Food Stamp Program: Certification Provisions of the Mickey Leland Childhood Hunger Relief Act

SUMMARY: This rule amends Food Stamp Program regulations to implement

nine provisions of the Mickey Leland Childhood Hunger Relief Act,

finalizing a proposed rule published in the Federal Register on August

30, 1994. This rule will: (1) simplify the household definition; (2)

establish eligibility for children who live with their food stamp

eligible parents in a drug or alcohol rehabilitation center; (3)

exclude from resources the value of vehicles used to transport fuel or

water; (4) increase the fair market value exclusion of vehicles for

determining a household's resource limit; (5) exclude certain General

Assistance (GA) vendor payments; (6) exclude the earnings of elementary

and secondary students under age 22 who live with their parents; (7)

increase the maximum amount of the dependent care deduction; (8)

eliminate the current federally-imposed limit and (9) require State

agencies to establish a Statewide limit on the dependent care

reimbursement paid to participants in the Food Stamp Employment and

Training Program (E&T); and require proration of food stamp benefits

only after a break of more than one month in certification.

DATES: This rule is effective December 16, 1996.

FOR FURTHER INFORMATION CONTACT: Margaret Werts Batko, Assistant Chief,

Certification Policy Branch, Program Development Division, Food and

Consumer Service, 3101 Park Center Drive, Alexandria, VA 22302 or by

telephone at (703) 305-2520.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This final rule has been determined to be economically significant

and was reviewed by the Office of Management and Budget (OMB) under

Executive Order 12866.

Executive Order 12372

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

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

final rule and related notices of 7 CFR Part 3015, Subpart V (48 FR

29115), 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 final rule is not intended to have retroactive

effect unless so specified in the Effective Dates 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 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.

Regulatory Flexibility Act

The Department has also reviewed this final rule in relation to the

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

94 Stat. 1164, September 19, 1980). Ellen Haas, Under Secretary for

Food, Nutrition, and Consumer Services, has certified that this rule

does not have a significant economic impact on a substantial number of

small entities. The rule will affect food stamp applicants and

recipients and the State and local agencies that administer the

Program. Eligibility criteria will be simplified and some currently

participating households will realize an increase in Program benefits.

Paperwork Reduction Act

This final rule does not contain reporting or recordkeeping

requirements subject to approval by the Office of Management and Budget

under the Paperwork Reduction Act of 1995 (Pub. L. 104-13). The

information collection requirements associated with application,

certification and ongoing eligiblity of food stamp households is

approved under OMB No. 0584-0064. This rule affects the determination

of eligibility and benefit levels only; it does not affect the current

information collection requirements for making such determination.

Regulatory Impact Analysis

Need for Action

This action is required as a result of Title XIII, Chapter 3,

Omnibus Budget Reconciliation Act of 1993, Pub. L. 103-66, the Mickey

Leland Childhood Hunger Relief Act (Leland Act), amendments to the Food

Stamp Act of 1977, as amended, 7 U.S.C. 2011-2032. The Leland Act

amendments: (1) simplify the household definition; (2) establish

eligibility for children who live with their food stamp eligible

parents in a drug or alcohol rehabilitation center; (3) exclude from

resources the value of vehicles used to transport fuel or water; (4)

increase the fair market value exclusion of vehicles for determining a

household's resource limit; (5) exclude certain General Assistance

vendor payments; (6) exclude the earnings of elementary and secondary

school students under age 22 who live with their parents; (7) increase

the maximum amount of the dependent care deduction; (8) eliminate the

current federally-imposed limit and require State agencies to establish

a Statewide limit on the dependent care reimbursement paid to

participants in the Food Stamp Employment and Training Program; and (9)

require proration of benefits only in the initial month of

certification.

Benefits

This action will increase the number of potentially eligible food

stamp recipients and will increase the benefit level of certain

households that are affected by these provisions.

Costs

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

Stamp Program by approximately $7 million in Fiscal Year 1994; $107

million in Fiscal Year 1995; $132 million in Fiscal Year 1996; $187

million in Fiscal Year 1997; and $207 million in Fiscal Year 1998.

Background

On August 30, 1994, the Department published a proposed rule at 59

FR 44866 to implement amendments to the Food Stamp Act of 1977, as

amended, 7 U.S.C. 2011-2032, (Food Stamp Act) made by the Mickey Leland

Childhood Hunger Relief Act. Title XIII, Chapter 3,

[[Page 54271]]

Omnibus Budget Reconciliation Act of 1993, Pub. L. 103-66, (Leland

Act).

Comments were solicited on the provisions of the proposed

rulemaking through October 31, 1994. The Department received 26 comment

letters from State and local welfare agencies and public interest

groups. All comments received were reviewed and considered, and those

which raised relevant issues or questions are addressed below by

subject. Comments which were unclear or not pertinent to this

rulemaking are not addressed in this preamble. For a full understanding

of the provisions of this final rule, the reader should refer to the

preamble of the proposed rule.

By the time this rule is published, subsequent legislation will

have modified some of its provisions. The Department will be amending

these regulations to reflect those legislative changes.

Simplifying the Household Definition for Households With Children and

Others

Section 13931 of the Leland Act amended section 3(i) of the Food

Stamp Act to simplify the household definition provisions and to

support families that live together to share housing expenses but

maintain individual households. With certain enumerated exceptions, the

simplified household definition allows persons who live together and

purchase food and prepare meals separately to participate in the

Program as separate food stamp households. Those presumed to be groups

of individuals who customarily purchase and prepare meals together even

if they do not do so are: (1) spouses who live together; (2) parents

and their children 21 years of age or younger (who are not themselves

parents living with their children or married and living with their

spouses); and (3) children (excluding foster children) under 18 years

of age who live with and are under the parental control of a person

other than their parent together with the person exercising parental

control. The Leland Act left intact the separate household status of

individuals (and their spouses) who live with others, are 60 years of

age or older, and are unable to purchase food and prepare meals due to

a disability or disabling infirmity, as long as the other household

members' income (excluding that of the spouse) does not exceed 165% of

the poverty line.

The Department proposed to amend 7 CFR 273.1(a) to mirror section

13931 of the Leland Act with one addition. The Leland provision did not

address whether a child under 18 who is living with a non-parent adult

can be a separate household from that adult when the child is married

and living with his or her spouse or living with his or her own child.

To provide the same treatment for a child living with a non-parent

adult that is provided for a child living with a natural, adoptive, or

stepparent, the Department proposed changing the definition of parental

control to specify that children who live with their own children or

who are married and live with their spouses are not considered to be

under parental control for purposes of the section. Several commenters,

including State welfare agencies and public interest groups, strongly

supported the proposal because it simplifies the household

determination by making the purchase and preparation of food the basis

for membership in a household with only a few simple exceptions.

The Department also proposed two conforming amendments to implement

section 13931 of the Leland Act. As described in greater detail above,

the Leland Act preserved the separate household status permitted for

elderly individuals who are so disabled that they cannot purchase and

prepare food for themselves. The Department proposed amending the

provision that implements this exception, 7 CFR 273.1(a)(2)(ii), to

update its references to the new portions of 7 CFR 273.1(a)(2)(i)

regarding spouses and children. The Department proposed a second

conforming amendment to remove the requirement of 7 CFR 273.10(f)(2)

that mandates certification periods of up to six months for households

meeting the parent/child or sibling provisions of 7 CFR 273.1(a)(2)(i)

(C) and (D) because the Leland Act amended the parent/child provisions

and removed the sibling provisions.

No adverse comments were received on the amendment removing the

six-month certification requirement for households consisting of an

individual and his/her minor children living with the individual's

parent or sibling, and so it will not be changed in this final

rulemaking. The other proposed conforming amendment is discussed below.

Two State welfare agencies requested clarification on how section

13931 of the Leland Act and the Department's proposed rule changed 7

CFR 273.1(a)(2)(ii), which allows individuals who are elderly and so

disabled that they cannot purchase and prepare food for themselves to

be separate households (in certain circumstances) from the others with

whom they live. In the proposed rule, the Department updated the

references in the elderly and disabled provision to correspond to the

proposed rule's household definition. Under that proposal, an elderly

and disabled person would be combined into one household with his or

her spouse, his or her natural, adopted or stepchildren under age 22,

and those children under 18 over whom the elderly and disabled

individual exercised parental control. This makes the provision

needlessly complex. This special rule for elderly and disabled people

was created to discourage these individuals from being

institutionalized, and to encourage people to take care of them by

allowing them to be separate food stamp households. To continue to

subject this exception to the other household provisions regarding

children is also a departure from the legislation, which only requires

that the elderly and disabled individual be included in the same food

stamp household as his or her spouse. For these reasons, the Department

is amending 7 CFR 273.1(a)(2)(ii) to follow the statutory language more

directly.

