Food Stamp Program; Child Support Deduction

SUMMARY: This rule is being proposed to implement a provision of the

1993 Mickey Leland Childhood Hunger Relief Act establishing a child

support deduction. The deduction would increase the benefits of food

stamp households that pay legally obligated child support to a

nonhousehold member.

DATES: Comments must be received on or before February 6, 1995, 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 Consumer Service, USDA,

3101 Park Center Drive, Alexandria, Virginia, 22302, (703) 305-2496.

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 Consumer 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:

Executive Order 12866

This proposed rule has been determined to be significant and was

reviewed by the Office of Management and Budget in conformance with

Executive Order 12866.

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 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,

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 reporting and recordkeeping burden associated with the

eligibility, certification, and continued eligibility of food stamp

recipients is approved under OMB No. 0584-0064. Current burden

estimates for OMB No. 0584-0064 include burden associated with

collecting and verifying information reported on the application to

determine initial household eligibility and also on the change report

and monthly report forms. The provision in 7 CFR 273.9 of this proposed

rulemaking which allows an income deduction for certain child support

payments does not alter burden estimates already approved under OMB No.

0584-0064. The methodologies used to determine the burden estimates

assume that all households will report information on each income and

resource line of the application form and will be subject to the same

level of reporting and verification burden as current levels require.

The public reporting burden for the Food Stamp Program application is

estimated to average 13.74 minutes per application. The proposed

reporting requirements in 7 CFR 273.12 and 7 CFR 273.21 do not alter

the burden estimate for reporting already approved under OMB No. 0584-

0064. Establishing a quarterly reporting option for the child support

deduction will not increase the reporting burden because households are

already required to report certain changes when they occur. At State

agency option, quarterly reporting would replace change reporting for

the child support deduction and would reduce the number of times a year

a household would have to complete a food stamp application form.

Comments regarding this burden estimate or any other aspect of this

collection of information, including suggestions to reduce this burden

may be sent to: U.S. Department of Agriculture, Clearance Officer,

OIRM, room 404-W, Washington DC 20250 and to Wendy Taylor, OIRM, Office

of Management and Budget, Paperwork Reduction Project (OMB No. 0584-

0064) Washington, DC 20503.

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.

Regulatory Impact Analysis

Need for Action

This action is required as a result of the Mickey Leland Childhood

Hunger Relief Act which amends the Food Stamp Act of 1977, as amended,

to establish a child support deduction for households that pay legally

obligated child support to a nonhousehold member.

Benefits

The child support deduction would increase the number of

potentially eligible food stamp recipients and would increase the

benefit level of households entitled to the deduction.

Costs

It is estimated that this action would increase the cost of the

Food Stamp Program by less than $1 million in Fiscal Year 1994; $55

million in Fiscal Year 1995; $125 million in Fiscal Year 1996; $130

million in Fiscal Year 1997; and $145 million in Fiscal Year 1998.

Background

On January 4, 1994, the Food and Consumer Service (FCS) published a

notice in the Federal Register announcing a public hearing on January

20, 1994. The public hearing was scheduled to provide an opportunity

for State agencies, advocacy groups, and other interested parties to

engage in public dialogue on issues concerning the regulatory

provisions to be published in connection with the Food Stamp Act of

1977 (Act) amendments made by the Mickey Leland Childhood Hunger Relief

Act, Chapter 3, Title XIII, Omnibus Budget Reconciliation Act of 1993,

Pub. L. 103-66, enacted August 10, 1993 (Leland Act). All provisions of

the Leland Act pertinent to the Food Stamp Program (Program), including

the child support deduction, were included as topics of dialogue during

the public hearing.

Child Support Deduction

A food stamp applicant's eligibility and coupon allotment are

determined, in part, by the amount of income the household has

available to spend on food after certain monthly expenses are deducted

from the household's total monthly income. Household expenses that are

deducted from income in determining food stamp eligibility and coupon

allotment include: (1) a standard deduction (which is provided to all

food stamp households); (2) an earned income deduction equal to 20

percent of the household's gross earned income; (3) a medical deduction

for expenses over $35 a month for elderly or disabled household

members; (4) up to a certain limit, a dependent care deduction for the

actual costs the household must pay for the care of children or other

dependents while household members are seeking or maintaining

employment or while they are participating in education or training

programs; and (5) the costs for shelter which exceed 50 percent of

income after other deductions. There is a limit on the shelter

deduction for households without an elderly or disabled member.

Section 13921 of the Leland Act (Pub. L. 103-66, Title I, Chapter

3, August 10, 1993) amends section 5(e) of the Food Stamp Act to add a

deduction for household members who make legally obligated child

support payments to or for an individual living outside of the

household. The provision is intended to encourage noncustodial parents

to comply fully with their child support obligations. At the same time,

the deduction will result in a more accurate reflection of the

household's reduced ability to buy food. The legislative history (House

Conference Report No. 213, 103d Congress, 1st Session (1993), p. 925)

indicates that Congress did not want an undue administrative burden

placed on the State agency as a result of this provision.

The Department is addressing a number of issues related to the

child support deduction in this proposed rule. These issues are

discussed below and include: (1) definition of a legal obligation to

pay child support and allowable amount of child support deduction; (2)

verification; (3) budgeting and reporting procedures; (4) length of

certification period; and (5) quality control requirements.

