In the meantime, the Department encourages State agencies to adopt the option allowing them to adjust their application forms and processes to accommodate households containing some members who know

they do not have documents to prove their immigration status or who might have difficulty in applying for a social security number.

7 CFR 273.2(c)—Filing an Application

In the NPRM, we proposed to amend paragraph 7 CFR 273.2(c), “Filing an application.” We proposed to add a new paragraph 7 CFR 273.2(c)(1) entitled “Filing process.” The new paragraph would: (1) Retain the requirement appearing in the first sentence of current paragraph (c)(1) regarding the manner in which applications can be submitted; (2) include new language that clarifies that the application may be submitted by facsimile transmission as well as in person, through an authorized representative, or by mail; (3) include new language that recognizes that some State agencies are using on-line or other types of automated applications that may require the applicant to come into the local office to complete the application; (4) include the requirement appearing in the fifth sentence of current paragraph (c)(1) that allows an applicant to file an incomplete application provided it contains at the least the applicant's name, address, and signature; (5) remove the language appearing in the sixth sentence of current paragraph (c)(1) which requires State agencies to document the date the application was filed by recording on the application the date it was received by the food stamp office; and (6) provide that applications signed through the use of electronic signature techniques and applications containing handwritten signatures which are then transmitted to the appropriate office via fax or other electronic transmission technique are acceptable.

We proposed to add a new paragraph 7 CFR 273.2(c)(2) entitled “Households right to file.” The new paragraph would require the State agency to: (1) Make food stamp applications readily accessible to all potentially eligible households or to anyone who requests one; (2) provide an application in person or by mail to anyone who requests one; (3) mail an application by the next business day to anyone who requests an application by mail; (4) allow a household to file an application on the same day it contacts the food stamp office during office hours; (5) post signs or make available other advisory materials explaining a person's right to file an application on the day of their first contact with the food stamp office and the application processing procedures; (6) notify all persons who contact a food stamp office and either request food assistance or express financial and other circumstances which indicate a probable need for food assistance, of their right to file an application and encourage them to do so.

New paragraph (c)(2) would also address the handling of applications filed at the wrong certification office. The new paragraph would: (1) Continue to allow the State agency to require households to file an application at a specific certification office or allow them to file an application at any certification office within the State or project area; (2) require that if an application is received at an incorrect office, the State agency advise the household of the address and telephone number of the correct office; (3) require the State agency to forward an application received at an incorrect office to the correct office not later than the next business day; and (4) remove the requirement currently located in the third sentence of 7 CFR 273.2(c)(2)(ii) that the State agency inform the household that its application will not be considered filed and the processing standards must not begin until the application is received by the appropriate office.

We proposed to add a new paragraph 7 CFR 273.2(c)(4) entitled “Notice of required verification.” The new paragraph would require that State agencies: (1) Provide households, at the time of application for certification and recertification, with a clear written statement of what acts the household must perform in cooperating with the application process, and identify potential sources of required verification; and (2) inform special needs households of the State agency's responsibility to assist them in obtaining required verification, providing the household is cooperating with the State agency. Special needs households were defined as including, but not limited to, households with elderly or disabled members, households in rural areas with low-income members, homeless individuals, households residing on reservations, and households in areas in which a substantial number of members of low-income households speak a language other than English.

Finally, we proposed to remove current paragraph (c)(5), and to redesignate current paragraph 273.2(c)(6) “Withdrawing an application,” as new paragraph (c)(3).

Numerous commenters objected to some of the proposed changes to 7 CFR 273.2(c) on the grounds that we were removing important safeguards for applicants. For example, one commenter opposed the revision to 7 CFR 273.2(c)(1) which deleted the requirement that States encourage a household to file an application on the same day the household first contacts the food stamp office for assistance. The commenter thought that the language to encourage same day filing should be retained and expanded to prohibit State agencies from suggesting any disadvantages there might be to applying for food stamps and require them to explain that possible disadvantages of applying for other programs do not relate to the Food Stamp Program.

Many commenters also objected to our proposal to repeal the current requirement that the food stamp office document the date an application is filed by recording on the application the date it is received. The commenter thought that, rather than delete the requirement, the Department could make it more flexible to account for the different ways that States may have for recording application filing dates, such as through automated systems.

Many commenters also objected to the proposal to provide States with an extra day for mailing an application to a household that requests one over the telephone and for mailing applications to the correct office when filed at the incorrect office. The commenters noted that the proposed changes will likely result in affected households losing one-thirtieth of their benefits for the month of application. The commenter recommended that the proposed regulations be amended to offer States the option of forwarding a misfiled application by mail the day it is received or by fax the next day. The commenter also recommended that the final rules provide an exception to the current requirement for mailing an application the day it is requested by phone to allow for when the request is made after the last mail collection of the day.

Some commenters believed that the proposed provision did not go far enough in providing flexibility for State agencies, and recommended further simplification to the regulations. One commenter remarked that the proposed regulations at 7 CFR 273.2(c)(2), (c)(3), and (c)(4) appeared to be more prescriptive than required by the Food Stamp Act and Section 835 of PRWORA and should be redrafted in the final rule to allow States the flexibility prescribed by the Act to establish their own procedures in the operation of local offices.