One commenter asked whether there was a minimum age for children

who can, by default, have their own household under this elderly and

disabled exception. Section 5(i) of the Food Stamp Act, as amended by

the Leland Act, provides that ``[n]otwithstanding the preceding

sentences, [the household definition provision] an individual who lives

with others, who is sixty years of age or older, and who is unable to

purchase food and prepare meals because such individual suffers * * *

from a disability * * * shall be considered, together with any of the

others who is the spouse of such individual, an individual household,

without regard to the purchase of food and preparation of meals if the

income * * * of the others, excluding the spouse, does not exceed the

poverty line * * * by more than 65 per centum.'' This statutory

language requires that the elderly and disabled individual be combined

with his or her spouse, but does not address children that may also be

in the household. It would be rare for an elderly person who is so

disabled that he or she cannot purchase and prepare food to be living

alone in a household with a minor child. Because this circumstance is

not very likely to occur and the Food Stamp Act does not address

children, the Department has decided not to set an arbitrary minimum

age, and instead will follow the language of the Food Stamp Act.

With respect to the proposal as a whole, one commenter thought it

was confusing that the household definition establishes different ages

(18 and 21) depending on the child's relationship

[[Page 54272]]

with the people with whom the child lives. Because these ages were

statutorily mandated, the Department does not have the authority to

change them. Several commenters requested that the Department continue

to grant separate household status to minor children who live with an

elderly or disabled parent or sibling. However, section 13931 of the

Leland Act amended the household definition, eliminating the sibling

provision in favor of a more simplified definition. The Department

cannot override the Leland Act by restoring this provision. One

commenter asked whether an individual can have a separate food stamp

household the month he or she turns 22 (or 18 if the individual lives

under the parental control of a non-parent), or the month after. The

household composition analysis is not analogous to other age-driven

provisions because it is also based on whether the individual purchases

and prepares food separately from the others in the household. Separate

household status is not granted automatically; an individual must meet

the requirements that apply to all applicants, including the

requirement to purchase and prepare food separately.

Two commenters asked whether the provisions of 7 CFR 273.1(c)(1)

regarding boarders should be changed in light of the Leland Act changes

and the legislative intent behind those changes. Current regulations at

7 CFR 273.1(c)(1) preclude children, even adult children, from being

granted boarder status in their parents' home. According to 7 CFR

273.1(c)(5), a boarder's income and resources are excluded from the

income and resources of the household providing boarder services.

Allowing adult children to be boarders in their parents' homes might

encourage parents to allow children to remain at home until they are

self-sufficient. The commenters thought a rule change would be

necessary to remove the prohibition against children being boarders in

their parents' homes. However, the current boarder provision, 7 CFR

273.1(c)(1), incorporates the new household definition by reference and

denies boarder status only to those ``* * * individuals or groups of

individuals described in paragraph (a)(2) [of 7 CFR 273.1] * * *.''

Paragraph 273.1(a)(2) is being amended by this rule to describe

children under age 22 living with their natural, adoptive, or

stepparents, and children under 18 living under the parental control of

a non-parent adult. Therefore, children age 22 and over are no longer

prohibited by 7 CFR 273.1(c)(1) from being considered boarders in their

parents' homes, and children 18 and over living with non-parent adults

are not prohibited from being considered boarders in the adult's home.

The Department received many comments on its proposal to amend the

definition of parental control. The current definition is contained in

Food Stamp Program Policy Memo 3-93-6, dated March 26, 1993, which

states that children under parental control for food stamp eligibility

purposes are ``minors who are dependents--financial or otherwise--of

the household as opposed to independent units.'' The proposed rule

retained the ``dependents or otherwise'' clause of the old definition,

and added that ``[c]hildren who are living with their children or who

are married and living with their spouse are considered to be

independent units and not under parental control.'' The Department

proposed to change the definition so that children living with non-

parent adults would be treated the same as children living with their

natural, adoptive, or stepparents.

Four State welfare agencies objected to the proposal that children

with children of their own should be separate households from the

parents or adults with whom they live only if the children purchase and

prepare food separately. One commenter also objected to this granting

of separate status to children who are married and living with their

spouse when they purchase and prepare food separately from the adults

with whom they live. This treatment is statutorily mandated with

respect to children under age 22 who live with their natural, adoptive,

or stepparents. The Department's only discretion in implementing this

particular provision was to extend this treatment to those children

under 18 who are living with non-parent adults. Several public interest

groups commended the Department's decision to extend the parent/child

and spousal exceptions mandated for natural, adopted, or stepchildren

under age 22 who live with their parents to children under 18 who live

with non-parent adults. No comments were received that objected to

treating these two groups of children (those who live with their

natural, adoptive, or stepparents and those under 18 who live with a

non- parent adult) the same. Therefore, the Department's proposal to

amend 7 CFR 273.1(a) to define as independent those children who are

either married and living with their spouses, or living with their own

children, is retained in this final rulemaking.

One State welfare agency requested more time to implement the

extension of the parent/child and spousal exceptions to children under

18 living with non-parent adults because it was not statutorily

mandated, and so not included in the implementing instructions provided

by the Department. The Department recognizes that implementing new

provisions places an administrative burden on State welfare agencies,

especially those with separate rulemaking procedures. Therefore, the

Department is making one exception to the September 1, 1994,

implementation date for the provisions of this rule. State agencies

must implement the provision allowing separate household status to

children under 18 who are living with their spouse or children in the

home of a non-parent adult no later than 90 days after publication of

this rule.

Several commenters requested guidance on what constitutes parental

control with respect to a minor who is ``financially or otherwise''

dependent on other household members. Some commenters argued that the

definition is vague and can result in inconsistent treatment. Although

the Department recognizes that this definition may be subject to

interpretation, the Department drafted this definition (in Food Stamp

Program Policy Memo 3-93-6) to provide a consistent measure that would

be broad enough to be compatible with State laws, which vary widely on

issues of parental control. The Department is also reluctant to provide

finite lists of dependencies which would be indicative of parental

control. The Department feels that this determination should be left to

the eligibility worker, who is in the best position to evaluate a

particular child's relationship with the adults in his or her

household. The Department believes that a more specific definition of

parental control would limit the eligibility worker's flexibility to

make these determinations. For these reasons, the Department has

decided to adopt the proposed revision to 7 CFR 273.1(a)(2)(i)(B)

(designated 273.1(a)(2)(i)(C) in this rule) with one minor language

clarification suggested by a commenter that makes the provision easier

to understand.

One commenter was concerned that the Department's definition of

parental control can hurt children who leave their parents' homes

because of abuse or neglect and who move in with neighbors, relatives,

or parents of schoolmates. The commenter noted that defining parental

control to include financial dependence often prevents these children

from having their own food stamp households, and therefore makes it

more difficult for families to afford to take in these children. The

[[Page 54273]]

commenter requested that a household's affidavit stating that a child

is not under parental control be accepted to conclusively establish

that child's independence. If in fact a child is under parental control

according to Program rules, those facts are not changed merely because

the household provides a statement otherwise. The facts of a given

situation, as determined by the eligibility worker, would govern the

certification of a child or children as a separate household.

The commenter's other suggestion was to expand the definition of

foster children to include children who live with others outside of the

formal foster care system. However, even if these children were

included as foster children, they would not be entitled to separate

household status because foster children are considered boarders under

7 CFR 273.1(c)(6). As boarders, these children could not have their own

household, but could be included in the food stamp household of the

household providing boarder services at its request. This option

results in an outcome identical to the situation first presented by the

commenter, in which the child cannot have his or her own household, but

can be included in the household of others. Although the Department

understands the difficulties these children and the families that take

them in face, the Department has elected not to change the definition

of parental control for the reasons discussed above.

In summary, the Department is adopting the changes to 7 CFR

273.1(a)(2)(i) as proposed, with a minor change in language. The

proposed change to 7 CFR 273.1(a)(2)(ii) was revised to clarify that

only the spouse of an elderly and disabled household member must be

included in the household of the elderly and disabled person. The

proposed change to 7 CFR 273.10(f) is adopted without change.

