Food Stamp Program: Revisions in Use and Disclosure Rules Involving the Sharing of Information Provided by Retail and Wholesale Food Concerns With Other Federal and State Agencies

DEPARTMENT OF AGRICULTURE

Food and Consumer Services

7 CFR Part 278

RIN 0584-AC00

Food Stamp Program: Revisions in Use and Disclosure Rules

Involving the Sharing of Information Provided by Retail and Wholesale

Food Concerns With Other Federal and State Agencies

AGENCY: Food and Consumer Service, USDA.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: This rulemaking proposes to implement certain provisions in

two different laws which expand the authority of the United States

Department of Agriculture's Food and Consumer Service (FCS) to share

information provided by applicants and firms participating as

authorized retail food stores or wholesale food concerns in the Food

Stamp Program (FSP) with other government agencies. The Food Stamp Act

of 1977, as amended, was amended by section 203 of the Food Stamp

Program Improvements Act of 1994, and the Social Security Act and the

Internal Revenue Code were amended by section 316 of the Social

Security Independence and Program Improvements Act of 1994. This

proposed rule also includes one technical change to correct an error in

regulatory reference that does not change the substance of the affected

provision.

The proposed rule would implement the authority for FCS to share

such information, excluding employer identification numbers (EINs) and

Social Security numbers (SSNs), with Federal and State law enforcement

and investigative agencies for purposes of administering and enforcing

the Food Stamp Act of 1977, as amended, or any other Federal or State

law and regulations issued under this Act or any other Federal or State

law. It also would provide new criteria to govern the sharing of such

information and criminal penalties for unauthorized use. Finally, this

rule would implement the Secretary of Agriculture's new authority to

share EIN and SSN information of applicants and firms participating in

the FSP with other Federal agencies.

DATES: Comments on the provisions of this rule must be received no

later than June 12, 1995, to be assured of consideration.

ADDRESSES: Comments should be addressed to Suzanne Fecteau, Food and

Consumer Service, Chief, Coupon and Retailer Branch, 3101 Park Center

Drive, Alexandria Virginia 22302-1594. All written comments will be

open to 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) in room 706, 3101 Park Center Drive, Alexandria,

Virginia.

FOR FURTHER INFORMATION CONTACT: Questions regarding this rulemaking

should be addressed to Suzanne Fecteau at the above address or by

telephone at (703) 305-2418.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This rule has been determined to be not significant for purposes of

Executive Order 12866 and therefore has not been reviewed by the Office

of Management and Budget.

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 and related Notice to 7 CFR part 3015 subpart V (48 FR 29115, June

24, 1983), this Program is excluded from the scope of the Executive

Order 12372 which requires inter-governmental 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). William E.

Ludwig, the Administrator of the Food and Consumer Service, has

certified that this proposed rule will not have a significant economic

impact on a substantial number of small entities. This action may have

a significant effect on a limited number of small entities found to be

in violation of State or Federal laws. [[Page 25626]]

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).

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 intended to have retroactive effect. 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)(10) 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 283 (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.

Background

This rule would expand the use and disclosure of information

provided by applicants and firms participating as authorized retail

food stores or wholesale food concerns in the FSP. The provisions of

this rule will be effective retroactively to August 15, 1994, when Pub.

L. 103-296 was enacted, and will be implemented 30 days after the final

rulemaking is published.

Current regulations restrict FCS' ability to share information

provided by retailers and wholesalers participating in the Food Stamp

Program. EINs and SSNs may only be shared with Federal employees whose

duties or responsibilities require access to those numbers for the

administration and enforcement of the Food Stamp Act of 1977, as

amended. The use of EINs and SSNs is only allowed for the maintenance

of a list of specific individuals and firms that have been sanctioned

or convicted of Food Stamp Program violations under sections 12 (Civil

Money Penalties and Disqualification) and 15 (Violations and

Enforcement) of the Food Stamp Act. Other information provided by

retailers (e.g. application information, sales and redemption data) can

be shared with other Federal or State agencies only for the purposes of

administration or enforcement of the Food Stamp Program, the Special

Supplemental Food Program for Women, Infants and Children (WIC), and

for audits by the General Accounting Office.

