Food Stamp Program: Utility Reimbursement Exclusion

DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Parts 272 and 273

[Amendment No. 355]

RIN 0584-AB79

Food Stamp Program: Utility Reimbursement Exclusion

AGENCY: Food and Nutrition Service, USDA.

ACTION: Interim Rule and request for comments.

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SUMMARY: This action excludes certain utility reimbursements made by

the Department of Housing and Urban Development (HUD) and Farmers Home

Administration (FmHA) from income consideration in determining Food

Stamp Program eligibility and benefits. This action will result in

increased benefits to households that receive the reimbursements, a

consistent nationwide policy, greater consistency in the treatment of

housing and energy assistance payments, and more consistency with the

Aid to Families with Dependent Children (AFDC) Program.

DATES: This rule is effective and must be implemented no later than

August 1, 1994. Comments must be received on or before August 15, 1994

to be assured of consideration.

ADDRESSES: Comments should be submitted to Judith M. Seymour,

Eligibility and Certification Regulation Section, Certification Policy

Branch, Program Development Division, Food and Nutrition Service, USDA,

3101 Park Center Drive, Alexandria, Virginia, 22302. Comments may also

be datafaxed to the attention of Ms. Seymour at (703) 305-2454. All

written comments will be open for public inspection at the office of

the Food and Nutrition Service during regular business hours (8:30 a.m.

to 5 p.m., Monday through Friday) at 3101 Park Center Drive,

Alexandria, Virginia, Room 720.

FOR FURTHER INFORMATION CONTACT: Questions regarding the proposed

rulemaking should be addressed to Ms. Seymour at the above address or

by telephone at (703) 305-2496.

SUPPLEMENTARY INFORMATION:

Classification

Executive Order 12866

The Food and Nutrition Service is issuing this interim rule in

conformance with Executive Order 12866 and it has been designated

``economically significant.''

Executive Order 12372

The Food Stamp Program is listed in the Catalog of Federal Domestic

Assistance under No. 10.551. For the reasons set forth in the final

rule in 7 CFR part 3015, Subpart V and related Notice (48 FR 29115),

this Program is excluded from the scope of Executive Order 12372 which

requires intergovernmental consultation with State and local officials.

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). Ellen Haas, the

Assistant Secretary for Food and Consumer Services, has certified that

this rule does 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

This rule does not contain reporting or recordkeeping requirements

subject to approval by the Office of Management and Budget (OMB) under

the Paperwork Reduction Act of 1980 (44 U.S.C. 3507).

Regulatory Impact Analysis

Need for Action

This rule is required to eliminate inconsistent policies resulting

from litigation, promote equity in the treatment of housing and energy

assistance, and increase consistency with the Aid to Families with

Dependent Children program.

Benefits

This action increases benefits to low-income households responsible

for paying utility expenses separately from their rent who receive

utility reimbursements from HUD and FmHA.

Costs

It is estimated that this action will increase the cost of the Food

Stamp Program by approximately $13 million for each month of its

implementation in FY 1994 and $160 million in FY 1995.

Executive Order 12778

This rule has been reviewed under Executive Order 12778, 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. This rule is not intended to have retroactive effect

unless so specified in the ``Effective Date'' paragraph of this

preamble. Prior to any judicial challenge to the provisions of this

rule or the application of its provisions, all applicable

administrative procedures must be exhausted. In the Food Stamp Program

the administrative procedures are as follows: (1) For Program benefit

recipients--State administrative procedures issued pursuant to 7 U.S.C.

2020(e)(1) and 7 CFR 273.15; (2) for State agencies--administrative

procedures issued pursuant to 7 U.S.C. 2023 set out at 7 CFR 276.7 (for

rules related to non-quality control (QC) liabilities) or Part 284 (for

rules related to QC liabilities); (3) for Program retailers and

wholesalers--administrative procedures issued pursuant to 7 U.S.C. 2023

set out at 7 CFR 278.8.

Public Participation and Effective Date

The provisions of this rulemaking are required to be effective and

implemented no later than August 1, 1994. Because of the need to

establish a consistent nationwide policy with respect to the treatment

of the specified utility reimbursements, Ellen Haas, Assistant

Secretary for Food and Consumer Services, has determined, pursuant to 5

U.S.C. 553, that public comment on this rulemaking prior to

implementation is impracticable. However, because we believe that the

administration of the rule may be improved by public comment, comments

are solicited on this rule for 60 days. All comments will be analyzed,

and any appropriate changes to the rule will be incorporated in the

subsequent publication of a final rule.