Legal Obligation and Amount of the Child Support Deduction

To be eligible for the child support deduction, the statute

requires that the household must be legally obligated to pay child

support. The Department is aware that various arrangements may exist

between unmarried, separated, or divorced parents with respect to child

support. However, the law is specific that the deduction is allowed

only for persons who have a legal obligation, such as a court order

that would be upheld by a judge in a court of law, an order issued

through an administrative process, or a legally enforceable separation

agreement. Accordingly, the Department proposes to amend 7 CFR 273.9(d)

to specify that persons who are legally obligated to pay child support

to or for an individual living outside the household and who make such

payments are eligible to receive a child support deduction.

The Department is proposing in this rule to amend 7 CFR 273.9(d) to

specify that the child support deduction must reflect the child support

the household pays or expects to pay during the certification period,

rather than the obligated amount. The legislation states that ``* * *

households shall be entitled to a deduction for child support payments

made (emphasis added) * * *.'' It is clear that the objective of the

law is to allow a deduction on the basis of payments actually made, not

the amount the household is legally obligated to pay. Current data show

that 49 percent of parents who are legally obligated to pay child

support either do not pay any support (24 percent) or pay less than the

full amount of the support (25 percent). (Overview of Entitlement

Programs, 1993 Green Book, Background Material and Data on Programs

Within the Jurisdiction of the Committee on Ways and Means, Committee

on Ways and Means, U.S. House of Representatives, p. 748.)

Strengthening the child support system is an important goal of the

Department. The Department believes that Congress did not intend to

provide a deduction for child support payments that the household

member did not actually pay. Such a deduction would simply be a

windfall to absent parents who fail to meet their responsibilities to

their children. Furthermore, a child support deduction that reflects

actual payments would allow the household to include child support

payments that were previously unpaid (i.e., arrearages). Most

importantly, basing the deduction on amounts paid would most accurately

reflect the current food assistance needs of the paying household.

The Department also is including a clarification discussed in the

legislative history of the Leland Act (114 Congressional Record,

S10726, August 6, 1993). The history indicates that legally obligated

payments paid on behalf of the nonhousehold member (such as paying rent

to a landlord) must be considered as part of the child support

deduction for the household making the payments. This would include any

additional payments the noncustodial parent is legally obligated to

make to obtain health insurance coverage for a child or children.

Accordingly, the Department is proposing to specify in 7 CFR 273.9 that

the child support deduction shall include payments the household makes

on behalf of the nonhousehold member to the extent that the payments

represent the household's child support obligation and have been

ordered by a court or administrative authority. Alimony or spousal

support payments that are made to or on behalf of a nonhousehold member

or payments made in accordance with a property settlement would not be

allowable as part of the child support deduction.

The Department is also proposing to add conforming language at 7

CFR 273.11(c)(1)(i) and (2)(iii) to provide procedures for allowing the

child support deduction for households with ineligible members. As

proposed, the child support deduction would be handled the same way as

the earned income, standard, medical, dependent care, and excess

shelter deductions. That is, the entire deduction would be allowed to

households with members disqualified because of intentional Program

violation or work requirements because the entire income of these

household members is counted. In the case of ineligible aliens or

members disqualified for refusal to obtain or apply for a social

security number, the amount of child support paid or expected to be

paid would be divided evenly among the household members, including the

ineligible member, and all but the ineligible member's share would be

deducted from household income.

The Department is proposing to add the provision of section 13921

of the Leland Act authorizing a child support deduction to the

allowable deductions in 7 CFR 273.9(d) by redesignating paragraphs

(d)(7) and (d)(8) as paragraphs (d)(8) and (d)(9) and by adding a new

paragraph (d)(7) following the provisions for the standard utility

allowance. In accordance with section 13921 of the Leland Act, the

child support deduction must be determined in the food stamp benefit

calculation prior to determining the household's excess shelter

deduction and it would be preferable to insert the child support

deduction before the shelter deduction at 7 CFR 273.9(d)(5). However,

redesignating 7 CFR 273.9(d)(5) and subsequent paragraphs would require

extensive renumbering of existing policy guidance and regulations in

clearance. Therefore, the Department is proposing to place the new

deduction following the standard utility allowance provisions. To

ensure the correct calculation of allotments, however, the Department

is proposing to amend 7 CFR 273.10 by redesignating paragraphs

(e)(1)(i)(F) and(G) as (e)(1)(i)(G) and (e)(1)(i)(H) and adding a new

paragraph (e)(1)(i)(F) to place the child support deduction before the

shelter deduction in the order of allotment calculation. The Department

will amend the food stamp application form and the food stamp worksheet

to include a space for households to identify child support payments.

Verification of Child Support Deduction

The Department is proposing that both the legal obligation to pay

child support and the actual amount paid be verified. The household

would be the primary source of verification of the legal obligation to

pay child support, the amount of the obligation, and the amount paid.