Eligibility of Children of Parents Participating in Drug or Alcohol

Treatment Programs

Section 13932 of the Leland Act amended the Food Stamp Act to

authorize Program eligibility for children living with their otherwise

eligible parent(s) in a drug or alcohol treatment center. Under this

provision, the children would be included in the parent's household. To

implement this provision, the Department proposed to amend 7 CFR

273.1(e)(1)(ii) to extend food stamp eligibility to children of

narcotic addicts or alcoholics who are residents of drug or alcohol

treatment centers. Conforming language was also proposed to 7 CFR

273.1(f)(2), and to the definition of ``eligible foods'' in 7 CFR

271.2.

Two public interest groups commented on this provision, and both

raised the same issue. Although the commenters generally supported the

provision, both requested that State welfare agencies be given the

option to allow narcotic addict or alcoholic parents and their children

who live with them in the treatment center to be separate households.

This issue was addressed in the preamble to the proposed rule. The

Department has considered this issue again, but continues to believe

that the household definition in the Food Stamp Act, as amended by the

Leland Act, prohibits allowing separate household status to children

under 22 living with their parents in a treatment center. Therefore,

the Department is adopting with minor technical change the amendments

to 7 CFR 273.1(e)(1)(ii) and 7 CFR 273.1(f)(2) contained in the

proposed rule.

Vehicles Necessary To Carry Fuel or Water

Section 13924 of the Leland Act amended section 5(g)(2) of the Food

Stamp Act to exclude from household resources the value of a vehicle

that a household depends upon to carry fuel for heating or water for

home use when such transported fuel or water is the household's primary

source for fuel or water. The Department proposed to amend 7 CFR

273.8(h)(1) to add the new vehicle exclusion as paragraph (vi). The

language of the Department's proposed rule mirrors the statutory

language, and the Department is adopting as final the language of the

provision in the proposed rulemaking. However, in response to several

issues raised by commenters, the Department would like to clarify its

rationale for adopting this provision.

One commenter objected to adding another vehicle exclusion to an

already complicated provision, but because this provision is

statutorily mandated, the Department does not have the discretion to

omit this exclusion.

In this final rulemaking, the Department is continuing its

commitment to providing State agencies with enough flexibility so that

they can implement this rule to address their specific situations. For

example, the Alaska State agency has the flexibility to determine

whether a boat or other vehicle would meet the requirements of this

provision because the Department has not defined the term ``vehicle.''

Several commenters commended the Department for this position, and it

has not been changed in this rulemaking.

The Department wishes to clarify its position on one policy

expressed in the preamble to the proposed rule in light of comments

received. The Department indicated in the preamble to the proposed rule

at 59 FR 44869, that access to public utilities would not preclude a

household from using this exclusion as long as the household actually

used the vehicle as provided in section 13924 of the Leland Act. This

statement was based on the Department's view that a household may not

be able to afford the fuel that is piped into the home, or may choose

not to use the fuel for other reasons. The Department believed that

these households should be entitled to the exclusion.

Although the Department stated in the preamble to the proposed rule

that the provision could apply where the household was unable to use

its utilities ``for whatever reason, such as non- payment of utility

bill[s],'' the Department did not intend to indicate that this resource

exclusion could be extended to cover temporary conditions. This policy

was intended to address those situations in which a household was using

its vehicle to transport fuel or water for sustained periods of time.

This interpretation is supported by both the legislative history and

the language of the statute. The Conference Report indicates that

Congress intended this exclusion to apply only when households did not

have fuel or water ``piped into their homes.'' (House Conference Report

No. 213, 103rd Cong., 1st Session 927 (1993)). Further, the language of

the statute allows a resource exclusion for ``a vehicle that a

household depends on * * * when such transported fuel or water is the

primary source * * * for the household * * *'' (emphasis added). This

language implies something more permanent than a temporary condition

like a utility being off because of non-payment of the bill. The two

State welfare agencies that commented on this aspect of the vehicle

exclusion did not support the provision. One agency wondered how its

eligibility workers could know how long to apply the exclusion if a

household told the worker it was using the vehicle because the

electricity had been turned off for non- payment. Such cases would be

labor intensive for the caseworker in order to ensure that the

exclusion ended when utilities were restored. Both State agency

commenters suggested that allowing it to apply in this situation would

be error-prone and administratively difficult to implement.

This vehicle exclusion extends eligibility to households that would

not otherwise be eligible because of the

[[Page 54274]]

excluded vehicle. Allowing the exclusion when a household has

temporarily had its utilities turned off for non-payment of its utility

bills also presents the incongruous situation of addressing a

household's inability to pay a utility bill with temporary eligibility

for food stamps.

The Department recognizes that there may be times when a

household's utilities will be off for an extended period of time, or

that there may be rural areas or other areas with sporadic or

unreliable access to water or fuel. There may also be occasions where a

household's access to drinking water is interrupted for an extended

period of time such that the exclusion would be appropriate. To balance

the need for administrative ease in determining entitlement to the

exclusion with an appropriate response to a household's circumstances,

the Department is modifying the language of the final rule to allow the

vehicle exclusion if it is anticipated that the transported fuel or

water will be the household's primary source of fuel or water during

the certification period. This gives eligibility workers the

flexibility to evaluate each situation and apply the provision with

common sense and good judgment.

The legislative history of the provision indicates that Congress

intended to apply the exclusion without requiring the household to meet

any ``additional tests concerning the nature, capabilities, or other

uses of the vehicle.'' (House Conference Report No. 213, 103rd Cong.,

1st Session 927 (1993); House Report No. 111, 103rd Cong., 1st Session

33 (1993)). The Department drafted its proposed rule to reflect this

statutory intent, and no adverse comments were received on this

provision. However, some commenters mistakenly thought this was a

verification provision. This language is intended merely to prevent a

household that meets the fuel/water vehicle exclusion from having to

further justify excluding the vehicle. It is very possible that a

vehicle excluded under this provision would have value far in excess of

the fair market value vehicle exclusion (discussed below), and this

language would preclude the household from having to meet the fuel/

water vehicle exclusion test first, and then having to meet a fair

market value test.

In the preamble to the proposed rule, the Department requested

comments on how this exclusion could be verified. By asking for these

comments, the Department did not mean to indicate that it was departing

in any way from its normal verification requirements and procedures.

Several public interest groups urged that an applicant household's

assertion that it depends on a vehicle to transport its fuel or water

should conclusively establish its entitlement to the exclusion. The

Department sees no reason to exempt this vehicle exclusion from the

normal verification requirements by allowing self-declaration. Several

commenters supported including a question in the food stamp

application, or checking with someone outside the household who is

familiar with the household's circumstances. With the exception of the

documentation requirement contained in the proposed rule, the

Department is not adopting any specific verification requirements for

this exclusion. No adverse comments were received regarding the

Department's requirement that no documentation be required unless the

exclusion was questionable, so it is adopted as final.

No comments were received on the proposed technical amendment to

the summary of the vehicle provisions at 7 CFR 273.8(h)(6). Therefore,

the proposed revisions to 7 CFR 273.8(h)(1) and 7 CFR 273.8(h)(6) are

adopted as final.

Vehicles Needed To Seek and Continue Employment and for Household

Transportation

Current regulations at 7 CFR 273.8(h)(3), in accordance with

section 5(g) of the Food Stamp Act, require that all licensed vehicles

be evaluated to determine their fair market value for purposes of

determining a household's resource eligibility for the Program. Section

13923 of the Leland Act amended section 5(g)(2) of the Food Stamp Act

to increase the fair market value resource exclusion of vehicles by $50

on September 1, 1994, and by an additional $50 on October 1, 1995.

Beginning on October 1, 1996, the fair market value resource exclusion

will be adjusted annually, using a base of $5,000, to reflect changes

in the Consumer Price Index (CPI).

In order to implement section 13923 of the Leland Act, the

Department proposed to amend 7 CFR 273.8(h)(3) to conform to the

timetable and values mandated by section 13923. The Department received

three comments on this provision, each one requesting a departure from

the values or timetable provided by the Leland Act. Two of the

commenters suggested that the participant's equity value should be

evaluated, which would provide a more realistic measure of the

vehicle's value to the household. One commenter suggested increasing

the exclusion directly to $4,600 without the intermediate steps. The

Department has no discretion in this area. Section 13923 of the Leland

Act is itself a compromise position. As indicated in the House

Conference Report, the exclusion was originally going to be raised to

$5,500 in 1994, and adjusted annually to the CPI thereafter. (House

Conference Report No. 213, 103rd Cong., 1st Session, 927 (1993)). Given

this clear legislative mandate, the Department cannot unilaterally

raise the fair market value exclusion or change the Leland Act's

timetable. The Department is therefore adopting the provision as

proposed.