Use and Disclosure of Information Provided by Retail Food Stores and

Wholesale Food Concerns

Section 9(c) of the Food Stamp Act of 1977, as amended (the Act) (7

U.S.C. 2018(c)) governs the authorization of retailers and wholesalers

to participate in the Food Stamp Program, based on information those

retailers and wholesalers provide FCS. Section 203 of the Food Stamp

Program Improvements Act of 1994, Pub. L. 103-225 (108 Stat. 106)

amends section 9(c) of the Act, to expand the use and disclosure of

information provided by applicant and participating retail and

wholesale food concerns, such as food stamp redemption data, as well as

information about ownership (excluding EINs and SSNs) and sales data

included on the initial application, in addition to information

required to be submitted for purposes of determining whether a firm

continues to qualify. As authorized by the amendment to section 9(c),

this rule would allow disclosure of this information to other Federal

and State law enforcement and investigative agencies for the purposes

of administering and enforcing the Food Stamp Act, as well as the

enforcement of any other Federal or State laws and the regulations

issued under this Act and such laws.

This rule proposes other safeguards in addition to new penalties

for unauthorized use and disclosure of information. It would limit the

use and disclosure of this information to the purpose of effectively

administering and enforcing the Food Stamp Act or for investigating

violations of other State or Federal laws, or enforcement of such laws

and regulations. Federal and State agencies authorized to have access

to this information would be required to submit a request in writing.

The request must set forth specifically which law is being enforced and

must also demonstrate how the requested information is relevant to the

enforcement of that law. The Department will base its determination

whether or not to disclose the requested information upon such a

showing by the requesting agency. The Department expects such

information to be requested most frequently by taxation authorities

such as the Internal Revenue Service and State income and sales tax

agencies. The information may also be useful to law enforcement and

investigative agencies which seek to verify the income and sources of

income of a retailer.

In addition to responding to specific requests from other Federal

and State agencies, FCS would periodically initiate cross matches of

retailer data against other agencies' files. The purpose of these

matches is to allow the verification of information reported by

applicants and participating firms, and to assist in the administration

and enforcement of the Food Stamp Act and other Federal and State laws.

The Food Stamp Improvements Act of 1994 also amends section 9(c) of

the Food Stamp Act to provide criminal penalties for the misuse of any

information obtained from retail food stores and wholesale food

concerns. This would apply to any person who publishes, divulges,

discloses, or makes this information known in any manner or to any

extent not authorized by Federal law or regulations. A penalty which

includes a fine of not more than $1,000, or imprisonment of not more

than one year, or both, is established by law and is reflected in this

proposed rulemaking.

Cross-Matching of Social Security Account Number Information and

Employer Identification Number Information Maintained by the Department

of Agriculture

Section 1735 of the Food, Agriculture, Conservation, and Trade Act

of 1990 (Pub. L. No. 101-624, 104 Stat. 3359) amended section

205(c)(2)(C) of the Social Security Act (42 U.S.C. 405(c)(2)(C)) and

added section 6109(f) to the Internal Revenue Code of 1986 (26 U.S.C.

6109(f)) to permit the Secretary of Agriculture to collect the Social

Security numbers of individual retailers who apply for FSP

authorization and those of the officers of corporate applicants, as

well as employer identification numbers assigned by the Internal

Revenue Service. Section 316 of the Social Security Independence and

Program Improvements Act of 1994 (Pub. L. No. 103-296, 108 Stat. 1464)

expands FCS' authority to share the EINs and SSNs of food stamp

retailers and wholesalers with other agencies or instrumentalities of

the United States for verification purposes to more effectively

administer and enforce the Food Stamp Program, as well as other Federal

laws. [[Page 25627]]

This rulemaking proposes to permit the Department to share the list

of names and identifying numbers of food concerns with other Federal

agency personnel who otherwise have access to EINs and SSNs, for the

purpose of effectively administering and enforcing the Food Stamp Act

or for investigating violations of other Federal laws, or enforcement

of such laws. The use of such lists would be limited to cross-matching

employer identification number information and Social Security account

number information maintained by the Department of Agriculture for the

purpose of verifying information provided by applicants and firms

participating in the Food Stamp Program.

Under the amendments, the Department must restrict access to

officers and employees of the United States government whose duties or

responsibilities require access to EINs and SSNs. To obtain such

information, a Federal agency must already have access to EINs and

SSNs, and must submit a written request that demonstrates the need for

such information. The applicable law shall be clearly identified as the

relevant basis for a request to assist FCS in determining whether

retailer data can be released to the requesting agency. The Department

anticipates such information to be requested most frequently by the

Internal Revenue Service. The information may also be useful to other

Federal agencies which seek to verify the income and sources of income

for a given retailer, in conjunction with an EIN or SSN.