Any document that verifies the obligation to pay child support, such as

a court order, administrative order, or legally enforceable separation

agreement would be sufficient verification of the obligation and

obligated amount. Acceptable verification of amounts paid would include

canceled checks, wage withholding statements, verification of

withholding from unemployment compensation, and statements from the

custodial parent regarding direct payments or third party payments the

noncustodial parent pays or expects to pay on behalf of the custodial

parent. However, documents used to verify the household's legal

obligation to pay child support would not be acceptable verification of

the household's actual payments. If the household fails or refuses to

submit required verification, the State agency would determine the

household's eligibility and coupon allotment without consideration of

the child support deduction.

In addition, we are proposing that State agencies enter into

agreements with their State Child Support Enforcement (CSE) agencies to

obtain verification from CSE of child support payments made to the

agency by individuals in food stamp households claiming the deduction.

We are proposing that a match with CSE records be conducted at least

once prior to the household's next recertification. For households

certified for 3 months or fewer, the match would be required at

alternate recertifications. The State agency would also be required to

verify payments made to courts or CSE agencies in other States to the

extent that verification can be obtained electronically.

We are not proposing more specific requirements for scheduling the

matches at this time because we realize that CSE systems enhancements

are currently being developed. We encourage State food stamp and CSE

agencies to comment on the feasibility of requiring more frequent

matches with CSE information and the potential effectiveness of match

data as verification of child support obligations and payments. Of

particular concern is the effectiveness of automated verification

procedures when the food stamp household and the custodial parent do

not reside in the same State.

State agencies would be required to notify applicants on the

application form that child support information will be checked through

computer matching with CSE. The information obtained through the match

would be used to enable the State agency to make a more informed

decision regarding the household's deduction for the new certification

period. If the deduction is allowed prospectively based on an average

of past payments and recent data are available from CSE, the CSE data

could be used as the basis for anticipating future payments, taking

into account any changes in circumstances reported at recertification.

However, State agencies would not be required to conduct any month-by-

month reconciliation of amounts reported by the household and the CSE

data. Because the deduction will frequently be based on an average of

past payments, the amount of the deduction would not coincide with the

actual payment made. State agencies would not be required to use the

information retrospectively to establish claims or provide restored

benefits. Information from CSE records is considered unverified upon

receipt. Therefore, if there is a discrepancy between information

provided by the household and that obtained from CSE records, the State

agency would be required to give the household an opportunity to

resolve the discrepancy in accordance with procedures at 7 CFR

273.2(f)(9) for handling unverified data obtained through the Income

and Eligibility Verification System.

Accordingly, the Department is proposing to amend 7 CFR 273.2(f)(1)

to add requirements related to verification of child support at initial

certification. We are also proposing a conforming amendment to 7 CFR

273.2(b)(2) requiring the State agency to notify applicants that child

support information is subject to verification through computer

matching. An amendment to 7 CFR 273.2(f)(8)(i) is also proposed to

require verification of child support payments at recertification.

Changes reported during the certification period would be verified in

accordance with 7 CFR 273.2(f)(8)(ii). We are interested in obtaining

comments on these verification requirements and suggestions for less

burdensome ways of verifying child support payments.

Child Support Budgeting and Reporting Procedures

The Leland Act and legislative history indicate that the Department

may minimize requirements for budgeting and reporting changes in child

support payments. Section 13921 of the Leland Act allows retrospective

calculation of the support payments. Another option discussed in the

legislative history (House Conference Report No. 213, 103rd Congress,

1st Session (1993), p. 925) would permit State agencies to develop an

average based on payments made during the last certification period

(with appropriate adjustments to account for any changes in the child

support order) rather than track the household's monthly payments. The

Department is cognizant of the need to minimize the reporting and

budgeting burden while also ensuring that households receive a

deduction only for payments that are actually being made.

Accordingly, the Department is proposing several procedures in this

rule that strike a balance between the need to have accurate

information and the need to minimize burdens on food stamp households

and State agencies. State agencies will have the option to select the

procedure(s) which best suits their needs.

Option 1--Change Reporting and Prospective or Retrospective Budgeting

Current rules at 7 CFR 273.12 identify the changes a household must

report during its certification period. Households must report certain

changes within 10 days of the date the change becomes known. The

Department proposes to amend the current reporting requirements at 7

CFR 273.12 to establish reporting requirements for child support

payments. The intent is to provide a means of obtaining information

about payments being made that is not overly burdensome on the

household or the State agency. Because the Department recognizes that

some households will have a history of making child support payments

while others will not, the proposal includes reporting and budgeting

requirements for households with and without a child support payment

record.

Under this proposal, any household that is subject to change

reporting (for the child support payment) under 7 CFR 273.12(a) would

be required to report changes in the legal obligation, including but

not limited to changes such as a child reaching an age limit at which

child support is no longer legally obligated or a change in the legally

obligated amount.

For change reporting households that have a record of 3 or more

months of paid child support, the State agency would average at least 3

months of legally obligated child support and use the average as the

household's support deduction, taking into account any anticipated

changes in the legal obligation or other changes that would affect the

payment. The average would be used to establish a household's child

support payment for the certification period. The average would be

adjusted during the certification period in accordance with any changes

in the payment reported by the household or which otherwise become

known to the State agency. At recertification, the State agency would

obtain updated information on which to base a new average for the new

certification period.