Giving the considerable disagreement on the proposed provisions among commenters, and our commitment to retaining provisions in the regulations that meet the goal of PRWORA to

provide timely, accurate, and fair service to applicants for, and participants in, the Food Stamp Program, we have decided to withdraw the proposed changes to 7 CFR 273.2(c). We may consider revising these regulations in a future proposed rulemaking. At this time, we are implementing only those changes to the existing regulations at 7 CFR 273.2(c) that are necessitated by PRWORA.

Current regulations at 7 CFR 273.2(c)(1) require that households must file food stamp applications by submitting the forms to the food stamp office either in person, through an authorized representative, or by mail. No provision is made for the electronic submission of applications. As noted above, however, Section 11(e)(2)(C) of the Act, as amended by Section 835 of PRWORA, now allows for the use of signatures provided and maintained electronically, for the storage of records using automated retrieval systems only, and for any other feature of a State agency's application that does not rely exclusively on the collection and retention of paper applications or other records. In accordance with the revised provisions of Section 11(e)(2)(C) of the Act, we had proposed in the NPRM to revise section 7 CFR 273.2(c)(1) to specifically provide that applications signed through the use of electronic signature techniques and applications containing handwritten signatures which are then transmitted to the appropriate office via fax or other electronic transmission technique are acceptable means of filing a food stamp application.

We received several comments in support of the change, and are finalizing the provision at 7 CFR 273.2(c)(1). One commenter thought that the household should be given a paper printout of whatever information is recorded electronically in order to be able to review it and correct errors before the certification process has gone too far. We agree with the commenter that the household should be able to verify the information that has been recorded. However, we believe how that should be done should be left up to the State agency and we are amending the final rule accordingly.

We are making three additional changes to the current regulations in response to comments. The current regulations at 7 CFR 273.(2)(c)(1)(i) provide that the State agency must encourage households to file an application on the same day the household or its representative contacts the food stamp office in person or by telephone and expresses interest in receiving food stamps. One commenter pointed out that some applicants for assistance may not be aware of the Food Stamp Program, or aware that they might be eligible, so they don't express interest in the specific Program, even though they express concerns about food security. Therefore, in response to comments and to increase access to the Program, we are adding that the State agency must encourage a household to file an application for the Program if it expresses concerns about food insecurity.

Current regulations at 7 CFR 273.2(c)(2)(ii) provide that the certification office shall offer to forward the household's application to the appropriate office that same day if the household has completed enough information on the application to file. One commenter suggested that State agencies may not be able to forward the application on the same day. In order to give the State agencies some flexibility, while at the same time protecting the interests of the applicant, this commenter suggested we allow the State agency to forward it the next day, providing that the State agency ensures it arrives in the appropriate office the day it was forwarded. In other words, it can send it electronically, via fax, or courier, as long as it arrives the day it was forwarded. We agree that this will afford the State agency flexibility and protect the applicant. Therefore, we are modifying 7 CFR 273.2(c)(2)(ii) to provide that the State agency may forward the application the next day by any means that ensure the application arrives at the appropriate office the day it was forwarded.

One commenter expressed concern that in an attempt to divert households from public assistance, the State agency might inadvertently divert a household from applying for food stamps. This commenter suggested that in order to protect applicants rights, we amend 7 CFR 273.2(c)(2)(i) and remind State agencies not to discourage households from applying for food stamps. In response to these comments and in an attempt to increase Program access, and in conformance with changes we are making at 7 CFR 273.2(j) which are discussed later in this preamble, we are providing at 7 CFR 273.2(c)(2)(i) that if the State agency attempts to discourage households from applying for cash assistance, it shall make clear that the disadvantages and requirements of applying for cash assistance do not apply to food stamps. In addition, it shall encourage applicants to continue with their application for food stamps. The State agency shall inform households that receiving food stamps will have no bearing on any other program's time limits that may apply to the household.

Finally, current regulations at 7 CFR 273.2(c)(3) require that State agencies make application forms readily accessible to potentially eligible households and provide an application form to anyone who requests one. One commenter pointed out that many State agencies now use paperless or interactive electronic systems and no longer keep paper applications in stock. Therefore, to accommodate the various types of systems in use by State agencies, and to ensure that applicants receive timely, accurate and fair service, we are modifying the language at 7 CFR 273.2(c)(3) to provide that regardless of the type of system a State agency uses (paper or electronic), the State agency must provide a means for applicants to begin the application process immediately by providing a name, address and signature.

Household Cooperation—7 CFR 273.2(d)

In the NPRM, we proposed to amend current regulations at 7 CFR 273.2(d), which contain provisions related to household cooperation in the application process and quality control reviews. We proposed to retain all of the contents of current paragraph (d)(2), and amend paragraph (d)(1) as follows: (1) Rename the paragraph “Cooperation with application process”; (2) remove the example of “refusal to cooperate” appearing in current paragraph (d)(1); (3) expand on the policy regarding household cooperation with subsequent reviews to provide that a subsequent review can be in the form of an in-office interview; and (4) remove the last two sentences of current paragraph (d)(1), which concern the failure of a person outside of the household to cooperate with a request for verification.