Background

The HUD utility reimbursements excluded from Food Stamp Program

(Program) income consideration by this rule are provided pursuant to

the United States Housing Act of 1937 (the Housing Act), 42 U.S.C.

1437, to comply with a provision of the Housing Act (42 U.S.C.

1437a(a)(1)) that requires HUD to limit the shelter costs of tenants in

Federally assisted housing to 30 percent of their income. In

calculating a tenant's rent payment, HUD has interpreted the term

``rent'' to include the cost of utilities and other services, including

electricity, gas, heating fuel, water and sewerage, and trash and

garbage collection (24 CFR 813.102, 965.472, 965.476). In some housing,

utilities are included in the tenant's rent. In units in which the

utilities are paid directly by the tenant, HUD permits a deduction to

be made from the rent paid to the owner on account of the separate

payment being made to the utility supplier. This deduction, provided

for in 24 CFR 813.102 and 913.102, for the estimated value of utilities

and charges for other housing services payable directly by the family

is called a ``utility allowance.'' The amount of the utility allowance

is based, not on an individual family's expenses, but on a community-

wide standard. Therefore, the tenant's actual utility costs may be more

or less than the allowance.

For most tenants, the amount of the utility allowance is less than

the amount they are required to pay toward their rent including

utilities. In most cases, the utility allowance involves no direct

payment to the household, but is merely a credit reducing the

household's contribution to the landlord. If the utility allowance

exceeds the rent that can be charged for a dwelling, the excess is paid

in the form of a ``utility reimbursement'' or rebate to the household.

Similar reimbursements are made to some rural low-income households

by the Farmers Home Administration (FmHA) of the Department of

Agriculture as part of its Rental Assistance Program which provides,

pursuant to 7 CFR pt. 1930, subpt. C; pt. 1944, subpt. E, loans for

housing in rural areas. Under the FmHA Program, the borrower (the owner

of the property) may apply for Rental Assistance for each tenant in the

project who meets the eligibility criteria. The Rental Assistance

payment equals the difference between 30 percent of the household's

income and the sum of the rent plus the utility allowance for the

project. If the tenant pays the utilities, the total Rental Assistance

payment from FmHA is made to the owner, who is obligated to pass on to

the tenant the portion allocated to utilities. When FmHA's utility

allowance is more than 30 percent of the household's adjusted income,

the landlord is obligated to forward the difference to the tenant as a

utility reimbursement.

Under section 5(d) of the Food Stamp Act of 1977 (7 U.S.C.

2014(d)), any income received by the household directly or indirectly

must be counted in determining the household's eligibility and

benefits, except for the exclusions listed in the Act. Neither the Food

Stamp Act nor current regulations specifically address the treatment of

HUD and FmHA utility reimbursements. It is clear that Federal energy

assistance payments are excluded by section 5(d)(11) of the Food Stamp

Act. However, the HUD and FmHA reimbursements are not provided

specifically for energy assistance alone. Current policy requires

counting these HUD utility reimbursements as income. This policy is

applicable nationwide except in jurisdictions in which the

reimbursements are excluded by judicial decision.

In the past, it was our policy that utility reimbursements did not

qualify as energy assistance. In response to questions concerning the

payments, we issued Policy Memo 90-6 addressing HUD payments and Policy

Memo 3-91-04 regarding FmHA payments. Policy Memo 90-6 provides that

any amount paid by HUD directly to the household as a utility

reimbursement or indirectly to the utility provider must be counted as

income to the household. Under Policy Memo 3-91-04, the utility

reimbursement paid by the landlord to the tenant is counted as income

to the household.

This policy has been maintained over several years and has been

successfully defended in court on a number of occasions. While we

believe the current policy is a permissible interpretation of the

statute, we believe it is not in the best interest of the Program to

continue to litigate this issue. In reexamining the policy, we have

determined that there are several compelling reasons to change the

policy so as to exclude the utility reimbursements in the future.

First, although the HUD and FmHA utility reimbursements are not

provided specifically for energy assistance, a substantial portion of a

household's utility expense is for heating and cooling. A change in

policy to exclude the utility reimbursements is not inconsistent with

the specific exclusion in section 5(d)(11) of the Food Stamp Act and 7

CFR 273.9(c)(11) for Federal energy assistance. Excluding the utility

reimbursements under the existing regulatory provision would achieve

consistency in the treatment of Federal energy assistance.

Second, the current policy is inconsistent with the policy of the

Aid to Families with Dependent Children (AFDC) Program in most States.

Increasing consistency between the Food Stamp and AFDC Programs is a

Department priority because it makes the Programs simpler to administer

and more understandable to households.