In addition to responding to specific requests from other Federal

agencies under this proposed rule, FCS would periodically initiate

cross matches of retailer data against other Federal agencies' files.

The purpose of these matches is to allow the verification of

information reported by applicant and participating firms, and to

assist in the administration and enforcement of other Federal laws.

The provisions of this rule do not extend to private actions

against the authorized entities, either contemplated or ongoing, as

private litigants are not law enforcement agencies.

Technical Correction

This rule proposes to implement a technical change to correct a

regulatory reference error in Sec. 278.1 (q)(iv), whereby a paragraph

dealing with privacy that should have been referenced as ``278.1 (q)''

was mistakenly referenced as ``278.1 (s)''. This correction does not

change the intent of this provision.

Finally, it is anticipated that changes to Department of Treasury

references used in this proposed rule will be made in the final rule to

reflect changes made by the Department of Treasury in a proposed rule

dealing with information sharing that was printed in the Federal

Register on May 10, 1995.

List of Subjects

7 CFR Part 278

Administrative practice and procedure, Banks, Banking, Claims, Food

stamps, Groceries--retail, Groceries, General line--wholesaler,

Penalties.

Accordingly, 7 CFR part 278 is proposed to be amended as follows:

1. The authority citation for 7 CFR part 278 continues to read as

follows:

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

PART 278--PARTICIPATION OF RETAIL FOOD STORES, WHOLESALE FOOD

CONCERNS AND INSURED FINANCIAL INSTITUTIONS

2. In Sec. 278.1:

a. The introductory text of paragraph (q) is revised;

b. Paragraphs (q)(1) and (q)(2) are redesignated as paragraphs

(q)(2) and (q)(3), respectively, and a new paragraph (q)(1) is added;

c. Newly redesignated paragraphs (q)(2)(i), (q)(2)(ii), (q)(3)(i),

and (q)(3)(ii) are revised;

d. Newly redesignated paragraph (q)(2)(iii) is amended by adding

after the word ``Department'' in the first sentence the words ``or any

agency or instrumentality of the United States'' and by removing the

designation ``(c)(2)'' following the references to ``Sec. 301.6109-2''

and ``(26 CFR Sec. 301.6109-2)'';

e. Newly redesignated paragraph (q)(2)(iv) is amended by adding

after the word ``Department'' the words ``or maintained by any agency

or instrumentality of the United States'', by removing the references

to ``Sec. 278.1(s)(1)(ii)'' and ``Sec. 278.1 (q)(1)(iv)'' and adding in

their place references to ``paragraph (q)(2)(ii) of this section'' and

``paragraph (q)(2)(iv) of this section'', and by removing the

designation ``(d)'' following the references to ``Sec. 301.6109-2'' and

``(26 CFR 301.6109)'';

f. Newly redesignated paragraph (q)(2)(v) is amended by removing

the designation ``(e)'' after the references to ``Sec. 301.6109-2'' and

``(26 CFR 301.6109-2)'';

g. Newly redesignated paragraph (q)(3)(iv) is amended by removing

the reference ``Sec. 278.1(q)(2)(iv)'' and adding in its place the

reference ``paragraph (q)(3)(iv) of this section''; and

h. A new paragraph (q)(4) is added. The revisions and additions

read as follows:

Sec. 278.1 Approval of retail food stores and wholesale food concerns.

* * * * *

(q) Safeguarding privacy. With the exception of EINs and SSNs, the

use and disclosure of the contents of an initial application or other

information required to be submitted to determine whether an applicant

continues to qualify, including ownership information and sales and

redemption data provided by retail food stores and wholesale concerns

by Federal and State law enforcement and investigative agencies, is

limited to the purposes of administering or enforcing the Food Stamp

Act or any other Federal or State law, and the regulations issued under

the Food Stamp Act or such other law. Such information may also be

disclosed to and used by State agencies that administer the Special

Supplemental Food Program for Women, Infants and Children (WIC). Such

purposes shall not exclude the audit and examination of such

information by the Comptroller General of the United States authorized

by any other provision of law. Any person who publishes, divulges,

discloses, or makes known in any manner or to any extent not authorized

by Federal law or regulations any information obtained under this

paragraph shall be fined not more than $1,000 or imprisoned not more

than 1 year, or both. Additional safeguards with respect to employee

identification numbers (EINs) are contained in paragraph (q)(2) of this

section. Additional safeguards with respect to Social Security numbers

(SSNs) are contained in paragraph (q)(3) of this section.