One commenter strongly opposed our amendments to 7 CFR 273.2(d)(1). The commenter believed that in revising the paragraph, we had omitted words and phrases that were critical to preserving the rights of food stamp participants and which may leave the requirements of the paragraph open to misinterpretation. For example, existing regulations require that for a food stamp office to deny a household's application for refusal to cooperate, the household must be able to cooperate but clearly demonstrate that it will not take actions

it can take

that are required to complete the application process. In the proposed rule, we had removed the words “it can take” from the sentence, believing them to be unnecessary. The commenter believed, however, that removal of the words

it can take

would leave the

sentence open to new interpretations, including the possibility that a household could be denied food stamps based on its failure to produce a document that has been destroyed or its failure to obtain a note from its estranged landlord.

The commenter also objected to our proposal to remove the example of “refusal to cooperate” appearing in current paragraph (d)(1). The example, which is meant to illustrate the difference between a household being unable to cooperate and refusing to cooperate in completing the application process, states that to be denied for refusal to cooperate, a household must refuse to be interviewed and not merely fail to appear for the interview. We proposed removing the example because there are numerous ways that a household could refuse to cooperate, and the example is not definitive. The commenter believed, however, that the example illustrates an important principle—protecting applicants that make good faith efforts to cooperate—which does not exist in many TANF programs, and which, without a concrete example, may not be applied properly by eligibility workers whose primary training has been in AFDC and TANF.

The commenter also objected to our proposal to remove the last two sentences of current paragraph (d)(1), which concern the failure of a person outside of the household to cooperate with a request for verification. The first of these sentences provides that the State agency may not determine a household to be ineligible when a person outside of the household fails to cooperate with a request for verification. Section 835 of PRWORA amended section 11(e)(3) of the Act to remove this requirement. The last sentence of current paragraph (d)(1) describes certain individuals who are not considered “outside” the household for the purpose of the existing provision and, because of the change brought about by Section 835 of PRWORA, is no longer necessary. We noted in the proposed rule that removal of these two sentences does not change current policy because refusal to cooperate continues to be defined as refusal by a household member. The commenter argued, however, that without a clear statement in the regulations that a household may not be determined ineligible because of the failure of a person outside the household to cooperate with a request for verification, eligibility workers are likely to fail to apply the principle and incorrectly deny applications.

We agree with the commenter that clarity in the regulations is critical to ensuring that all food stamp applicants and participants receive timely, accurate and fair service. Therefore, we are withdrawing our proposal to amend paragraph 7 CFR 273.2(d)(1) and we are retaining the existing language of the paragraph with one modification. We are reminding State agencies that they must also assist households in obtaining the required verification if the household is cooperating with the State agency as provided for by paragraph 7 CFR 273.2(c)(5).

Interviews—7 CFR 273.2(e)

In the NPRM, we proposed to amend current regulations at 7 CFR 273.2(e), which address interview procedures. Chief among the changes was a proposal to eliminate the requirement that every household have a face-to-face interview at all recertifications. As discussed in the NPRM, prior to PRWORA, the Act did not contain an explicit provision requiring food stamp applicants to be interviewed. Rather, the requirement is inferred. Section 11(e)(2) did provide language which allowed elderly/disabled households to request a waiver of the in-office interview under certain conditions. Section 835 of PRWORA amended section 11(e)(2) of the Act to remove this waiver language, thereby eliminating any reference in the Act to the fact that in-office interviews are conducted. In consideration of the removal of the waiver language and in the spirit of PRWORA, the Department chose to reevaluate current policy and proposed in the NPRM to replace the current interview requirement with the requirement that a face-to-face interview be required at the time of initial certification and at least once every 12 months thereafter unless the household is certified for longer than 12 months or the face-to-face interview is waived by the State agency. This proposal would eliminate the requirement to conduct a face-to-face interview at the time of recertification if it occurs during the 12-month period since the last face-to-face interview.

In addition, we proposed to amend current rules at 7 CFR 273.2(e)(2) which address waivers of the interview requirement. Prior to enactment of PRWORA, the interview could

only

be waived if requested by the household because the household was unable to appoint an authorized representative and had no adult household members able to come to the office because the members were elderly, mentally or physically handicapped, lived in a location not served by a certification office, had transportation difficulties, or had similar hardships as determined by the State agency. Section 835 of PRWORA struck this waiver provision from the Act and amended Section 11(e)(2) of the Act to provide State agencies the authority to waive an interview without first being requested by a household. In the NPRM, we proposed to amend 7 CFR 273.2(e) to require the State agency to waive the in-office face-to-face interview in favor of a telephone interview or announced home visit for household hardship cases. The proposal allowed the State agency to determine what constitutes hardship cases. It also allowed the State agency to waive the in-office interview in favor of a telephone interview or scheduled home visit for households with no earned income if all of its members are elderly or disabled. Under the proposal, the State agency would continue to be required to grant a face-to-face interview to any household that requests one.

Most commenters were supportive of our proposals to revise the face-to-face interview requirements, which were felt to be burdensome on both participants and State agencies. Because of that support and because the changes stem from amendments to the Act made by PRWORA, we are adopting the proposals as final in this rule.

In addition to the above noted changes, we also proposed in the NPRM to further revise 7 CFR 273.2(e) to simplify current provisions and provide more State agency flexibility in the area of scheduling interviews. However, we received mixed remarks on these proposed changes from commenters. Several commenters, while supporting the added flexibility provided to State agencies, thought we did not go far enough in simplifying current rules. For example, several commenters requested that we remove the current requirement that the State agency hold applications pending until the 30th day from the date of application when an applicant misses the scheduled interview or fails to provide requested information or verification within 10 days of the request. This would allow States to take immediate action to deny an application after a missed interview or the expiration of the 10-day period for return of requested information.