For households without a record of at least 3 months of paid,

legally obligated child support, the State agency would base the child

support deduction on anticipated payments, exclusive of payments toward

arrearages. The household would be required to report changes greater

than $50 in the amount of legally obligated child support actually

paid, excluding any amounts paid toward arrearages. The base from which

to measure the $50 change would be the figure used at the most recent

certification action to determine the household's allotment.

Under current 7 CFR 273.12(a)(1)(i), households have to report a

change in gross monthly income when the amount changes by more than

$25. The Department considered proposing a $25 change reporting

requirement for child support payments, but decided instead to increase

the reporting threshold. Using a higher amount would mean that fewer

small changes would have to be reported and processed, thereby saving

time for both households and the State agency and minimizing the

administrative burden. The Department believes the increased efficiency

would offset any confusion caused by the inconsistency in the reporting

thresholds. Included in the category of households without a payment

record would be households with a newly established legal obligation

and households that have failed to meet an obligation. These households

would be certified initially for a short period, in accordance with 7

CFR 273.10(f)(4), to allow development of a payment history prior to

assignment of a longer period with a deduction based on averaged

payments.

With certain exceptions, households subject to change reporting may

have their income and deductions budgeted prospectively or

retrospectively. The Department is proposing that a State agency may

budget child support payments either prospectively or retrospectively,

depending on the reporting option selected.

Option 2--Quarterly Reporting and Prospective or Retrospective

Budgeting

The Department is proposing to include a new reporting option State

agencies may use for households that are subject to change reporting

requirements under 7 CFR 273.12 and are eligible to receive a child

support deduction. Under this option, State agencies may require

households to submit a quarterly report to report changes in the amount

of child support paid and changes in the legal obligation. The

household would remain responsible for reporting changes other than

changes in child support payments as required by 7 CFR 273.12(a)(1)

within 10 days.

The Department is proposing quarterly reporting for two reasons:

(1) it enables State agencies to assign longer certification periods

while receiving periodic information on the actual amount of child

support paid, and (2) it allows States to adjust the deduction on the

basis of several months of data. Under this proposal, a State agency

electing to use the quarterly reporting system would be required to

provide the household with a quarterly report by the end of the second

month in each quarter. The State agency's quarterly report must be

written in clear, simple language, meet the bilingual requirements of

Sec. 272.4(b), and contain the following:

a. A requirement to report the actual amount of child support paid

for the first 2 months of the quarter and the actual amount paid or

anticipated for the third month;

b. A requirement to report changes in the legal obligation to pay

child support anticipated for the upcoming quarter, including but not

limited to changes such as the completion of an obligation or a change

in the legally obligated amount.

c. A requirement to return the report to the State agency by a

specified date in the third month in the quarter;

d. Notification of the verification the household must submit with

the report;

e. The individual or agency unit available to assist the household

in completing the form and the toll-free number (or number where

collect calls will be accepted) which the household may use to obtain

further information;

f. A statement to be signed by the household member who is

responsible for paying child support indicating his or her

understanding that the information may result in a change in the

household's food stamp benefits, including reduction or termination;

g. A statement that failure to return the report by the required

deadline may result in disallowance of the child support deduction;

h. A reminder that other changes required to be reported under 7

CFR 273.12(a)(1) must be reported within 10 days from the date the

household becomes aware of the change; and

i. A statement advising the household that the State agency will

act on a change reported before the quarterly report is submitted;

j. A brief description of the Food Stamp Program civil and criminal

penalties for fraud.

The State agency would use this report to make any changes in the

household's child support deduction for the next 3 months. State

agencies would be required to average the previous quarter's payments

to determine the deduction for the following quarter. The State agency

would also need to take into account any reported changes in the legal

obligation to pay child support.

Households must be given a reasonable time after the end of the

second month to submit the quarterly report. If the household fails to

file a quarterly report or files an incomplete report by the date set

by the State agency, the State agency would be required to send the

household a reminder notice advising the household that it has 10 days

from the date the State agency mails the notice to file a complete

quarterly report. If the household does not file a complete report by

the extended filing date, the State agency would recalculate the

household's eligibility and benefit level without allowing a deduction

for child support. The State agency would not be allowed to terminate

the household for failing to submit a complete quarterly report unless

the household is otherwise ineligible.

The State agency would be required to send an adequate notice as

defined under current rules at 7 CFR 271.2 if the household fails to

submit a complete report or if the information contained on a complete

quarterly report results in a reduction or termination of benefits.

Adequate notice is currently defined, in part, as a written notice that

advises the household of an action the State agency intends to take.

The notice may be received by the household prior to the date of the

action, at the time the household receives its reduced benefits, or at

the time the household would have received its benefits if the action

the State agency intends to take is a termination of benefits.

Households have 10 days from the mailing date of the notice to contest

the State agency's action. State agencies may combine the reminder

notice and adequate notice.

The Department is further proposing in this rule to prohibit

quarterly reporting for some food stamp households. Section 6(c)(3) of

the Act prohibits dual reporting requirements. Thus, if the State

agency elects to require a household to report any child support

payments quarterly, the quarterly report would be the sole reporting

requirement for reporting child support. Section 6(c)(1)(A) of the Act

prohibits State agencies from requiring certain households such as

migrant or seasonal farmworker households to submit periodic reports.

We are including these statutory prohibitions in this proposal at 7 CFR

273.12.

