Food Stamp Program: Resource Provision From the Mickey Leland Memorial Domestic Hunger Relief Act of 1990

SUMMARY: This rule amends Food Stamp Program regulations to implement

provisions contained in the Mickey Leland Memorial Domestic Hunger

Relief Act of 1990 (the Leland Act) and the Food, Agriculture,

Conservation, and Trade Act Amendments of 1991 that expand the criteria

by which a resource can be considered inaccessible. It finalizes

provisions in a proposed rule published in the Federal Register on

October 20, 1994.

DATES: This rule is effective September 20, 1995, and must be

implemented no later than the first day of the first month beginning

after December 19, 1995.

FOR FURTHER INFORMATION CONTACT: Supervisor, Eligibility and

Certification Regulations Section, Certification Policy Branch, Program

Development Division, Food Stamp Program, Food and Consumer Service,

USDA, 3101 Park Center Drive, Alexandria, Virginia, 22302, or by

telephone at (703) 305-2496.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This final 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 (``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(s) to 7 CFR part 3105, subpart V

(48 FR 29115, June 24, 1983; or 48 FR 54317, December 1, 1983, as

appropriate), this Program is excluded from the scope of Executive

Order 12372 which requires intergovernmental consultation with State

and local officials.

Executive Order 12778

This final 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)(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 retailers and wholesalers--

administrative procedures issued pursuant to 7 U.S.C. 2023 set out at 7

CFR 278.8.

Regulatory Flexibility Act

This final rule has also been reviewed with respect to the

requirements of the Regulatory Flexibility Act of 1980 (Pub. L. 96-354,

94 Stat. 1164, September 19, 1980). The Administrator of the Food and

Consumer Service (FCS) has certified that this proposal would not have

a significant economic impact on a substantial number of small

entities. State and local agencies that administer the Program will be

the most affected. Food stamp applicants and recipients will be

affected due to changes in excludable resources for purposes of the

Food Stamp Program.

Paperwork Reduction Act

This action does not contain reporting or record keeping

requirements subject to approval by the Office of Management and Budget

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

Background

The Mickey Leland Memorial Domestic Hunger Relief Act (Food,

Agriculture, Conservation, and Trade Act of 1990, Title XVII, Pub. L.

101-624, 104 Stat. 3783); (hereinafter referred to as the Leland Act)

made several changes to the Food Stamp Act of 1977, as amended (7

U.S.C. 2011, et seq.) (the Act). This rulemaking pertains to section

1719 of the Leland Act which amended section 5(g) of the Act, 7 U.S.C.

2014(g)(5), to expand the criteria by which property can be considered

inaccessible to households in the calculation of their resources for

purposes of food stamp eligibility. The Department originally published

a proposed rule on August 13, 1991 at 56 FR 40164 regarding, in part,

this Leland Act provision. The Department received twenty comments on

the proposal to amend 7 CFR 273.8(e) to incorporate this provision. On

December 13, 1991, section 904 of the Food, Agriculture, Conservation,

and Trade Act Amendments of 1991 (Pub. L. 102-237, 105 Stat. 1818)

(hereinafter referred to as the 1991 Technical Amendments) further

amended section 5(g)(5) of the Act. The Department re-proposed the rule

on the inaccessible resources provision on October 20, 1994 at 59 FR

52928 and provided the public with 90 days to comment on the proposed

provision. For additional information on the provisions of this rule,

the reader should refer to the preamble of the proposed rule, 59 FR

52928-31.

The Department received 12 comments on this proposed rule, 7 from

State agencies and 5 from public interest groups. Three commenters

supported the proposed rule as written. One commenter opposed the rule

as written. The other commenters opposed or suggested modifications to

one or more provisions of the proposed rule. These comments are

discussed below.

Currently, regulations at 7 CFR 273.8(c) describe both liquid and

non-liquid resources that are counted when determining a household's

eligibility for food stamps. Non-liquid resources such

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as land, buildings, and licensed and unlicensed vehicles, with some

exceptions, are included as resources because they can be converted to

cash. However, not all property can be easily sold, and this has posed

significant problems for both State agencies administering the Food

Stamp Program and households applying for benefits. Except for the

provisions regarding vehicles, current regulations focus on the

accessibility/inaccessibility of resources. In establishing

inaccessibility, State agencies are compelled to require a household to

verify that the property it owns, which is not otherwise an exempt

resource, has little or no fair market value; cannot be sold because it

is jointly owned with non-household members who are unwilling to sell;

or is otherwise inaccessible. In many instances, households have found

it difficult to provide this verification. Further, in establishing

accessibility/inaccessibility, State agencies may be faced with

questions of state property law and probate law. The situation was

particularly difficult with heir property, i.e., an undivided

fractional interest in a decedent's property. It is apparent that the

treatment of heir property was the primary problem Congress was

addressing when it passed section 1719 of the Leland Act, as the

legislative history contained in House Report No. 101-569, 101st

Congress, 2nd Session, Part 1, at 429-30, specifically refers to the

problems of heir property encountered by food stamp applicants and

State agencies.