Other commenters felt that the proposed regulations did not provide enough safeguards for food stamp applicants and recipients. These commenters thought that the rules should more closely reflect the priority the Administration has given to preserving access to food stamps for low-income families in need, and should be amended to include

additional requirements, such as the following: (1) The food stamp office should routinely notify all applicants about the possibility of waiving the face-to-face interview in cases of hardship and the procedures for requesting such waivers; (2) the food stamp office should notify all applicants that they may send an authorized representative to their interview if they cannot attend personally; (3) the food stamp office should notify the applicant of the date and time of the interview in person, by telephone, or by letter mailed at least seven days in advance of the scheduled interview; (4) the food stamp office should send an applicant that misses a scheduled interview a notice informing him or her of this fact. The notice should ensure that the household has at least 10 days (or, if longer, until the thirtieth day following the date of application) in which to contact the food stamp office to reschedule an interview before the application may be denied and should provide a general telephone number the applicant may call to reschedule the appointment without having to reach any particular eligibility worker; (5) the food stamp office should reschedule the interview for any applicant that visits or calls the office on or before the thirtieth day after filing his or her application if the household indicates a continued interest in receiving food stamps; and (6) the food stamp office should be required to accommodate working families in one of the following three ways: (a) When the office is open during hours the applicant does not work, offer the applicant an interview time that does not conflict with his or her work schedule; (b) if the food stamp office is not open during hours when the applicant is not working, offer the applicant a telephone interview, perhaps during the applicants lunch hour or scheduled break; or (c) attempt to reschedule the first missed interview.

Given the considerable disagreement among commenters on our proposals to amend 7 CFR 273.2(e), and the Department's commitment to ensuring that all food stamp applicants and participants receive timely, accurate and fair service, we have decided to withdraw most of the proposed changes not required by PRWORA and to retain current rules. However, we are taking this opportunity to remind State agencies of current policy: (1) State agencies should take into consideration the needs of the household and accommodate these needs when scheduling interviews as much as possible (such as scheduling interviews for working households when the applicant is not scheduled to work or after hours); (2) State agencies should schedule interviews so that the household has at least 10 days to provide requested verification before the end of the 30 day processing period; (3) State agencies may not request private information from households during a group interview; (4) State agencies may not require households to report for an in-office interview during their certification period, though they may request households to do so. For example, State agencies may not require households to report en masse for an in-office interview during their certification periods simply to review their case files, or for any other reason. The latter reminder is being incorporated into the regulations at 7 CFR 273.2(e).

We are finalizing two proposed changes put forth in the NPRM. Current regulations at 7 CFR 273.2(e)(3) require State agencies to schedule a second interview if a household fails to attend the first scheduled interview. In the NPRM, we proposed to delete that requirement. As noted in the NPRM, some State agencies have found it burdensome to schedule multiple interviews and have found that a household that fails to attend the first scheduled interview frequently does not attend a second scheduled interview. For many years, we have granted State agencies waivers of the requirement to reschedule a missed interview, under the waiver authority in 7 CFR 272.3(c), on the conditions that the State agency notify each household on the application or interview appointment notice that it is the household's responsibility to contact the State agency to reschedule a missed interview, and that the State agency not deny the household's application prior to the 30th day after application.

As with many of our proposals, comments received on our proposal to remove the requirement that State agencies reschedule a missed interview were mixed. Some commenters strongly supported the change, noting that requiring State agencies to schedule a second interview if the applicant fails to attend the first scheduled interview is not only burdensome but unnecessary, because those households that miss the first interview and do not reschedule it on their own, frequently, if not always, do not attend the second scheduled interview either. Other commenters, however, were concerned that changing the policy could result in the denial of food stamps to working families who, unable to attend the first interview due to a work conflict or sick child, may have difficulty reaching the food stamp office or scheduling an interview time they can make before the end of the 30-day period.

We recognize that a household may not be able to attend a scheduled interview. However, in the spirit of PRWORA, which focuses on State agency flexibility in the certification process and household responsibility, we are removing the requirement that the State agency reschedule a missed interview. However, we are adding a requirement to 7 CFR 273.2(e)(3) that the State agency must send a notice to the households that miss their interview appointments indicating that it missed the scheduled interview and informing the household that it is responsible for rescheduling a missed interview. In addition, we are reminding State agencies that if the household contacts the State agency within the 30 day processing period, the State agency must schedule a second interview. We are making a conforming amendment at 273.2(h)(1)(i)(D). We are also adding a statement to the same section that reminds the State agency that it may not deny a household's application prior to the 30th day after application if the household fails to appear for the initial interview.