The Department does not intend that changes other than changes in

child support be included on the quarterly report. The Department has

recently approved several waivers allowing State agencies to implement

a quarterly reporting system for certain portions of the food stamp

caseload. We will be reviewing the impact of these waivers to determine

the feasibility of a more expanded quarterly reporting system. The

quarterly report described in this rule pertains only to child support

payments.

Option 3--Monthly Reporting and Retrospective Budgeting

State agencies may require households (except certain legislatively

exempt households) to report changes on a monthly report form under the

current rules at 7 CFR 273.21 (i.e., monthly reporting households). All

monthly reporting households are required to be budgeted

retrospectively. Section 6(c) of the Act and corresponding regulations

at 7 CFR 273.21(h)(3) allow the State agency to determine the changes

the household must report monthly. Households that are required to

report monthly under 7 CFR 273.21 would be required to report their

monthly child support payments on the monthly report if the State

agency includes the requirement on its monthly report. If a household

that is required to report its child support payment on a monthly

report fails to report or fails to submit required verification related

to its child support payment, the State agency would determine the

household's eligibility and allotment level without consideration of

the child support deduction. If the State agency does not require the

household to report its monthly child support payments on the monthly

report, the household would be subject to change reporting for child

support payments.

Summary of Child Support Deduction Reporting and Budgeting Procedures

The intent of all the possible reporting and budgeting systems is

to most accurately reflect a household's actual payment of child

support while minimizing the burden on households and State agencies.

For that reason, the Department has provided several options as

discussed in detail above. In summary, the options are:

(1) Change reporting: If a household has a record of at least 3

months of paid child support, the State agency would budget the child

support deduction either prospectively or retrospectively based on an

average of the payments made in at least 3 previous months, and the

household would be required to report within 10 days changes in the

legal obligation to pay child support.

If a household has no record of paying child support (or a record

of less than 3 months) the State agency would budget the child support

deduction prospectively or retrospectively using an estimate based on

available information in accordance with 7 CFR 273.10(c), and

households would be required to report within 10 days changes in the

legal obligation and changes in the amount of the payment of $50 or

more.

(2) Quarterly reporting: The State agency may budget child support

payments prospectively or retrospectively based on actual monthly

information reported by the household on a quarterly report form.

(3) Monthly reporting: The State agency may budget child support

payments retrospectively based on actual amounts reported by the

household on a monthly report.

State agencies may choose one or more of these options. State

agencies may use a combination of the options, depending on the

budgeting and reporting systems already in place. That is, a State

agency which has monthly reporting for part of its caseload and change

reporting for other households, may opt to require the monthly

reporting households to report changes in child support payments

monthly while other households are required to report the changes

within 10 days. However, a State agency may not impose a dual reporting

requirement on a household. The Department does not believe that a

household should be subject to all three reporting methods because the

reporting requirements would be too cumbersome. Thus, no household

would be required under this proposal to report child support on a

change report, a monthly report, and a quarterly report. Regardless of

the system used, the State agency must act on any reported change.

Accordingly, the Department is proposing to amend 7 CFR 273.10, 7

CFR 273.12 (a) and (b), 7 CFR 273.21(h) and 7 CFR 273.21(j)(3)(iii) to

specify the requirements for the options State agencies may elect for

child support reporting and budgeting. The Department is also proposing

to amend 7 CFR 271.2 to define ``adequate notice'' as it relates to

monthly reporting and quarterly reporting.

Child Support Deduction--Certification Periods

Under current rules at 7 CFR 273.10(f), the State agency must

establish a definite period of time (i.e., certification period) within

which the household is eligible to receive benefits. Depending on

household circumstances, the household may be certified for as short a

period as 1 month but for no more than 12 months.

The Department is not proposing special certification period

requirements for households eligible to receive a child support

deduction. Establishing special certification period requirements was

considered, but during the January 20 hearing it was pointed out that

current rules adequately address the situation of households that pay

child support. Under current rules, households with no record of

payments or which have extreme monthly variations in payments would be

certified for a short period of time in accordance with 7 CFR

273.10(f)(4). Households with a stable payment record and households

that report their child support payments quarterly or monthly would be

certified for longer periods from 6 to 12 months, in accordance with 7

CFR 273.10(f)(5) and (8).

Child Support Deduction--Quality Control (QC)

As indicated in the above discussion, Congress recognized the

fluctuating nature of child support payments and intended that

determining the monthly amount of the allowable child support deduction

should not be a burden for State agencies. Accordingly, the Department

has proposed to give State agencies flexibility in determining how to

budget the payments, including use of averaging. According to the

legislative history of the child support deduction provision (House

Conference Report No. 213, 103rd Congress, 1st Session (1993), p. 925),

State agencies would be able to average the payments made during one

certification period and use that amount, taking into account any

changes in the obligation, for the next certification period. The

report indicates that ``The managers do not intend for this [averaging]

procedure to deny a household a deduction for any child support

actually paid, but rather the intention is to give States the option to

use consistent budgeting procedures that would minimize the number of

changes they would be required to make. State agencies correctly

following such procedures would not be charged with quality control

errors if the amount of child support that a household paid increased

or decreased as long as the State agency adjusted the household's

allotment prospectively at its next recertification.''