After the proposed rule was published, the Department realized that

a conforming amendment was needed at 7 CFR 273.8(i)(4), involving the

transfer of resources. That provision contains an example which

includes the old dollar figure of $4,500 for the vehicle exclusion.

Because the exclusion has changed and will become variable starting in

1996, the example in 7 CFR 273.8(i)(4) has been deleted.

General Assistance (GA) Vendor Payments

Section 13915 of the Leland Act amended section 5(k)(1)(B) of the

Food Stamp Act to change the treatment of third-party payments made to

recipients from GA programs. To implement this provision, the

Department proposed to amend and reorganize 7 CFR 273.9(c)(1). Three

commenters supported the proposed language as a significant improvement

over the previous, more complex provision. One commenter supported the

provision, but requested that GA vendor payments for utilities

assistance also be excluded from income under the provision. Under the

proposed language, 7 CFR 273.9(c)(1)(ii)(A) does exclude ``assistance

provided for utility costs'' from income. Because no adverse comments

were received, the Department is adopting the complete revision of 7

CFR 273.9(c)(1) contained in the proposed rulemaking.

Student Earned Income Exclusion

Section 13911 of the Leland Act amended section 5(d)(7) of the Food

Stamp Act to exclude ``income earned by a child who is a member of the

household, who is an elementary or secondary school student, and who is

21 years of age or younger * * *.'' Current regulations at 7 CFR

273.9(c)(7) exclude the earned income of children who are under age 18,

members of the household, under the parental control of another

household member, and students at least half-time. Under the current

regulations, the exclusion does not apply if the student has formed a

separate household. The legislative

[[Page 54275]]

history of section 13911 indicates that the provision was intended to

assist students that are still in high school and living with their

parents beyond age 18, but not to change the law regarding students who

live away from home and have separate food stamp households (House

Report No. 111, 103rd Cong., 1st Session 28 (1993)).

To implement this provision and address issues that had arisen

under the current student earned income exclusion, the Department

proposed to amend 7 CFR 273.9(c)(7) to exclude the earned income of ``a

student under age 22 who attends elementary or secondary school or

classes to obtain a General Equivalency Diploma at least half-time and

lives with a natural, adoptive or stepparent, is under the control of a

household member other than a parent, or is certified in a separate

food stamp household but lives with a natural, adoptive or

stepparent.'' The proposed rule included some provisions not directly

mandated by the statutory language, but that were either carried over

from the current provision or included in the proposed rule to

implement the legislative intent of the provision. Issues raised in the

comments to the proposed rulemaking are addressed below.

Living Arrangement

Thirteen commenters strongly opposed limiting the student earnings

exclusion to students living with their parents or under the parental

control of another household member. There were no comments that

supported the limitation. Commenters argued that a student's living

arrangements should have no bearing on the student's entitlement to the

exclusion. Several commenters argued that the First Circuit's decision

in Dion v. Commissioner, Maine Department of Human Services, 933 F.2d

13 (1st Cir. 1991), discussed in the preamble to the proposed rule

would specifically prohibit this limitation. Several commenters argued

that even if the legislative history supported the limitation,

statutory construction rules would prohibit looking to it because of

the clear language of the statute. Several commenters thought the

limitation was inconsistent with the Department's and Congress' intent

to encourage students to stay in school. Some State welfare agencies

also commented that the requirement would be burdensome and error-

prone.

The Department maintains its position that the language of the

statute and its legislative history support limiting the exclusion to

students living with their parents. It is appropriate and necessary for

the Department to look to the legislative history of this provision in

order to develop implementing regulations. This exclusion was passed

after the First Circuit's decision in Dion and so the Department

considered the provision's legislative history to determine whether,

and to what extent, Congress intended the provision to address issues

raised in that litigation. The Department disagrees with one

commenter's assertion that the Supreme Court's decision in Chevron USA

v. Natural Resources Defense Council, 467 U.S. 837 (1984), would

preclude looking to the legislative history to interpret this

provision. Even the Dion court looked to the legislative history to

interpret the statutory language of the pre-Leland provision. That

court concluded, based on the language of the statute and its

legislative history, that Congress had not intended to limit the

exclusion to students living with their parents. Dion, 933 F.2d at 19.

It is also the Department's position that its proposal does not violate

the holding in Dion. The decision in that case was based in part on the

lack of ``evidence that Congress considered the policy implications of

either extending the exclusion to all student-earners or limiting it to

those within their parents' household.'' (emphasis added) Dion, 933

F.2d at 17. Now Congress has clearly indicated its intent to limit this

exclusion only to students living with their parents. (House Report No.

111, 103rd Cong., 1st Session 28 (1993)).

Contrary to some commenters' assertions, the Department believes

the limitation best addresses Congressional intent. The House Report

states that the provision was intended ``to encourage those students

who are living with their parents to pursue their education * * *.''

(emphasis added) (House Report No. 111, 103rd Cong., 1st Session 28

(1993)). Congress clearly did not intend the exclusion to apply to all

students, but created the exclusion to address situations where

students' earnings could have a negative impact on the students'

families. There is also no reason that this limitation will be

administratively burdensome or error-prone because the information will

already have been collected and analyzed for the household

determination.

In order to reflect the realities of today's diverse household

situations and be consistent with the amended household definition

provisions of 7 CFR 273.1(a)(2)(i)(B), the Department will include

students who are living under the parental control of an adult

household member other than a parent. The Department continues to

believe that this is a reasonable interpretation of the statutory

language and intent that otherwise eligible students living with

parents (or with others acting in that role) should have their earned

income excluded.

The Department has therefore decided to retain the requirement in

the proposed rule that students must live with a natural, adoptive, or

stepparent, or be living under the parental control of a household

member other than a parent, to be eligible for this exclusion.

One commenter requested more time to implement the student income

exclusion because of the limitations regarding a student's living

arrangements. The Department may not extend the implementation beyond

the statutorily mandated date of September 1, 1994.

Status as Head of Household

The Department also received several comments arguing that the

exclusion should apply regardless of the student's status as head of

household. In its proposal, the Department extended the exclusion to

students who are certified in separate food stamp households, but who

live with their parents. Under the proposal, any (otherwise eligible)

student who lives with his or her natural, adoptive or stepparent is

entitled to the exclusion, regardless of that student's status in the

food stamp household.

The plaintiff in Dion, a 17 year-old girl who was the head of her

own food stamp household and who also lived with her parents, would be

eligible for the exclusion under the proposal. A student who lives with

someone other than his or her natural, adoptive, or stepparents, and

who forms a separate food stamp household would not be eligible for the

exclusion. The Department does not agree with the commenter who argued

that whether a student like Ms. Dion is living with her parents or

living on her own would not be relevant in this inquiry. Congress

specifically stated that the new student provision was not intended to

change ``current law regarding those students who live away from home

and have formed a separate household.'' (emphasis added) (House Report

No. 111, 103rd Cong., 1st Session 28 (1993)). Such students are

currently ineligible for the income exclusion, and so Congress

specifically intended for those students to remain ineligible for the

exclusion.

The Department is therefore retaining the proposal's extension of

the exclusion to students who have been certified in a separate food

stamp household, as long as that student is

[[Page 54276]]

living with a natural, adoptive or step-parent.

Half-Time Attendance

Another issue raised by several commenters was whether the

Department could require that students attend school at least half-time

to be eligible for the exclusion. The legislative history of section

13911 of the Leland Act did not address this issue. Because of concerns

that the increased scope of the exclusion (increasing the eligible age

from 18 to 21) would dramatically increase its cost, the Department

believed that the exclusion should be limited to students seriously

pursuing a high school diploma or General Equivalency Diploma (GED).

Seven commenters strongly objected to the proposal's half-time

requirement. One commenter, although recognizing the Department's

desire to limit costs with a fair and simple rule, agreed with other

commenters that the half-time requirement was arbitrary. Another

commenter suggested that students with learning disabilities, health

problems, difficult family situations, or other circumstances might not

be able to attend classes half-time. Commenters also argued that

restricting the exclusion to students who attended school for a

specified period of time each day was contrary to Congressional intent

to help students who need more time to finish school. (House Report No.

111, 103rd Cong., 1st Session 28 (1993)). Several State agencies

remarked that verification would be difficult and the requirement would

be error-prone.

The Department understands the concerns regarding the half-time

requirement. However, the Department is reluctant to exclude the income

of every student. To illustrate, although the Department is extending

the exclusion to GED students, we do not believe that this exclusion

should apply to a person working full-time and studying for the GED for

a few hours a week on his or her own.