We proposed at 7 CFR 273.2(e)(1) that interviews may be conducted at the food stamp office or another mutually convenient location of the State agency's choosing, including a household's residence. One commenter suggested we reword the statement to provide that the location be “mutually acceptable” as opposed to a “mutually convenient location of the State agency's choosing.” The commenter argued that a mutually acceptable location is by definition acceptable to the food stamp office. In addition, this commenter stated that the regulations as written could be read that applicants must be interviewed in their homes. Since home interviews can be viewed as invasive and demeaning, the household should be allowed to suggest another location. If the alternative is inconvenient to the food stamp office, it can always decline. We agree with the commenter that the State agency and the household should agree on a location. Therefore, we are modifying the proposed language and finalizing it to provide that interviews may be conducted at the food stamp office or another mutually acceptable location, including a household's residence. However, we are also reminding State agencies that if the interview is to be conducted in a household's residence, it must be scheduled in advance with the household.

We proposed at 7 CFR 273.2(e)(2) that the State agency must waive the face-to-face interview in favor of a telephone interview on a case-by-case basis because of household hardship situations. One commenter said that since food stamp offices are no longer required to reschedule missed interviews, the opportunity for a waived interview becomes much more important, especially for those applicants for whom coming into the office is a hardship. However, few households are aware of this option. Therefore, this commenter suggested that we require State agencies to notify households of their right to a waiver of the face-to-face interview. We agree with this comment. Therefore, at 7 CFR 273.2(e)(2) we are adding the requirement that State agencies must notify the applicant that it will waive the face-to-face interview for hardship situations as determined by the State agency. In addition, we are retaining current rules which provide that household hardship situations include, but are not limited to: illness, transportation difficulties, care of a household member, hardships due to residency in a rural area, prolonged severe weather, or work or training hours which prevent the household from participating in an in-office interview.

We are making an additional change to current regulations at 7 CFR 273.2(e) in response to comments. In their remarks, several commenters objected to the practice in some State offices of scheduling interviews on a “first-come, first-served” basis. Typically, a local agency will establish a “quota” for the number of applicants that staff can interview during established working hours. Potential applicants will begin to line up in front of the office early in the morning in hopes of getting an interview that day. Once the number of applicants in line reaches the “quota”, the local agency will accept no more individuals for an interview. The local agency will continue to accept applications, but staff advise any further potential applicants to come back the next working day. Under this procedure, a household may have to return to the food stamp office several times in order to be interviewed for the program. This policy is not acceptable as it clearly presents a barrier to participation for certain groups, such as working families, who cannot afford to take time off repeatedly in an attempt to be interviewed. It also violates the principle implied in 7 CFR 273.2(e) that the State agency schedule a specific date and time for an interview for every applicant household. Therefore, we are amending the regulations at 7 CFR 273.2(e) to clearly require that the State agency must schedule an interview for each applicant that is not interviewed on the day he or she submits an application. To the extent practicable, States should schedule the interview to accommodate the needs of groups with special circumstances, including working families.

Verification—7 CFR 273.2(f)

Current 7 CFR 273.2(f) sets forth the procedures, including the types of documents required, for providing verification to establish the accuracy of statements on the application. In the NPRM, we proposed to amend paragraph (f) to incorporate changes required by PRWORA and to respond to the President's regulatory reform initiative. We received a vast number of comments on our proposed changes to this section. Many commenters thought that while FNS had proposed some useful simplification of requirements related to verification, the agency did not go far enough in streamlining current requirements. These commenters thought that the rules should go further and, among other things, leave verification requirements to be decided by States, which should be given the flexibility to target verification requirements to items most likely to cause payment errors and relax others in the interest of facilitating program access.

Other commenters strongly opposed our decision to remove many of the provisions in the current regulations. The commenters thought that without these provisions clearly stating verification requirements State eligibility workers could misapply policies, effectively discouraging households from following through with their program application. For example, one commenter thought that the Department should reinstate the requirements at current section 273.2(f)(1)(vii) which provide that any documents which reasonably establish the applicant's identity must be accepted and no requirement for a specific type of document, such as a birth certificate, may be imposed. Without this language, the commenter feared that some food stamp offices would insist that a household produce the one form of verification they consider “best” even if the applicant lacks that form of identity. The same commenter thought that FNS should reinstate in section 273.2(f)(1)(vi) a cross reference to section 273.3(a), which prohibits States from establishing durational residency requirements. The commenter notes that while section 273.3(a) would continue to prohibit durational residency requirements, without a cross-reference to that provision in the verification rules, it could be missed by many eligibility workers, resulting in improper denials.

Given the considerable disagreement among commenters on our discretionary proposals to amend 7 CFR 273.2(f), we have decided to withdraw those proposed changes and retain current regulations. We may consider again proposing revisions to 7 CFR 273.2(f) in a future rulemaking. At this time, we are adopting into the regulations changes necessitated by PRWORA.

In response to comments, we are retaining one sentence from the NPRM in the final rule. The final rule at 7 CFR 273.2(f) will remind State agencies to give households at least 10 days to provide required verification in accordance with 7 CFR 273.2(h)(1)(i)(C) and refer State agencies to 7 CFR 273.2(i)(4) which contain the verification procedures for expedited service cases.

The regulations at current paragraph (f)(1)(xi) provide the requirements for verifying the shelter costs of homeless households who claim shelter costs greater than the homeless household shelter standard. In the NPRM, we proposed to revise the first sentence of this section to conform with Section 5(e) of the Act, 7 U.S.C. 2015(e)(5), as amended by Section 809 of PRWORA, which establishes an optional homeless household shelter deduction. This PRWORA change is discussed later in this preamble. The revised sentence requires homeless households claiming shelter expenses to provide verification of their shelter expenses in order to qualify for the homeless shelter deduction if the State agency has such a deduction. We also proposed to remove the language currently appearing in the second and third sentences of the paragraph which requires the eligibility worker to use prudent judgment in determining if the homeless household's verification of shelter expenses is adequate and provides an example. These sentences do not provide specific verification requirements and thus, we believed, are not necessary.