(1) Criteria for requesting information. Except for EINs and SSNs,

information provided by firms participating in the Food Stamp Program

may be requested by Federal or State law enforcement or investigative

agencies for purposes of administering or enforcing specified Federal

or State laws, or regulations issued under those laws. Release of

information under this paragraph shall be limited to information

relevant to the administration or enforcement of the specified laws and

regulations, as determined by FCS. The request must be submitted in

writing and must clearly indicate the specific provision of law or

regulations which would be administered or enforced by access to

requested information and the relevance of the information to those

purposes. [[Page 25628]] FCS may require additional information, if

needed to clarify a request. Requests under this paragraph are limited

to authorized entities authorized on and after August 15, 1994.

However, unauthorized firms redeeming food stamps in violation of the

Food Stamp Act, as amended, on and after August 15, 1994 shall be

subject to provisions of this Section.

(2) Employer identification numbers. (i) The Department may have

access to the EINs obtained pursuant to paragraph (b)(5) of this

section for the purpose of establishing and maintaining a list of the

names and EINs of the stores and concerns for use in determining those

applicants who previously have been sanctioned or convicted under

sections 9 and 12 of the Food Stamp Act of 1977, as amended, (7 U.S.C.

2018, 2021). The Department may share EINs with other Federal agencies

and instrumentalities if the Department determines that such sharing

would assist in verifying and matching such information against

information maintained by such other agency or instrumentality. Any

such information shared pursuant to this paragraph may be used by such

other agency or instrumentality for the purpose of effective

administration and enforcement of the Food Stamp Act of 1977, as

amended, or for the purpose of investigation of violations of other

Federal laws or enforcement of such laws. See Treas. Reg.

Sec. 301.6109-2 (26 CFR 301.6109-2).

(ii) The only persons permitted access to EINs obtained pursuant to

paragraph (b) of this section are officers and employees of the United

States who otherwise have access and whose duties or responsibilities

require access to the EINs for the administration or enforcement of the

Food Stamp Act of 1977, as amended, or for the purpose of investigation

of violations of other Federal laws or enforcement of such laws. See

Treas. Reg. Sec. 301.6109-2 (26 CFR 301.6109-2).

* * * * *

(3) Social Security numbers. (i) The Department may have access to

SSNs obtained pursuant to paragraph (b)(5) of this section for the

purpose of establishing and maintaining a list of names and SSNs for

use in determining those applicants who previously have been sanctioned

or convicted under section 12 and 15 of the Food Stamp Act of 1977, as

amended, (7 U.S.C. 2021 or 2024). The Department may use this

determination of sanctions and convictions in administering sections 9

and 12 of the Food Stamp Act of 1977 (7 U.S.C. 2018, 2021). The

Department may share SSNs with other Federal agencies and

instrumentalities if the Department determines that such sharing would

assist in verifying and matching such information against information

maintained by such other agency or instrumentality. Any such

information shared pursuant to this paragraph may be used for the

purpose of effective administration and enforcement of the Food Stamp

Act of 1977, as amended, or for the purpose of investigation of

violations of other Federal laws or enforcement of such laws.

(ii) The only persons permitted access to SSNs obtained pursuant to

paragraph (b) of this section are officers and employees of the United

States who otherwise have access and whose duties or responsibilities

require access to the SSNs for the administration or enforcement of the

Food Stamp Act of 1977, as amended, or for investigations of violations

of other Federal laws or enforcement of such laws.

* * * * *

(4) FCS initiated matches. Under the restrictions noted in

paragraph (q) of this section, FCS will periodically initiate cross

matches of retailer data against other Federal and State agencies'

files for the purpose of verifying information provided by applicant

and participating firms, and for the purposes of administering and

enforcing other Federal or State laws.

* * * * *

William E. Ludwig,

Administrator, Food and Consumer Service.

[FR Doc. 95-11785 Filed 5-11-95; 8:45 am]

BILLING CODE 3410-30-U