One commenter made a suggestion that provides some limit, but is

not arbitrary. The commenter suggested that as long as a person attends

school for enough time for that person's state or local school district

to consider the person a ``student,'' then the exclusion should apply,

regardless of the time the person spends in class. The Department has

chosen to adopt this practical and reasonable approach to the problem

of school attendance. This approach also resolves a separate issue

raised by two commenters, who requested that home-schooled students

also be eligible for the exclusion. The Department has amended 7 CFR

273.9(c)(7) to provide that as long as the otherwise eligible person is

either (1) attending elementary or secondary school, or (2) attending

GED or home-school classes recognized, operated, or supervised by the

student's state or local school district, then the student's earned

income will be excluded. The Department also believes that this

approach will be less administratively burdensome and error-prone.

GED Classes

One commenter objected to the Department's decision to include

students attending classes to obtain a GED among those students who are

eligible for this exclusion. The commenter believed that adding GED

students would make the exclusion too difficult to implement because of

the half-time attendance requirement. Two commenters supported the

inclusion of GED students. The Department has eliminated the half-time

requirement, and believes that the new provision will not be difficult

to apply to GED students. Although the Leland Act did not directly

address GED students, the legislative history reflects support for

those who are working to obtain a high school diploma, (House Report

No. 111, 103rd Session 28 (1993)), and the Department sees no reason

not to include those pursuing a diploma in a GED program recognized,

supervised, or operated by the student's state or local school

district. The Department believes that earning a high school diploma is

a significant step towards self- sufficiency, and that extending this

exclusion to include students pursuing a GED in a reputable program

will encourage them to continue. Therefore, the proposed provision to

allow the earned income exclusion for students attending GED classes is

retained in this final rule.

Case Adjustment When Student Becomes 22

Another issue addressed in the proposal is the point at which a

student's earnings must be counted when the student turns 22 during the

certification period. To make the requirements for applicant and

ongoing households and prospective and retrospective budgeting

procedures the same, the Department proposed to add a new paragraph (E)

to 7 CFR 273.10(e)(2)(i) to provide that for prospective eligibility

and benefit determination, the earned income of a high school or

elementary school student shall be counted beginning with the month

following the month in which the student turns 22. To address

retrospectively budgeted households, the Department proposed to amend 7

CFR 273.21(j)(1)(vii) to specify that the income of an elementary or

secondary student shall be counted beginning with the budget month

after the month in which the student turns 22. The Department's

proposal did not change the current regulations regarding the

continuation of the exclusion during temporary interruptions in school

attendance and the proration of income when the child's share cannot be

differentiated. Two commenters commended the Department's proposal as a

simple and fair handling of the issue.

One commenter suggested that the income be included beginning with

the certification period after the student turns 22 or graduates.

Similarly, one commenter suggested that certification periods be set to

correspond with these events. Although the Department encourages State

agencies to set certification dates as suggested by the commenter to

ease the administrative burden of making the adjustment, the Department

will not complicate the provision by requiring that certification

periods be so set. In addition, because the effects of the income

exclusion are so sweeping, the Department believes it would be too

costly to extend a student's earned income exclusion until the next

recertification. The Department is therefore adopting the language of

these proposals with one clarification in the context of retrospective

budgeting.

The Department is clarifying 7 CFR 273.21(j)(1)(vii), which

addresses retrospective eligibility and budgeting, because of a comment

we received which demonstrated that our proposal was not clear. The new

language specifies that the income of an elementary or secondary

student shall be counted beginning with the budget month after the

budget month in which the student turns 22. To illustrate: a student in

a retrospective budgeting jurisdiction (which budgets from the 15th of

the month to the 14th of the next month) turns 22 on September 14.

Under the provision, the student's income would be included the budget

month after the budget month in which the student turned 22. The

student turned 22 in the budget month of August 15-September 14, so the

student's income would be included beginning the budget month of

September 15-October 14.

With this change in wording for retrospectively budgeted cases, the

revisions to 7 CFR 273.10(e)(2)(i) and 7 CFR 273.21(j)(1)(vii) are

adopted as proposed.

[[Page 54277]]

JTPA Earnings

One commenter asked for clarification on whether earnings received

pursuant to the Job Training and Partnership Act (JTPA) could be

excluded from income under this provision. Under the language in this

final rulemaking, JTPA earnings can be excluded under the student

income exclusion. Current regulations at 7 CFR 273.9(b)(1)(v) provide

that JTPA earnings are earned income to the recipient. The student

income exclusion of 7 CFR 273.9(c)(7) excludes earned income of

students who meet its requirements. The two provisions do not conflict;

one defines JTPA earnings as ``earned income,'' and the other excludes

all ``earned income'' of those individuals who meet its requirements.

Summary

In summary, the Department is amending 7 CFR 273.9(c)(7) to exclude

the earned income of any household member who is an elementary or

secondary school student 21 years of age or younger who lives with his

or her natural, adoptive, or stepparents or who is living under the

parental control of a household member other than a parent. An

elementary or secondary school student is someone who attends

elementary or secondary school, or who attends GED or home-school

classes recognized, operated, or supervised by the student's state or

local school district.

Improving Access to Employment and Training Activities

Dependent Care Deduction

Section 13922 of the Leland Act amended section 5(e) of the Food

Stamp Act by increasing the maximum dependent care deduction to $200

for each dependent child under the age of two, and to $175 for all

other dependents. In its discussion on implementing the two-tiered

deduction, Congress urged that implementation be conducted in ways that

would minimize administrative burdens on State agencies. (House

Conference Report No. 213, 103rd Congress, 1st Session 926 (1993)).

The Department proposed to amend 7 CFR 273.9(d)(4) and 7 CFR

273.10(e) to replace the fixed maximum deduction with the Leland Act's

two-tiered approach. To address Congressional intent, the Department

proposed to require State welfare agencies to adjust the deduction from

$200 to $175 no later than the next regular recertification after a

dependent child's second birthday.

Several commenters supported the two-tiered approach as both

realistic and reasonable. Two commenters also supported the

Department's proposal to allow State welfare agencies flexibility

regarding when to adjust the amount of the deduction after a dependent

child's second birthday. One State welfare agency thought that allowing

the higher deduction amount to continue until the next recertification

after the child's second birthday was confusing, and suggested that the

Department require that the adjustment be made the month following the

child's second birthday. Under the language in the proposed rulemaking,

the State agency can adjust the deduction the month following the

child's second birthday if that timeframe is easier or less confusing

for the agency to implement. No other commenters objected to the

Department's decision to allow a later adjustment, and so the

Department is adopting the provision in the proposed rule requiring the

adjustment no later than the next recertification after the child's

second birthday.

The Department also proposed a conforming change to 7 CFR

273.10(d)(1)(i) to replace the term ``child care expense'' with the

term ``dependent care expense.'' No adverse comments were received on

this conforming change, and so the Department is adopting this

amendment as provided in the proposed rulemaking.

Dependent Care Reimbursement for the Food Stamp Employment and Training

Program

Section 13922 of the Leland Act amended section 6(d) of the Food

Stamp Act to replace the $160 cap on dependent care reimbursements to

participants in the Employment and Training Program with a requirement

that State agencies reimburse the actual costs of dependent care

expenses up to a limit set by the State agency. Section 13922(b) of the

Leland Act establishes a methodology for determining the relevant

limits, including a local market rate for dependent care.

One State welfare agency objected to the provision, stating that

there is no established local market rate for dependent care for

individuals over the age of 18. The Department does not see this as a

significant problem. The proposed rule would require the State agency

to establish a State limit for dependent care over the age of 18. The

State limit cannot be more than the local market rate. The lack of a

local market rate does not preclude the State welfare agency from

establishing a State limit, it simply places a cap on the State limit.

Without a local market rate, the State agency can establish a State

limit by using a reasonable estimation of the cost of service in the

area, and the amount of dependent care reimbursement payable to

households would be the established State limit or the actual cost of

dependent care, whichever is lower. Where there is a local market rate,

State welfare agencies cannot establish State limits which exceed that

rate, and the amount of the dependent care reimbursement is the lower

of the local market rate, the State limit, or actual costs. Because the

Department does not see this as a significant problem with the

provision, the Department is adopting the provision as proposed.