To implement this provision, the Department proposes that the QC

system would review the accuracy of the deduction at the most recent

certification action prior to the sample month. Any unreported change

in actual child support payments or obligation subsequent to the

certification action would not be the basis for citing a household

reporting error or a State agency error. A variance would exist if the

QC reviewer determines that the State agency did not apply the proper

deduction at the most recent certification action or that the household

reported a change after the most recent certification action and the

State agency failed to act or acted improperly on the reported change.

Therefore, the Department proposes to add a paragraph to 7 CFR

275.12(d)(2) to specify that any variances in the child support

deduction resulting from unreported changes in actual child support

payments or obligation shall be excluded from the QC error

determination.

Implementation

Section 13971 of the Leland Act provides that State agencies may

implement Section 13921, Child Support Payments to Non-Household

Members, on September 1, 1994, and shall implement the child support

deduction no later than October 1, 1995. Therefore, we are proposing

the amendments in this rule be effective on September 1, 1994, and be

implemented no later than October 1, 1995. The provision must be

implemented for all households that newly apply for Program benefits on

or after October 1, 1995, or the date the State agency implements the

provision prior to the required implementation date. State agencies

would be required to adjust the cases of participating households at

the next recertification, at household request, or when the case is

next reviewed, whichever comes first. The State agency must provide

restored benefits to such households back to October 1, 1995, or the

date the State agency implemented the provision prior to October 1,

1995. State agencies which fail to implement by October 1, 1995, shall

provide benefits retroactive to October 1, 1995, or the date of

application, whichever is later. Variances resulting from

implementation of the provisions of the final rule would be excluded

from error analysis for 120 days from the required implementation date,

in accordance with section 13951 of Pub. L. 103-66, which amended

section 16(c)(3)(A) of the Act, 7 U.S.C. 2025(c)(3)(A). State agencies

which implement prior to the required implementation date must notify

the appropriate regional office prior to implementation that they wish

the variance exclusion period to begin with actual implementation, as

provided in 7 CFR 275.12(d)(2)(vii)(A). Absent such notification, the

exclusionary period will begin with the required implementation date.

List of Subjects

7 CFR Part 271

Administrative practice and procedure, Food stamps, Grant programs-

social programs.

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.

7 CFR Part 275

Administrative practice and procedures, Food stamps, Reporting and

recordkeeping requirements.

Accordingly, 7 CFR parts 271, 273, and 275 are proposed to be

amended as follows:

1. The authority citation of parts 271, 273, and 275 continues to

read as follows:

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

PART 271--GENERAL INFORMATION AND DEFINITIONS

Sec. 271.2 [Amended]

2. In Sec. 271.2, the definition of ``Adequate notice'' is amended

by removing the words ``in a Monthly Reporting and Retrospective

Budgeting system'' and adding in their place the words ``in a periodic

reporting system such as monthly reporting or quarterly reporting''.

PART 273--CERTIFICATION OF ELIGIBLE HOUSEHOLDS

3. In Sec. 273.2:

a. a new sentence is added at the end of paragraph (b)(2),

b. a new paragraph (f)(1)(xii) is added, and

c. a new sentence is added at the beginning of paragraph

(f)(8)(i)(A).

The additions read as follows:

Sec. 273.2 Application processing.

* * * * *

(b) Food Stamp application form. * * *

(2) Income and eligibility verification system (IEVS). * * * The

State agency shall also notify all applicants on the application form

that information regarding child support payments may be verified with

Child Support Enforcement agencies or courts.

* * * * *

(f) Verification. * * *

(1) Mandatory verification. * * *

(xii) Legal obligation and actual child support payments. The State

agency shall verify the household's legal obligation to pay child

support, the amount of the obligation, and the monthly amount of child

support the household actually pays. The household is responsible for

providing verification of the legal obligation, the obligated amount,

and the amount paid. The State agency shall accept any document that

verifies the household's legal obligation to pay child support, such as

a court or administrative order, or legally enforceable separation

agreement. The State agency shall accept documentation verifying a

household's actual payment of child support including, but not limited

to, canceled checks, wage withholding statements, verification of

withholding from unemployment compensation, and statements from the

custodial parent regarding direct payments or third party payments the

noncustodial parent pays or expects to pay on behalf of the custodial

parent. Documents that are accepted as verification of the household's

legal obligation to pay child support shall not be accepted as

verification of the household's actual monthly child support payments.

In addition to requiring verification from the household, the State

agency shall be responsible for obtaining verification of the

household's child support payments if the payments are made to the

State's Title IV-D agency. State agencies shall enter into agreements

with Child Support Enforcement (CSE) agencies to obtain data regarding

the child support obligation and child support payment record of

members of food stamp households receiving a child support deduction.

The State agency shall match the records of food stamp recipients

receiving a child support deduction against CSE automated data files.

This match shall be conducted, at a minimum, at least once prior to the

next recertification. For households certified for 3 months or fewer,

the State agency shall conduct a match prior to alternate

recertifications. The State agency shall use the information in

determining the household's entitlement to a deduction in the new

certification period. The State agency shall give the household an

opportunity to resolve any discrepancy between household verification

and CSE records in accordance with paragraph (f)(9) of this section.