One commenter objected to requiring verification of shelter expenses over and above the homeless shelter deduction. The commenter pointed out that under section 5(e)(5) of the Act, States are not required to limit this deduction to households that can verify shelter costs. States may choose not to do so in recognition of the fact that when people pay for temporary shelter, it is

commonly through informal transactions that are impossible to verify. The commenter expressed concern that if the final rules mandate verification of these expenses, they are likely to result in the effective elimination of this deduction: States may find verifying incidental shelter expenses too burdensome and error-prone and drop the deduction, or; in those States that maintain it, few homeless households would produce satisfactory verification. We agree with this commenter. Therefore, we are deleting the requirement at 7 CFR 273.2(f)(1)(xi). We are moving that provision to 7 CFR 273.2(f)(2)(iii) under which States may verify the information if questionable. In addition, several commenters objected to our intention to remove the second and third sentences of paragraph (f)(1)(xi). One commenter thought that eliminating the option of allowing State agencies to use prudent judgment if the household claims shelter expenses but is unable to provide verification places an undue burden upon this very vulnerable population. We agree with the commenters that retaining the last two sentences in current paragraph (f)(xi) may prevent an unnecessary verification burden on homeless households, and we are retaining the two sentences in this rule at 7 CFR 273.2(f)(2)(iii).

Current paragraph (f)(4)(i) and (ii) provide that the State agency may use a collateral contact to verify information provided by an applicant. One commenter expressed concern that collateral contacts impair the confidentiality protections of the statute. This commenter warned that an inquiry from the food stamp office makes it obvious that a household has applied for benefits. This might be an embarrassment to the household. Therefore, to respond to this commenter's concerns, we are revising 7 CFR 273.2(f)(4)(ii) to provide that when talking with a collateral contact, State agencies should disclose only the information that is absolutely necessary to get the information being sought. State agencies should avoid disclosing that the household has applied for food stamps, and should not disclose any information supplied by the household, especially information that is protected by 7 CFR 273.1(c). State agencies should also not suggest that the household is suspected of any wrong doing.

Current paragraph (f)(4)(iii) governs use of home visits in the event documentary evidence is insufficient. One commenter expressed concern that some State agencies may justify home visits for the entire caseload or certain segments of the caseload by asserting that certain households are more error-prone. Certainly our intention in this provision is not to sanction universal mandatory home visits or home visits for households that fit error-prone profiling. Certainly rumors of such a policy could have a chilling effect on program participation. We are taking this opportunity to remind State agencies that home visits are to be used only when documentary evidence is insufficient to make a firm determination of eligibility or benefit level, and the home visit is announced in advance. In addition, in response to this commenter and to improve Program access, we are amending 7 CFR 273.2(f)(4)(iii) to provide that home visits are to be used on a case-by-case basis where the supplied documentation is insufficient. Simply because a household fits a profile of an error-prone household doesn't mean that it has not provided sufficient verification. In addition, we are reminding State agencies to assist the household in obtaining verification in accordance with 7 CFR 273.2(c)(5). The commenter also suggested that we broaden the prohibition on unannounced investigatory home visits. Such an action is beyond the scope of this rule. However, we are taking this opportunity to suggest that State agencies consult their legal counsel on their authority to stage unannounced home visits that are intended to investigate fraud. Neither the Food Stamp Act nor the Program regulations provide authority for such visits.

Current paragraph (f)(5)(i) requires State agencies to help applicants with verification, allows households to supply documentary evidence in person or through another means, prohibits State agencies from requiring households to present verification in person, and requires the State agency to accept any reasonable documentary evidence provided by households. Section 835 of PRWORA revised section 11(e) of the Act to remove the requirement that State agencies assist households in obtaining verification and the prohibition against requiring households to present additional proof of a matter for which the State agency already possesses current verification. While PRWORA removed the requirement to assist all households in the verification process, there remains a mandate to offer assistance to special needs households.

Although Section 835 of PRWORA did remove several requirements related to verification from the Act, we have decided not to change the substance of the current regulation. We believe that the current, long standing policies at 7 CFR 273.2(f)(5)(i) are a necessary adjunct of the PRWORA requirement that State agencies provide accurate, timely, and fair service. This includes the policy that States assist all applicants in obtaining verification. Although the Act now requires States to assist, at a minimum, households with special needs, we believe that in order to satisfy the Act's standard of timely, accurate and fair service, States must be required to assist all households in obtaining verification. The final rule does amend the current language to allow households to submit documentation by facsimile or other electronic devices.

Current paragraph (f)(9) provides procedures for using IEVS information to verify eligibility and benefits. To conform to the changes we previously discussed under section 272.8, in the final rule, we are amending the title of 7 CFR 273.2(f)(9) and the contents of paragraph (f)(9)(i) to indicate that use of IEVS is now a State option. If State agencies do access IEVS, the procedures contained in the remainder of paragraph (f)(9) are still appropriate and, therefore, we are making no other changes to the section.