Proration of Benefits

Section 13916 of the Leland Act amended section 8(c)(2)(B) of the

Food Stamp Act to eliminate proration of first month's benefits if a

household is recertified for food stamps after a break in certification

of less than one month. Current regulations at 7 CFR 273.10(a)(1)(ii)

require that a household's benefit level for the initial month of

certification be based on the day of the month it applies for benefits

and that the household receive benefits from the date of application to

the end of the month.

The Department proposed to revise 7 CFR 273.10(a) (1)(ii) and

(2)(i) to prohibit the proration of first month's benefits for all

households that apply for benefits after a break in certification of

less than one month.

The Department's proposal raised several issues. Several public

interest groups commented that the final rule should make clear that

benefits should not be prorated even if a client's previous

participation was in another county. Under the language of the Leland

Act, the reason for the break in certification is not relevant when

applying the provision. The Department does not believe the provision

requires clarification on that point. Furthermore, the administrative

problems that State welfare agencies face when transferring a

household's case from one jurisdiction to another are not really

impacted by this provision. Applying this provision just means that if

the client's break in certification is one month or less, the client's

benefits are calculated from the beginning of the month, not the day

the client reapplied in the new jurisdiction.

A State welfare agency requested clarification as to the

provision's impact on the Department's reinstatement policy. This

provision does not directly affect this policy. Under that policy, a

State agency may reinstate a household without requiring a new

application if the household has had a break in

[[Page 54278]]

certification of less than one month because of a late monthly report.

The Leland provision was not meant to eliminate policies helpful to

households, but only to ensure that those households that reapply after

a short break in certification do not receive reduced benefits.

Another State welfare agency raised the issue of the interaction of

the Leland Act proration provision and the Department's combined

allotment policy contained in 7 CFR 274.2(b) (2), (3), and (4). Under

that policy, a household that is eligible for expedited service and

applies after the 15th of the month is entitled to a combined allotment

representing the prorated portion of the first month's benefit, plus

the next month's benefit. To accommodate the administrative realities

of expedited service cases, the provision, like other provisions

regarding verification for expedited service cases, allows for delayed

verification. The commenter was concerned that dishonest applicants

could continue to reapply for expedited service benefits after the 15th

of a month, and under the combined provisions of the combined allotment

rule and the new proration provision, continue to get six weeks' worth

of benefits with little verification. Section 13916 of the Leland Act

defines ``initial month'' to mean one that follows a period of more

than one month in which the household was not certified to participate.

A household that reapplies within one month of a break that is entitled

to have its benefits not prorated under this section, is not, by

definition, in its ``initial month,'' and so is not entitled to a

combined allotment because a combined allotment is only available for

``initial'' allotments.

Although this question raises a serious issue, the Department does

not believe that further analysis on this point is fruitful in the

context of this rulemaking. The commenter's question is not really

addressed to the proration or the combined allotment policies. The

question really addresses the delayed verification requirements

necessitated in expedited service cases. If the Department addresses

the expedited service regulations in the future, we will reexamine this

issue in that context.

One State welfare agency requested that States that issue benefits

prospectively on a rolling fiscal month be exempted from this

provision. The language of the Leland Act does not allow exceptions to

the proration provision; therefore, the Department has no authority to

exempt such States.

The most significant issue to arise under this provision is whether

the proration of benefits provision applies only when an identical

household reapplies after a break in certification of less than one

month. Two State welfare agencies raised this issue in their comments.

One commenter suggested that as long as at least one household

member was certified in the previous month, the household should get

the benefit of the provision and its benefits should not be prorated.

This approach effectively extends the provision, which was intended to

benefit households, to individuals. The Department does not believe

this extension would be consistent with either the statutory language

or intent of section 13916 of the Leland Act. The Department does

recognize the need, however, to address changing household membership

in the context of this provision.

To address this issue, the Department has revised 7 CFR

273.10(a)(1)(ii) to specify that a household that reapplies after a

break in certification is not considered to be the ``same'' household

if the membership of the original household has changed to the extent

that the certification worker must establish a new case for a portion

of the original household. Under this approach, when a household's

membership changes so that a new case is created, the new case's

benefits are prorated, but the original case's benefits are not

prorated.

The Department believes that this approach is consistent with the

statutory language and intent, which was to eliminate the proration

requirement for households which reapply after a break in certification

of less than one month. (House Report No. 111, 103d Cong., 1st Session

30 (1993).) It also provides a reasonable limit on the provision,

protecting the interests of the original household over the interests

of members that leave to form new households. Because State agencies

will be able to apply this provision in conjunction with established

policy for creating new cases when household membership changes, this

approach would not be unduly burdensome. The Department believes that

it is most appropriate to have this case-related decision made by the

eligibility worker, who will be most familiar with the situation.

The Department also proposed to delete 7 CFR 273.10(a)(2) (ii) and

(iii). Both provisions, which prohibit proration in the first month of

a household's new certification period, were made moot by section 13916

of the 1993 Leland Act. No adverse comments were received on this

proposal, and so those paragraphs are deleted in this final rulemaking.

With the modification addressing the problem of changing household

composition, the proposed amendments to 7 CFR 273.10(a) are adopted as

final.

Implementation

Pursuant to section 13971 of the Leland Act, the Leland Act was

effective, and States were required to implement it, September 1, 1994.

Pursuant to Public Law 104-121, the Contract with America Advancement

Act of 1996, this final rule is effective December 16, 1996; State

agencies must implement it no later than June 30, 1997. State agencies

will be required to adjust the cases of ongoing households at the next

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

reviewed, whichever comes first. If implementation of the Leland Act or

this rule is delayed, benefits shall be restored, as appropriate, in

accordance with the Food Stamp Act. Three State welfare agencies did

not agree that restored benefits were mandated by the Leland Act. One

of those agencies suggested that Congress' decision to apply new

provisions no later than the next recertification indicated that the

Leland Act was not intended to be retroactive. As explained below, the

Department has determined that section 13951 of the Leland Act requires

that clients receive the benefits of its provisions as of September 1,

1994, and so benefits shall be restored, to the extent appropriate, in

accordance with the Food Stamp Act.

Legislative history indicates that the Leland Act provisions were

to be implemented in the Department's ``normal manner.'' (House

Conference Report No. 213, 103rd Congress, 1st Session 926 (1993)). The

Department's ``normal'' procedure is to set an implementation date

after which households are entitled to the benefits of the new

provision. If there is a statutorily mandated implementation date, the

implementation date would correspond to that date. If the State agency

cannot adjust the ongoing cases by this date, then benefits are

restored, within the restrictions provided by the Food Stamp Act, back

to the required implementation date when the case is adjusted. To help

ease the administrative burden of implementing statutory changes, the

Department does not require immediate adjustment or require State

agencies to conduct case reviews to determine which households would

benefit from legislative changes. Several public interest groups

requested that the Department require State welfare agencies to notify

ongoing

[[Page 54279]]

households of the Leland Act provisions because it would help

households realize the benefits of the legislation more quickly.

Although the Department in general encourages giving notice to

households, the Department has decided not to require that notice be

given to households because of the administrative burden and costs to

State agencies.

If for any reason a State agency fails to implement on the required

dates, restored benefits shall be provided, if appropriate under the

provisions of the Food Stamp Act, back to the relevant implementation

date or the date of application, whichever is later. In accordance with

section 13951 of the Leland Act, variances resulting from

implementation of the provisions of the final rule are excluded from

error analysis for 120 days from June 30, 1997.

List of Subjects

7 CFR 271

Administrative practice and procedure, Food stamps, Grant

programs--social programs.

7 CFR 272

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

Report and recordkeeping requirements.

7 CFR 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 271, 272, and 273 are amended as follows:

1. The authority citation for Parts 271, 272, and 273 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, in the definition of ``Eligible foods'',

paragraph (4) is amended by removing the words ``eligible households''

and adding in their place the words ``narcotic addicts or alcoholics

and their children who live with them''.

PART 272--REQUIREMENTS FOR PARTICIPATING STATE AGENCIES

3. In Sec. 272.1, a new paragraph (g)(151) is added in numerical

order to read as follows:

Sec. 272.1 General terms and conditions.

* * * * *

(g) Implementation. * * *

(151) Amendment No. 375. Public Law 103-66, the Mickey Leland

Childhood Hunger Relief Act, was effective and required to be

implemented on September 1, 1994. The provisions of Amendment No. 375

are effective December 16, 1996, and must be implemented by June 30,

1997. The State agency shall implement the provisions of this amendment

no later than the appropriate required implementation date for all

households newly applying for Program benefits on or after such

implementation date. The current caseload shall be converted to these

provisions at household request, at the time of recertification, or

when the case is next reviewed, whichever occurs first, and the State

agency must provide restored benefits, as may be appropriate under the

Food Stamp Act, back to the appropriate required implementation date.