Maintaining the current policy also causes inconsistent treatment

of households in subsidized housing between those in traditional

housing whose utilities are included in their rent and households who

are responsible for paying their own utility expenses. Excluding the

utility reimbursements would provide greater consistency in treatment

of various forms of housing assistance.

Finally, a change in policy eliminates the need to maintain at

least two distinct and conflicting policies for the foreseeable future

because courts in some jurisdictions have affirmed the current policy

and others have found it insupportable.

Therefore, this rule amends 7 CFR 273.9(c)(11) to provide that

payments or allowances made for the purpose of providing energy

assistance under any Federal law, including HUD and FmHA

reimbursements, are excluded from income. We are making a conforming

amendment to 7 CFR 273.10(d)(1)(i) to provide that a utility expense

which is reimbursed or paid by an excluded payment, including HUD or

FmHA utility payments, shall not be deductible. In accordance with

Section 5(e) of the Act, 7 U.S.C. 2014(e), households that receive

these payments will be entitled to use a standard utility allowance

that includes a heating or cooling component only if they incur heating

or cooling costs that exceed the amount of the excluded payment.

Implementation

This rule is effective and must be implemented no later than August

1, 1994. For quality control purposes, any variances resulting from the

implementation of the rule shall be excluded from error analysis for

120 days from the required implementation date, in accordance with 7

CFR 275.12(d)(2)(vii), as modified by section 13951(c)(2) of Pub. L.

103-66. Section 13951(c)(2) extended the variance exclusion period of

Section 16(c)(3)(A) of the Act, 7 U.S.C. 2025 (c)(3)(A), from a maximum

of 90 days to 120 days. The provisions must be implemented for all

households that newly apply for Program benefits on or after the

required implementation date. The current caseload shall be converted

to these provisions at household request, at the time of

recertification, or when the case is next reviewed, whichever occurs

first, and the State agency must provide restored benefits back to the

required implementation date. If for any reason a State agency fails to

implement on the required implementation date, restored benefits shall

be provided, if appropriate, back to the required implementation date

or the date of application, whichever is later.

List of Subjects

7 CFR Part 272

Alaska, Civil rights, Food stamps, Grant programs--social programs,

Reporting and recordkeeping requirements.

7 CFR Part 273

Administrative practice and procedure, Aliens, Claims, Food stamps,

Fraud, Grant programs--social programs, Penalties, Records, Reporting

and recordkeeping requirements, Social Security, Students.

Accordingly, 7 CFR parts 272 and 273 are amended as follows:

1. The authority citation for Parts 272 and 273 continues to read

as follows:

Authority: 7 U.S.C. 2011-2032.

PART 272--REQUIREMENTS FOR PARTICIPATING STATE AGENCIES

2. In Sec. 272.1, a new paragraph (g)(134) is added to read as

follows:

Sec. 272.1 General terms and conditions.

* * * * *

(g) Implementation. * * *

(134) Amendment No. 355. The provisions of Amendment No. 355 are

effective and must be implemented on August 1, 1994. Any variance

resulting from implementation of the provisions of this amendment shall

be excluded from error analysis for 120 days from this required

implementation date in accordance with 7 CFR 275.12(d)(2)(vii) as

modified by section 13951(c)(2) of Pub. L. 103-66. The provisions must

be implemented for all households that newly apply for Program benefits

on or after the required implementation date. The current caseload

shall be converted to these provisions at household request, at the

time of recertification, or when the case is next reviewed, whichever

occurs first, and the State agency must provide restored benefits back

to the required implementation date. If for any reason a State agency

fails to implement on the required implementation date, restored

benefits shall be provided, if appropriate, back to the required

implementation date or the date of application, whichever is later.

PART 273--CERTIFICATION OF ELIGIBLE HOUSEHOLDS

Sec. 273.9 [Amended]

3. In 273.9, the first sentence of paragraph (c)(11) introductory

text is amended by adding the words ``, including utility

reimbursements made by the Department of Housing and Urban Development

and the Farmers Home Administration'' before the period.

4. In 273.10, paragraph (d)(1)(i) is amended by adding a sentence

at the end of the paragraph to read as follows:

Sec. 273.10 Determining household eligibility and benefit levels.

* * * * *

(d) Determining deductions.

* * *

(1) Disallowed expenses.

(i) * * * A utility expense which is reimbursed or paid by an

excluded payment, including HUD or FmHA utility reimbursements, shall

not be deductible.

* * * * *

Dated: June 13, 1994.

Ellen Haas,

Assistant Secretary for Food and Consumer Services.

[FR Doc. 94-14713 Filed 6-15-94; 8:45 am]

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