Section 1719 of the Leland Act required the Department to

promulgate regulations requiring State agencies to develop standards

for identifying kinds of resources that, as a practical matter, a

household is unlikely to be able to sell for any significant return

because the household's interest is relatively slight or because the

cost of selling the household's interest would be relatively great.

Resources so identified were to be excluded as inaccessible resources

for food stamp purposes.

In December 1991, section 904 of the 1991 Technical Amendments

amended section 5(g)(5) of the Food Stamp Act by adding to the end of

this paragraph the following new sentences: ``A resource shall be so

identified (as inaccessible) if its sale or other disposition is

unlikely to produce any significant amount of funds for the support of

the household. The Secretary shall not require the State agency to

require verification of the value of a resource to be excluded under

this paragraph unless the State agency determines that the information

provided by the household is questionable.''

The regulations at 7 CFR 273.8(d) already exclude jointly-owned

resources that can be shown to be inaccessible. An example is a bank

account that is jointly-owned by food stamp applicant household and

non-household members which, by State law, is determined to be

inaccessible wholly or in part to the food stamp household. Also,

certain types of property are excluded from consideration as a resource

including property that the household is making a good faith effort to

sell (7 CFR 273.8(e)(8)). The Department believes that the amendments

to section 5(g)(5) of the Act were not intended to supplant the

existing regulations on inaccessible resources. Rather, these

amendments were intended to provide an additional exclusion for

resources such as heir property or other property which is unlikely to

produce a significant return or significant funds for the support of

the household.

One commenter, a State agency, opposed the rule as written, citing

administrative complexity, inconsistency with AFDC, and inequities

among food stamp recipients. The Department understands the State

agency's concerns; however, it disagrees with the commenter about the

rule. Given the legislative parameters, the Department believes it has

crafted a regulation that gives States maximum flexibility to establish

standards identifying a resource, not readily determined inaccessible

under existing regulations, as inaccessible with a minimum amount of

verification, without endangering program integrity.

Definition of ``Significant Return'' and ``Any Significant Amount

of Funds''

The Department proposed to define ``any significant return'' and

``any significant amount of funds'' as being one half the resource

limit for the household. The Department received 5 comments addressing

these definitions. Three commenters supported the definitions. Two

commenters suggested that the definitions be modified to define ``any

significant return'' and ``any significant amount of funds'' as being

the appropriate resource limit for the household.

The Department has decided to keep the definitions as proposed. For

food stamp purposes, households are permitted to have up to $2,000 in

resources ($3,000 for households if at least one member is aged 60 or

older). (For categorically-resource-eligible households, the issue of

accessibility is irrelevant.) As was pointed out in the proposed rule,

current data show that the average value of countable resources for all

food stamp households is less than $100. Ninety-five percent of all

food stamp households have $1,000 or less in countable resources. As

very few households participating in the food stamp program have

resources exceeding $1,000, the Department continues to believe that a

resource that would yield a return of $1,000 (or $1,500, as

appropriate) would be a significant return or a significant amount of

funds for a household that is otherwise eligible for food stamps.

Accordingly, the Department is adopting as proposed the definition of

``any significant return'' and ``any significant amount of funds'' at 7

CFR 273.8(e)(18) (i) and (ii).

Aggregation of Assets

Two commenters, both State agencies, recommended that all assets

being considered for a determination as inaccessible be added together

prior to the determination of inaccessibility and that the sum of those

assets be used in the determination. The Department is not adopting

this suggestion because the legislation is concerned with determining

the inaccessibility of a specific resource, not the aggregate resources

of a household. The Department understands the State agencies'

concerns, specifically those concerns dealing with attempts by

applicants to have resources declared inaccessible by sub-dividing one

resource into multiple units, each of which has a net value of less

than $1,000. In developing their standards, State agencies should make

it clear that a single resource cannot be sub-divided solely to apply

to obtain an exclusion as inaccessible. Also, the Department would like

to emphasize that this standard does not invalidate any other provision

regarding jointly-owned resources and inaccessible resources, as

described in 7 CFR 273.8(d). The Department expects that State agencies

will continue to apply all the provisions in 7 CFR 273.8 concerning

jointly-owned and inaccessible resources. The provisions of this rule

are intended to apply only to those resources that do not readily meet

the requirements in the other paragraphs of 7 CFR 273.8 for exclusion,

but would not provide a significant return to the household if sold.