If for any reason a State agency fails to implement on the appropriate

implementation date, restored benefits shall be provided, if

appropriate, back to the appropriate required implementation date or

the date of application, whichever is later. Any variances resulting

from implementation of this amendment shall be excluded from quality

control error analysis for 120 days from June 30, 1997.

PART 273--CERTIFICATION OF ELIGIBLE HOUSEHOLDS

4. In Sec. 273.1:

a. Paragraphs (a)(2)(i)(B) and (a)(2)(i)(C) are revised.

b. Paragraph (a)(2)(i)(D) is removed.

c. Paragraph (a)(2)(ii) is amended by removing the words ``may be a

separate household from the others based on the provisions of

paragraphs (a)(2)(i)(A) and (a)(2)(i)(B) of this section'' and adding

in their place the words ``may be considered, together with any of the

others who is the spouse of the elderly and disabled individual, an

individual household''.

d. Paragraph (e)(1)(ii) is amended by adding the words ``, and

their children who live with them'' after the words ``facility or

treatment center''.

e. Paragraph (f)(2) introductory text is amended by adding the

words ``and their children who live with them'' after the words ``on a

resident basis''.

The revisions read as follows:

Sec. 273.1 Household concept.

(a) Household definition. * * *

(2) Special definition:

(i) * * *

(B) A child under 22 years of age who is living with his or her

natural, adoptive, or stepparents, unless the child is also living with

his or her own child(ren) or spouse.

(C) A child (other than a foster child) under 18 years of age who

lives with and is under the parental control of a household member

other than his or her parent. A child is considered to be under

parental control for purposes of this provision if he or she is

financially or otherwise dependent on a member of the household, except

that a child who is living with his or her own child(ren) or spouse is

not considered to be under parental control.

* * * * *

5. In Sec. 273.7:

a. A new paragraph (c)(4)(xiv) is added.

b. A new paragraph (c)(4)(xv) is added.

c. Paragraph (d)(1)(ii)(A) is amended by revising the first,

seventh, and last sentences.

The additions and revisions read as follows:

Sec. 273.7 Work requirements.

* * * * *

(c) State agency responsibilities. * * *

(4) * * *

(xiv) The Statewide limit(s) for dependent care reimbursements as

established by the State agency. The limit(s) shall not be less than

the dependent care deduction amounts specified under Sec. 273.9(d)(4).

(xv) The local market rates of dependent care providers in the

State. State agencies shall adopt the local market rates already

established by programs under section 402(g) of the Social Security

Act. State agencies shall establish separate local market rates for

categories of care relevant to food stamp E&T which are not addressed

under section 402(g) of the Social Security Act and include such rates

in the E&T State Plan.

* * * * *

(d) Federal financial participation.

(1) Employment and training grants. * * *

(ii) Participant reimbursements. * * *

(A) The costs of such dependent care expenses that are determined

by the State agency to be necessary for the participation of a

household member in the E&T program up to the actual cost of dependent

care, the local market rate, or the Statewide limit, whichever is

lowest. * * * If more than one household member is required to

participate in the E&T program, the

[[Page 54280]]

State agency shall provide reimbursement for the actual cost of

dependent care, the local market rate, or the Statewide limit,

whichever is lowest, for each dependent in the household, regardless of

the number of household members participating in the E&T program. * * *

A State agency may claim 50 percent of costs for dependent care

services provided or arranged by the State agency up to the actual cost

of dependent care, the local market rate, or the Statewide limit,

whichever is lowest.

* * * * *

6. In Sec. 273.8:

a. Paragraph (h)(1) is amended by removing the period at the end of

paragraph (h)(1)(v) and adding in its place the word ``; or'' and

adding a new paragraph (h)(1)(vi).

b. Paragraph (h)(3) is revised.

c. Paragraph (h)(6) is amended by revising the first sentence of

the paragraph.

d. Paragraph (i)(4) is amended by removing the second sentence.

The additions and revisions read as follows:

Sec. 273.8 Resource eligibility standards.

* * * * *

(h) Handling of licensed vehicles. * * *

(1) * * *

(vi) Necessary to carry fuel for heating or water for home use when

such transported fuel or water is anticipated to be the primary source

of fuel or water for the household during the certification period.

Households shall receive this resource exclusion without having to meet

any additional tests concerning the nature, capabilities, or other uses

of the vehicle. Households shall not be required to furnish

documentation, as mandated by Sec. 273.2(f)(4), unless the exclusion of

the vehicle is questionable. If the basis for exclusion of the vehicle

is questionable, the State agency may require documentation from the

household, in accordance with Sec. 273.2(f)(4).

* * * * *

(3) Each licensed vehicle not excluded under paragraph (h)(1) of

this section shall be evaluated individually to determine its fair

market value resource exclusion limit, and that portion of the resource

exclusion limit which exceeds $4,500 for FY 1993, shall be attributed

in full toward the household's resource level regardless of any

encumbrances. The $4,500 fair market value resource exclusion limit for

licensed vehicles shall remain in effect through August 31, 1994. On

September 1, 1994 through September 30, 1995, the fair market value

resource exclusion limit shall be increased to $4,550. On October 1,

1995 through September 30, 1996, the fair market value resource

exclusion limit shall be increased to $4,600. On October 1, 1996 and

each October 1 thereafter, using a base of $5,000, the fair market

value resource exclusion limit for licensed vehicles shall be adjusted

to reflect changes in the new car component of the Consumer Price Index

for All Urban Consumers published by the Bureau of Labor Statistics for

the 12-month period ending on June 30 preceding the date of such

adjustment and rounded to the nearest $50. Any value in excess of the

appropriate fair market value resource exclusion limit shall be

attributed in full toward the household's resource level, regardless of

any encumbrances on the vehicle. For example, in November 1994 a

household owning an automobile with a fair market value of $5,550 shall

have $1,000 applied toward its resource exclusion level. Any value in

excess of $4,550 (the fair market value resource exclusion limit for

that time period) shall be attributed to the household's resource

level, regardless of the amount of the household's investment in the

vehicle, and regardless of whether or not the vehicle is used to

transport household members to and from employment. Each vehicle shall

be appraised individually. The fair market value resource exclusion

limit of two or more vehicles shall not be added together to reach a

total fair market value resource exclusion in excess of the fair market

value resource exclusion for the appropriate time period.

* * * * *

(6) In summary, each licensed vehicle shall be handled as follows:

First, the vehicle shall be evaluated to determine if it is an income

producer, a home, necessary to transport a disabled household member,

or necessary to carry fuel for heating or water for home use. * * *

* * * * *

7. In Sec. 273.9:

a. Paragraph (c)(1) is revised.

b. The first sentence of paragraph (c)(7) is revised, a sentence is

added after the first sentence, and the last sentence is removed.

c. Paragraph (d)(4) is amended by removing the words ``$160 per

month, per dependent'' in the last sentence and adding in their place

the words ``$200 a month for each dependent child under two (2) years

of age and $175 a month for each other dependent''.

The revisions read as follows:

Sec. 273.9 Income and deductions.

* * * * *

(c) Income exclusions. * * *

(1) Any gain or benefit which is not in the form of money payable

directly to the household, including in-kind benefits and certain

vendor payments. In-kind benefits are those for which no monetary

payment is made on behalf of the household and include meals, clothing,

housing, or produce from a garden. A vendor payment is a money payment

made on behalf of a household by a person or organization outside of

the household directly to either the household's creditors or to a

person or organization providing a service to the household. Payments

made to a third party on behalf of the household are included or

excluded as income as follows:

(i) Public assistance (PA) vendor payments. PA vendor payments are

counted as income unless they are made for:

(A) Medical assistance;

(B) Child care assistance;

(C) Energy assistance as defined in paragraph (c)(11) of this

section;

(D) Emergency assistance (including, but not limited to housing and

transportation payments) for migrant or seasonal farmworker households

while they are in the job stream;

(E) Housing assistance payments for households living in

transitional housing for the homeless;