Current paragraph (f)(10) provides procedures for verifying alien status through the SAVE system. To conform to the changes we previously discussed under § 272.11, in this final rule, we are amending the introductory paragraph of 7 CFR 273.2(f)(10) to indicate that use of SAVE is now a State option. If State agencies do access SAVE, the procedures contained in the remainder of paragraph (f)(10) are still appropriate and, therefore, we are making no other changes to the section.

We also proposed in the NPRM to make a number of revisions to paragraph (f) to reflect changes in the procedures for verifying alien status in the Food Stamp Program required by PRWORA and other Federal laws. A discussion of those proposed revisions follows in the paragraphs set forth below.

How Must State Agencies Verify Eligible Alien Status?

Section 402 of PRWORA and Sections 503 through 509 of AREERA made extensive changes in requirements for alien eligibility which affect the verification requirements. The changes affecting eligibility are described below under the discussion of alien eligibility at section 273.4 in this final rule. Section 432 of PRWORA also affects the requirements for verification of alien eligibility. Section 432(a) of PRWORA and subsequent amendments required the Attorney General to publish

regulations providing requirements for verifying that a person applying for a Federal public benefit is a qualified alien or is a U.S. citizen or non-citizen national and is eligible to receive the benefit. The Department of Justice (DOJ) developed Interim Guidance, which it published in the

Federal Register

on November 17, 1997 (62 FR 61344). State agencies should also be aware that DOJ will be publishing a final rule on Verification of Eligibility for Public Benefits. DOJ published the proposed rule in the

Federal Register

on August 4, 1998 (63 FR 41662). Our proposed rule referenced the forthcoming final rule. We proposed that the Department would incorporate into the final version of this rule relevant changes to alien verification procedures that DOJ's makes in its final rule. The Interim Guidance provides currently acceptable procedures for the verification of citizenship, alien status, and military connections. Section 432(b) of PRWORA provided that not later than 24 months after the date the verification regulations are adopted, States that administer a program that provides a Federal public benefit must have in effect a verification system that complies with the new regulations. We proposed to remove current paragraphs (f)(1)(ii)(B), (C), and (D), which mandate the types of documents that State agencies must use for verification. State agencies may refer to the DOJ Interim Guidance, Program policy interpretations, and the Social Security Administration (SSA) procedures for obtaining work history information. These sources provide examples of verification, including verification the household provides, which State agencies may use in developing their own verification requirements.

The Department proposed to remove current 7 CFR 273.2(f)(1)(ii)(A), which requires the household to provide verification that each alien is eligible. In the introductory paragraph (f)(1)(iv), we proposed that State agencies must verify the immigration status of all aliens and other factors relevant to the eligibility of individual aliens prior to certification. Other factors relevant to the eligibility of individual aliens could be the date of admission or date status was granted; military connection; 40 qualifying quarters of work coverage; battered status; Indian, Hmong or Highland Laotian status; place of residence on August 22, 1996; or age on August 22, 1996. We also proposed to include in new paragraph (f)(1)(iv) the provision from the first sentence of current paragraph (f)(1)(ii)(G), which provides that an alien whose eligibility is questionable is ineligible until the alien provides acceptable documentation, with two exceptions which would be contained in new paragraphs (f)(1)(ii)(A) and (B). We would remove the last sentence of current paragraph (f)(1)(ii)(G) because the reference to 7 CFR 273.11(c) is unnecessary. These changes, would eliminate current paragraph (f)(1)(ii)(G). In regard to expedited service, State agencies would have determined the eligible status of aliens prior to certification, but could postpone verification in accordance with paragraph (i).

Pursuant to the President's regulatory reform initiative, we proposed to remove the first two sentences and the last sentence of current paragraph (f)(1)(ii)(E) because they do not provide any significant guidance to State agencies and are unnecessary. New paragraph (f)(1)(ii)(A) would include the provisions appearing in the third and fourth sentences of current paragraph (f)(1)(ii)(E), with some changes in wording for clarity. The third sentence of current paragraph (f)(1)(ii)(E) provides that when a State agency accepts a non-INS document from the household as reasonable evidence of alien status, the State agency must send the document to INS for verification. The fourth sentence of current paragraph (f)(1)(ii)(E) provides that the agency must not delay, deny, reduce or terminate an individual's benefits while awaiting such verification. With these changes, current paragraph (f)(1)(ii)(E) would be eliminated.

Several advocacy groups thought that the introductory text of paragraph (f)(1)(iv) (“[t]he immigration status of aliens must be verified.”) would lead State agencies to attempt to verify the immigration status of ineligible aliens. We did not intend such a result. The final rule makes it clear that the Department is authorizing State agencies to verify only the status of aliens claiming eligible immigration status. Moreover, we are retaining the language of the current rule indicating that households must have the option to withdraw the application or participate without an alien who does not wish the State agency to contact INS to verify his or her status. We received only a few comments on the proposal to require State agencies to use the DOJ verification guidance in developing their verification procedures. One State agency thought that the proposal to make use of SAVE optional gave State agencies the authority to verify the immigration status of certain aliens only if questionable. This is clearly not the case. Verification of immigration status is mandatory for all applicant alien household members, whether or not a State agency elects to use SAVE. Another State agency felt that the Department should not adopt by reference unpublished DOJ rules which might impose burdensome verification requirements on State agencies. The Department recognizes the State agency's concerns, and the final rule deletes the reference to a future DOJ final rule. However, as stated previously, PRWORA section 432(a) charges DOJ with the responsibility for publishing rules for verification of alien status and citizenship. PRWORA section 432(b) requires State agencies to comply with such regulations. As of the date of publication of this final rule, DOJ has not published its final rule outlining the verification requirements. However, we understand that DOJ is making changes to the rule in response to the comments it received in the proposed rule. Once DOJ issues its final rule, the Department will review its provisions and determine if further rulemaking is appropriate for the Program.