* * * * *

(8) Verification subsequent to initial certification. (i)

Recertification. (A) At recertification the State agency shall require

the household to verify the amount of legally obligated child support a

household member pays to a nonhousehold member. * * *

* * * * *

4. In Sec. 273.9, paragraphs (d)(7) and (d)(8) are redesignated as

paragraphs (d)(8) and (d)(9), respectively, and a new paragraph (d)(7)

is added to read as follows:

Sec. 273.9 Income and deductions.

* * * * *

(d) Income deductions. * * *

(7) Child support deduction. Child support payments paid by a

household member to or for a nonhousehold member, provided that the

household member has a legal obligation to pay child support and the

payments are verified in accordance with Sec. 273.2(f). Households that

fail or refuse to obtain necessary verification of their legal

obligation or of their child support payments shall have their

eligibility and benefit level determined without consideration of a

child support deduction. If the noncustodial parent makes child support

payments to a third party (e.g., a landlord or utility company) on

behalf of the nonhousehold member in accordance with the support order,

such payments shall be included in the child support deduction.

Payments that are made by the household to obtain health insurance for

the child or children shall also be included as part of the child

support deduction. For households that have at least a three-month

record of child support payments, the State agency shall allow a

deduction for amounts paid toward arrearages. Alimony payments made to

or for a nonhousehold member shall not be included in the child support

deduction. Households that are eligible to receive a child support

deduction shall report changes in accordance with the reporting

requirements specified in Sec. 273.12 or Sec. 273.21.

* * * * *

5. In Sec. 273.10:

a. The introductory text of paragraph (d) is amended by adding the

words ``child support'' between the words ``shelter,'' and ``and

medical''.

b. A new paragraph (d)(8) is added.

c. Paragraph (e)(1)(i)(E) is amended by removing the reference

``(e)(1)(i)(F)'' and adding in its place a reference to

``(e)(1)(i)(G)''.

d. Paragraphs (e)(1)(i)(F) and (e)(1)(i)(G) are redesignated as

paragraphs (e)(1)(i)(G) and (e)(1)(i)(H), respectively, and a new

paragraph (e)(1)(i)(F) is added.

e. Newly redesignated paragraph (e)(1)(i)(G) is amended by removing

the reference to ``(e)(1)(i)(G)'' and adding in its place a reference

to ``(e)(1)(i)(H)''.

The additions and revisions read as follows:

Sec. 273.10 Determining household eligibility and benefit levels.

* * * * *

(d) Determining deductions. * * *

(8) Child Support Deduction. The State agency shall budget child

support payments either prospectively or retrospectively, depending on

the reporting system used. In addition, the following budgeting

procedures shall be used:

(i) For change reporting households with a history of 3 or more

months of paying child support, the State agency shall average at least

3 months of child support, taking into account any anticipated changes

in the legal obligation, and use that average as the household's

support deduction.

(ii) For change reporting households with no child support payment

record or less than a 3-month record, the State agency shall estimate

the anticipated payments (excluding payments toward arrearages) and use

that estimate as the household's support deduction.

(iii) For quarterly reporting households, the State agency shall

initially use either paragraphs (d)(8)(i) or (d)(8)(ii) of this section

as appropriate, then develop an average using the information provided

in the quarterly report for subsequent quarters, making any necessary

adjustments for anticipated changes.

(iv) For monthly reporting households, the State agency shall

initially use either paragraphs (d)(8)(i) or (d)(8)(ii) of this section

as appropriate, then adjust the deduction as appropriate based on the

monthly reports.

(e) Calculating net income and benefit levels.

(1) Net monthly income.

(i) * * *

(F) Subtract allowable monthly child support payments in accordance

with Sec. 273.9(d)(5).

* * * * *

Sec. 273.11 [Amended]

6. In Sec. 273.11,

a. Paragraph (c)(1)(i) is amended by adding the words ``child

support,'' after the words ``dependent care,''.

b. Paragraph (c)(2)(iii) is amended by adding the words ``child

support payment,'' after the word ``allowable'' in the second sentence

and after the word ``deductible'' in the third sentence.

7. In Sec. 273.12,

a. The word ``and'' is removed at the end of paragraph (a)(1)(iv)

and the period at the end of paragraph (a)(1)(v) is revised to read ``;

and'' and a new paragraph (a)(1)(vi) is added.

b. A new sentence is added after the first sentence of paragraph

(a)(2).

c. Paragraph (a)(4) is redesignated as paragraph (a)(5) and a new

paragraph (a)(4) is added.

d. The heading of paragraph (b) is revised, new introductory text

is added to paragraph (b) and the introductory text of paragraph (b)(1)

is revised.

e. Paragraph (b)(2) is revised.

The revisions and additions read as follows:

Sec. 273.12 Reporting changes.

(a) Household responsibility to report.

(1) * * *

(vi) Changes in the legal obligation to pay child support,

including termination of the obligation when a child reaches an age at

which child support is no longer legally obligated. A household with

less than a 3-month record of child support payments shall also be

required to report changes greater than $50 from the amount used in the

most recent certification action. Households required to report changes

in child support on a quarterly or monthly report shall report actual

monthly amounts paid in addition to changes in the legal obligation.