Negotiable Financial Instruments

The Department proposed in 7 CFR 273.8(e) to prohibit applying this

provision to negotiable financial instruments. In the preamble, the

Department indicated that financial instruments such as stocks and

bonds

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were to be considered for this purpose as negotiable financial

instruments. One comment was received on this provision. That commenter

pointed out that in that State, a ``negotiable financial instrument''

has a specific legal meaning and does not include financial resources

such as stocks. The Department has revised the language of the

provision to provide that financial resources such as stocks, bonds,

and negotiable financial instruments are excluded from being considered

an inaccessible resource under this provision. Thus, in the State in

question, as in all other States, stocks and bonds are ineligible for

designation as inaccessible resources.

Application of this Rule to Vehicles

Three commenters on the August 13, 1991 proposed rulemaking

discussed whether or not vehicles could be identified as inaccessible

resources under this provision. As discussed in the October 20, 1994

proposed rule, the Department believes that it is very clear from the

statutory language and the legislative history of the inaccessible

resource provision that it was not the intent of Congress to include

vehicles. Five commenters, all public interest groups, disagreed with

the Department's position. The Department continues to believe, for the

reasons cited at length in the October 20, 1994 proposed rule, that its

interpretation that this legislative provision does not apply to

vehicles is the correct interpretation. Accordingly, the Department is

adopting as final the prohibition against applying the provision to

vehicles.

Quality Control

One commenter noted that the proposed rule did not address how

quality control review would affect a situation in which a State agency

had excluded a resource as unlikely for the household to sell for any

significant return, and the eligibility worker had not required the

household to provide any verification. The commenter has recommended

that the resource should be excluded from the error determination if

the resource is an appropriately excludable resource and the State

agency did not deem the significant return questionable. The Department

has considered this comment and agrees, in part. The Department agrees

that any resource which meets the standards developed by the State

agency to be considered unlikely to generate a significant return for

the household must be excluded from the error determination process.

However, the Department does not agree that the status of the resource,

as either included or excluded by quality control, should be based

strictly on the information provided by the household, and on the

eligibility worker's determination that this information is not

questionable. One of the key aspects of the quality control review

process is to determine a household's actual living circumstances for

the period of time under review, regardless of the information reported

by the household, or any determinations made by the eligibility worker.

The Department has determined that any resources discovered in the

course of the quality control review process which may be excluded

because their sale would not generate a significant return to the

household must be treated in the same manner as any other resource

discovered by quality control. The resource must be examined by the

quality control reviewer to determine whether or not the resource meets

the standards developed by the State agency to be considered unlikely

to generate a significant return for the household. Specific quality

control guidance regarding the review of these resources shall be

developed upon publication of this rule.

Implementation

The Department proposed that this rule be effective upon

implementation by State agencies but in no event later than the first

day of the first month beginning 120 days after publication of the

final rule. The Department did not receive any comments on the

implementation schedule as proposed. Accordingly, this action amends 7

CFR 272.1(g) to add a new paragraph to address implementation

requirements for this final action.

Quality control variances resulting from implementation of the

remaining provisions of this final rule will be excluded for 120 days

from the required implementation date, in accordance with 7 CFR

275.12(d)(12), as modified by 7 U.S.C. 2025(c)(3)(A).

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 procedures, Aliens, Claims, Food

stamps, Grant programs-social programs, Penalties, Reporting and

recordkeeping requirements, Social security, Students.

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

1. The authority citation of 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)(141) is added to read as

follows:

Sec. 272.1 General terms and conditions.

* * * * *

(g) Implementation. * * *

(141) Amendment No. 360. This provision is effective September 20,

1995, and must be implemented no later than the first day of the first

month beginning December 19, 1995.

PART 273--CERTIFICATION OF ELIGIBLE HOUSEHOLDS

3. In Sec. 273.8, a new paragraph (e)(18) is added to read as

follows:

Sec. 273.8 Resource eligibility standards.

* * * * *

(e) Exclusions from resources. * * *

(18) State agencies shall develop clear and uniform standards for

identifying kinds of resources that, as a practical matter, the

household is unable to sell for any significant return because the

household's interest is relatively slight or because the costs of

selling the household's interest would be relatively great. A resource

shall be so identified if its sale or other disposition is unlikely to

produce any significant amount of funds for the support of the

household. This provision does not apply to financial instruments such

as stocks, bonds, and negotiable financial instruments, or to vehicles.

The determination of whether any part of the value of a vehicle is

included as a resource shall be handled using the provisions of

paragraph (h) of this section. The State agency may require

verification of the value of a resource to be excluded if the

information provided by the household is questionable. The following

definitions shall be used in developing these standards:

(i) ``Significant return'' shall be any return, after estimated

costs of sale or disposition, and taking into account the ownership

interest of the household, that is estimated to be one half or more of

the applicable resource limit for the household; and

(ii) ``Any significant amount of funds'' shall be funds amounting

to one half or more of the applicable resource limit for the household.

* * * * *

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Dated: August 10, 1995.

Ellen Haas,

Under Secretary for Food, Nutrition, and Consumer Services.

[FR Doc. 95-20591 Filed 8-18-95; 8:45 am]

BILLING CODE 3410-30-U