We proposed a new paragraph (f)(1)(iv)(B) to address verification of alien eligibility when work history is questionable. Section 402(a)(2)(B) of PRWORA provides that aliens lawfully admitted for permanent residence may be eligible for food stamps if they can be credited with 40 qualifying quarters of work. The conforming amendment proposed here would provide that State agencies must obtain verification of eligibility based on 40 qualifying quarters of work before the State agency may certify the alien, unless the State agency or the applicant has submitted a request to SSA regarding the number of quarters of work that can be credited, SSA has responded that the individual has fewer than 40 quarters, and the individual or the State agency has documentation from SSA that SSA is conducting an investigation to determine if more quarters can be credited. If the State agency can document that SSA is conducting an investigation, the individual may participate for up to 6 months from the date of the first determination that the number of quarters was insufficient for eligibility. This provision is based on an interpretation of the phrase “has worked 40 qualifying quarters of coverage” set forth in section 402(a)(2)(B)(ii) of PRWORA. An immigrant, under the express terms of section 402(a)(2)(B), would be eligible for food stamp benefits if the immigrant had actually worked 40 qualifying quarters of coverage, notwithstanding SSA's inaccurate or incomplete recording of the immigrant's work history. Food

stamp eligibility is premised on the immigrant's act of working the 40 quarters rather than SSA's recording of the immigrant's work history. Thus, in keeping with past practice concerning the receipt of benefits pending the completion of Federal government verification, we proposed to permit immigrants to receive food stamp benefits for a maximum period of 6 months. We emphasized that food stamp benefits pending the completion of an SSA investigation are only available to an alien who: (1) Is admitted as a lawful permanent resident under the Immigration and Nationality Act (INA),

i.e.,

an immigrant; (2) SSA has determined has fewer than 40 quarters of coverage; and (3) provides the State agency with documentation produced by SSA indicating SSA is investigating the number of quarters creditable to the alien.

One advocacy group felt that proposed 6-month period for resolution of quarters of coverage disputes with the SSA was arbitrary, unfair, and noncompliant with the SAVE statute. Moreover, they thought the Department should allow participation pending the outcome of any Federal agency's investigation of a matter which bears on the individual's eligible alien status, and the State agency's determination of “battery or extreme cruelty,” as long as the alien is cooperating with the investigation. We are partially adopting this suggestion in the final rule. The SAVE statute requires the Department to accept an alien's attestation of “satisfactory” alien status until verified through SAVE. However, PRWORA imposed new facets of verification of eligibility factors for aliens which go far beyond the verification of immigration status with the INS which the SAVE statute contemplates. For example, in addition to immigration status, status as a veteran and possession of 40 quarters of Social Security coverage now have a bearing on an alien's eligibility. As Congress did not amend the SAVE statute to provide for attestation of matters beyond those which the State agency can confirm through INS, we find no

mandate

to expand affirmation of status to encompass verification of information held in the files of other Federal agencies. Nor do we believe that Congress intended that we allow an indefinite period for completion of the verification process. After several years of operating under the 6-month limit, the Department is unaware of any instances where SSA was unable to complete a requested investigation within the established time frame. Accordingly, we are preserving this time frame in the final rule. However, the Department is using its discretionary authority to add to the final rule a provision requiring that State agencies certify the individual pending the results of an investigation for up to 6 months when the applicant or the State agency has submitted a request to a Federal agency for verification of information which bears on the individual's eligible alien status. For example, a State agency may find it necessary to contact the Department of Veterans Affairs to confirm an immigrant's veteran status. On the other hand, we are unable to extend the same procedure to an alien who is pursuing qualified alien status based on the outcome of a State agency's determination of battery or extreme cruelty. There is a real distinction between an alien seeking qualified status based on battery and an alien who already possesses an eligible immigration status. An alien cannot legally attest to food stamp eligibility based on an immigration status she does not yet possess. In order to have qualified aliens status, the alien must initiate a claim for such status

and

receive a favorable determination from the State agency. In this respect, such an alien is in the position of an asylum applicant or an applicant for naturalization. Unless and until INS actually grants the alien an eligible immigration status, he or she remains ineligible for the Program.

A commenter thought that State agencies could read the proposed rule to limit the verification of quarters of coverage to information contained in SSA's files. We did not intend such a reading of the rule. The commenter correctly pointed out that SSA records do not show current year earnings and in some cases the last year's earnings, depending on the time of request. Also, in some cases, an applicant may have work from uncovered employment that SSA does not document, but is countable toward the 40 quarters test. In both of these cases, the individual, rather than SSA, would need to provide the evidence need to verify the quarters. While we believe that State agencies are following the SSA guidance for determining 40 quarters of coverage, w

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