(2)* * *Households that are required to report a change monthly as

specified under Sec. 273.21 or that are required to report monthly

child support payments on a quarterly report as specified under

paragraph (a)(4) of this section shall not be required to report

changes within 10 days of the date they become known to the household.*

* *

* * * * *

(4) The State agency may require a household that is eligible to

receive a child support deduction in accordance with Sec. 273.9(d)(7)

to report its monthly child support payments on a quarterly report.

(i) A State agency that elects to require a household to report its

monthly child support payments on a quarterly report shall provide the

household with the quarterly report no later than the end of the second

month in the quarter. The State agency shall provide the household a

reasonable period after the end of the month in which to return the

report. If the household does not file the report by the due date or

files an incomplete report, the State agency shall provide the

household with a reminder notice advising the household that it has 10

days from the date the State agency mails the notice to file a complete

quarterly report. If the household does not file a complete report by

the extended filing date as specified in the reminder notice, the State

agency shall determine the household's eligibility and benefits without

consideration of the child support deduction. The State agency shall

not terminate a household for failure to submit a quarterly report

unless the household is otherwise ineligible. The State agency shall

send the household an adequate notice as defined in Sec. 271.2 of this

chapter if the household fails to submit a complete report or if the

information contained on a complete quarterly report results in a

reduction or termination of benefits. The quarterly report shall meet

the requirements as specified in paragraph (b) of this section. The

State agency may combine the content of the reminder notice and the

adequate notice as long as the notice meets the requirements of the

individual notices.

(ii) The quarterly report form shall be the sole reporting

requirement for reporting monthly child support payments. The State

agency shall not include other items for the household to report on the

quarterly report. The State agency shall not require households

excluded from monthly reporting as specified in Sec. 273.21(b) to

report monthly child support payments on a quarterly report. The State

agency is also prohibited from requiring monthly reporting households

to submit a quarterly report.

* * * * *

(b) Report forms. The State agency shall provide the household with

a form for reporting the changes required in paragraph (a) of this

section and shall pay the postage for the household to return the

report.

(1) The report form for reporting changes within 10 days of the

date the change becomes known shall, at a minimum, include the

following:

* * * * *

(2) The quarterly report form for reporting child support payments

shall be written in clear, simple language and meet the bilingual

requirements described in Sec. s272.4(b) of this chapter. The report

shall include the following:

(i) A requirement to report the actual amount of child support paid

for the first two months of the quarter and the actual amount paid or

anticipated for the third month;

(ii) A requirement to report changes in the legal obligation to pay

child support anticipated for the upcoming quarter, including but not

limited to changes such as the completion of an obligation or a change

in the legally obligated amount;

(iii) The date in the third month by which the State agency must

receive the form;

(iv) Notification of the verification the household must submit

with the report;

(v) The name of the individual or agency unit available to assist

the household in completing the form and the toll-free number (or

number where collect calls will be accepted) which the household may

use to obtain further information;

(vi) A statement to be signed by the household member who is

responsible for paying child support indicating his or her

understanding that the information may result in changes in the level

of benefits, including reduction or termination;

(vii) A statement that failure to return the report by the required

deadline may result in disallowance of the child support deduction;

(viii) A reminder that other changes required to be reported under

paragraph (a)(1) of this section must be reported within 10 days from

the date the household becomes aware of the change;

(ix) A statement advising the household that the State agency will

act on changes in its monthly child support deduction if the household

elects to report the change before submitting the quarterly report; and

(x) A brief understandable description of the Food Stamp Program

civil and criminal penalties for fraud printed in prominent and

boldface lettering.

* * * * *

8. In Sec. 273.21:

a. The colon at the end of paragraph (h)(2)(v) is removed and a

semicolon is added in its place and the period at the end of paragraphs

(h)(2)(vii) and (h)(2)(viii) is removed and a semicolon is added in its

place.

b. A new paragraph (h)(2)(ix) is added.

c. The period at the end of paragraphs (j)(3)(iii)(C) and

(j)(3)(iii)(D) is removed and a semicolon is added in its place and a

new paragraph (j)(3)(iii)(E) is added.

The revision and additions read as follows:

Sec. 273.21 Monthly Reporting and Retrospective Budgeting (MRRB).

* * * * *

(h) The monthly report form.* * *

(2) Monthly report form.* * *

(ix) If the State agency elects to require reporting of child

support payments on the monthly report form, the State agency shall

require the household to report changes in the actual monthly amount of

child support paid and any changes in the legal obligation to pay child

support.

* * * * *

(j) State agency action on reports.* * *

(3) Incomplete filing.* * *

(iii)* * *

(E) If the household does not report or verify its monthly child

support payment or a change in its legal obligation, the State agency

shall not allow a child support deduction.

* * * * *

PART 275--PERFORMANCE REPORTING SYSTEM

9. In Sec. 275.12, a new paragraph (d)(2)(ix) is added to read as

follows:

Sec. 275.12 Review of active cases.

* * * * *

(d) Variance identification.* * *

(2) Variances excluded from error analysis.* * *

(ix) Any variance in a child support deduction which was the result

of an unreported change subsequent to the most recent certification

action shall be excluded from the error determination.

* * * * *

Dated: November 30, 1994.

Ellen Haas,

Under Secretary for Food, Nutrition, and Consumer Services.

[FR Doc. 94-30107 Filed 12-7-94; 8:45 am]

BILLING CODE 3410-30-U