(F) Emergency and special assistance. PA provided to a third party

on behalf of a household which is not specifically excluded from

consideration as income under the provisions of paragraphs (c)(1)(i)(A)

through (c)(1)(i)(E) of this section shall be considered for exclusion

under this provision. To be considered emergency or special assistance

and excluded under this provision, the assistance must be provided over

and above the normal PA grant or payment, or cannot normally be

provided as part of such grant or payment. If the PA program is

composed of various standards or components, the assistance would be

considered over and above the normal grant or not part of the grant if

the assistance is not included as a regular component of the PA grant

or benefit or the amount of assistance exceeds the maximum rate of

payment for the relevant component. If the PA program is not composed

of various standards or components but is designed to provide a basic

monthly grant or payment for all eligible households and provides a

larger basic grant amount for all households in a particular category,

e.g., all households with infants, the larger amount is still part of

the normal grant or benefit for such households and not an ``extra''

payment excluded under this

[[Page 54281]]

provision. On the other hand, if a fire destroyed a household item and

a PA program provides an emergency amount paid directly to a store to

purchase a replacement, such a payment is excluded under this

provision. If the PA program is not composed of various standards,

allowances, or components but is simply designed to provide assistance

on an as-needed basis rather than to provide routine, regular monthly

benefits to a client, no exclusion would be granted under this

provision because the assistance is not provided over and above the

normal grant, it is the normal grant. If it is not clear whether a

certain type of PA vendor payment is covered under this provision, the

State agency shall apply to the appropriate FCS Regional Office for a

determination of whether the PA vendor payments should be excluded. The

application for this exclusion determination must explain the emergency

or special nature of the vendor payment, the exact type of assistance

it is intended to provide, who is eligible for the assistance, how the

assistance is paid, and how the vendor payment fits into the overall PA

benefit standard. A copy of the rules, ordinances, or statutes which

create and authorize the program shall accompany the application

request.

(ii) General assistance (GA) vendor payments. Vendor payments made

under a State or local GA program or a comparable basic assistance

program are excluded from income except for some vendor payments for

housing. A housing vendor payment is counted as income unless the

payment is for:

(A) Assistance provided for utility costs;

(B) Energy assistance (as defined in paragraph (c)(11) of this

section);

(C) Housing assistance from a State or local housing authority;

(D) Emergency assistance for migrant or seasonal farmworker

households while they are in the job stream;

(E) Housing assistance for households living in transitional

housing for the homeless;

(F) Emergency or special payments (as defined in paragraph

(c)(1)(i)(F) of this section; or

(G) Assistance provided under a program in a State in which no GA

payments may be made directly to the household in the form of cash.

(iii) Department of Housing and Urban Development (HUD) vendor

payments. Rent or mortgage payments made to landlords or mortgagees by

HUD are excluded.

(iv) Educational assistance vendor payments. Educational assistance

provided to a third party on behalf of the household for living

expenses shall be treated the same as educational assistance payable

directly to the household.

(v) Vendor payments that are reimbursements. Reimbursements made in

the form of vendor payments are excluded on the same basis as

reimbursements paid directly to the household in accordance with

paragraph (c)(5) of this section.

(vi) Demonstration project vendor payments. In-kind or vendor

payments which would normally be excluded as income but are converted

in whole or in part to a direct cash payment under a federally

authorized demonstration project or waiver of provisions of Federal law

shall be excluded from income.

(vii) Other third-party payments. Other third-party payments shall

be handled as follows: moneys legally obligated and otherwise payable

to the household which are diverted by the provider of the payment to a

third party for a household expense shall be counted as income and not

excluded. If a person or organization makes a payment to a third party

on behalf of a household using funds that are not owed to the

household, the payment shall be excluded from income. This distinction

is illustrated by the following examples:

(A) A friend or relative uses his or her own money to pay the

household's rent directly to the landlord. This vendor payment shall be

excluded.

(B) A household member earns wages. However, the wages are

garnished or diverted by the employer and paid to a third party for a

household expense, such as rent. This vendor payment is counted as

income. However, if the employer pays a household's rent directly to

the landlord in addition to paying the household its regular wages, the

rent payment shall be excluded from income. Similarly, if the employer

provides housing to an employee in addition to wages, the value of the

housing shall not be counted as income.

(C) A household receives court-ordered monthly support payments in

the amount of $400. Later, $200 is diverted by the provider and paid

directly to a creditor for a household expense. The payment is counted

as income. Money deducted or diverted from a court-ordered support or

alimony payment (or other binding written support or alimony agreement)

to a third party for a household's expense shall be included as income

because the payment is taken from money that is owed to the household.

However, payments specified by a court order or other legally binding

agreement to go directly to a third party rather than the household are

excluded from income because they are not otherwise payable to the

household. For example, a court awards support payments in the amount

of $400 a month and in addition orders $200 to be paid directly to a

bank for repayment of a loan. The $400 payment is counted as income and

the $200 payment is excluded from income. Support payments not required

by a court order or other legally binding agreement (including payments

in excess of the amount specified in a court order or written

agreement) which are paid to a third party on the household's behalf

shall be excluded from income.

* * * * *

(7) The earned income (as defined in paragraph (b)(1) of this

section) of any household member who is under age 22, who is an

elementary or secondary school student, and who lives with a natural,

adoptive, or stepparent or under the parental control of a household

member other than a parent. For purposes of this provision, an

elementary or secondary school student is someone who attends

elementary or secondary school, or who attends classes to obtain a

General Equivalency Diploma that are recognized, operated, or

supervised by the student's state or local school district, or who

attends elementary or secondary classes through a home-school program

recognized or supervised by the student's state or local school

district. * * *

* * * * *

8. In Sec. 273.10:

a. The third sentence of paragraph (a)(1)(ii) is amended by adding

the words ``of more than one month, fiscal or calendar depending on the

State's issuance cycle,'' after the words ``following any period'',

replacing the comma after the words ``not certified for participation''

with a period, and removing the remainder of the sentence.

b. The fourth sentence of paragraph (a)(1)(ii) is removed and a new

sentence is added in its place.

c. Paragraphs (a)(2)(ii) and (a)(2)(iii) are removed, and the

designation for paragraph (a)(2)(i) is removed.

d. Newly redesignated paragraph (a)(2) is further amended by adding

the words ``more than one month'' after the words ``If an application

for recertification is submitted'' in the third sentence.

e. The sixth sentence of paragraph (d)(1)(i) is amended by removing

the word ``child'' the first time it appears and adding ``dependent''

in its place.

f. A sentence is added to the end of paragraph (d)(4).

g. Paragraph (e)(1)(i)(E) is amended by removing the words

``maximum amount

[[Page 54282]]

of $160 per dependent'' and adding in their place the words ``maximum

amount as specified under Sec. 273.9(d)(4) for each dependent''.

h. A new paragraph (e)(2)(i)(E) is added.

i. Paragraph (f)(2) is removed and reserved.

The additions read as follows:

Sec. 273.10 Determining household eligibility and benefit levels.

(a) Month of application.

(1) Determination of eligibility and benefit levels. * * *

(ii) * * * For purposes of this provision, a household is not

considered to be the same household as the previously participating

household if the certification worker has established a new food stamp

case for the household because of a significant change in the

membership of the previously participating household. * * *

* * * * *

(d) Determining deductions. * * *

(4) Anticipating expenses. * * * If a child in the household

reaches his or her second birthday during the certification period, the

$200 maximum dependent care deduction defined in Sec. 273.9(d)(4) shall

be adjusted in accordance with this section not later than the

household's next regularly scheduled recertification.

* * * * *

(e) Calculating net income and benefit levels. * * *

(2) Eligibility and benefits.

(i) * * *

(E) If a household contains a student whose income is excluded in

accordance with Sec. 273.9(c)(7) and the student becomes 22 during the

month of application, the State agency shall exclude the student's

earnings in the month of application and count the student's earnings

in the following month. If the student becomes 22 during the

certification period, the student's income shall be excluded until the

month following the month in which the student turns 22.

* * * * *

9. In Sec. 273.21, the first sentence of paragraph (j)(1)(vii)(A)

is revised and a new sentence is added after the first sentence to read

as follows:

Sec. 273.21 Monthly Reporting and Retrospective Budgeting (MRRB)

* * * * *

(j) State agency action on reports.

(1) Processing. * * *

(vii) * * *

(A) Earned and unearned income received in the corresponding budget

month, including income that has been averaged in accordance with

paragraph (f) of this section. The earned income of an elementary or

secondary school student excluded in accordance with Sec. 273.9(c)(7)

shall be excluded until the budget month following the budget month in

which the student turns 22. * * *

* * * * *

Dated: September 27, 1996.

Ellen Haas,

Under Secretary for Food, Nutrition, and Consumer Services.

[FR Doc. 96-26072 Filed 10-16-96; 8:45 am]

BILLING CODE 3410-30-U