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

DEPARTMENT OF AGRICULTURE

Food and Consumer Service

7 CFR Part 278

RIN 0584-AC00

Food Stamp Program: Revisions in Use and Disclosure Rules

Involving the Sharing of Information Provided by Retail and Wholesale

Food Concerns with Other Federal and State Agencies

AGENCY: Food and Consumer Service, USDA

ACTION: Final rule.

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SUMMARY: This rulemaking implements certain provisions in two different

laws which expand the authority of the United States Department of

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

provided by applicants and firms participating as authorized retail

food stores or wholesale food concerns in the Food Stamp Program (FSP)

with other Federal and State government agencies.

The intent of this final rule is to enable better administration

and enforcement of the Food Stamp Act of 1977, as amended (the Act), or

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

any other Federal or State law. This rule provides new criteria to

govern the sharing of such information and new criminal penalties for

unauthorized use. It also implements the Secretary of Agriculture's new

authority to share employer identification numbers (EINs) and Social

Security numbers (SSNs) of applicants and firms participating in the

FSP with other Federal agencies.

Finally, this rule makes technical changes to correct an error in

regulatory reference and also to reflect changes made by the Department

of the Treasury

[[Page 68120]]

in a parallel rule that does not change the substance of the affected

provisions.

EFFECTIVE DATE: Provisions in this rule are effective and will be

implemented beginning February 25, 1997.

FOR FURTHER INFORMATION CONTACT: Questions regarding this final rule

should be addressed to Suzanne Fecteau, Food and Consumer Service,

Chief, Redemption Management Branch, 3101 Park Center Drive,

Alexandria, Virginia 22302-1594, or by telephone at (703) 305-2418.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This final rule has been determined to be not significant for

purposes of Executive Order 12866 and therefore has not been reviewed

by the Office of Management and Budget.

Executive Order 12372

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

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

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

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

12372, which requires inter-governmental consultation with State and

local officials.

Regulatory Flexibility Act

This final rule has been reviewed with regard to the requirements

of the Regulatory Flexibility Act of 1980 (5 U.S.C. Sec. 601-612).

William E. Ludwig, the Administrator of the Food and Consumer Service,

has certified that this rule will not have a significant economic

impact on a substantial number of small entities; however, it may have

a significant effect on a limited number of small entities that violate

State or Federal laws.

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 1980 (44 U.S.C. 3507).

Executive Order 12778

This final rule has been reviewed under Executive Order 12778,

Civil Justice Reform. This rule has 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 also has retroactive effect. Prior to any judicial challenge

to the provisions of this rule or the application of its provisions,

all applicable administrative procedures must be exhausted. In the Food

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

Program benefit recipients--State administrative procedures issued

pursuant to 7 U.S.C. 2020(e)(10) and 7 CFR 273.15; (2) for State

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

set out at 7 CFR 276.7 (for rules related to non-quality control (QC)

liabilities) or Part 283 (for rules related to QC liabilities); (3) for

Program retailers and wholesalers-- administrative procedures issued

pursuant to 7 U.S.C. 2023 set out at 7 CFR 278.8.

Background

On May 12, 1995, the Department published a proposed rule at 60 FR

25625, to implement section 203 of the Food Stamp Program Improvements

Act of 1994, Public Law 103-225. Section 203 revises section 9(c) of

the Food Stamp Act of 1977, as amended, to expand FCS' authority to

share information provided by applicants and participating retail food

concerns--including information about food stamp redemptions, retail

food sales, and store ownership--with other Federal and State law

enforcement and investigative agencies. It covers certain information

provided on authorization applications, as well as additional

supporting information submitted to document store eligibility to

participate in the FSP. This information can be shared for the purpose

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

enforcement of any other Federal or State laws, and the regulations

issued under this Act or such other laws.

The sharing of EINs and SSNs is not covered by Public Law 103-225

or by Section 9(c) of the Food Stamp Act of 1977, as amended. The

sharing of EINs and SSNs is covered in section 316 of the Social

Security Independence and Program Improvements Act of 1994, Public Law

103-296, and is also implemented by this rule. Section 316 revises

section 6109(f) of the Internal Revenue Code of 1986, and section

205(c)(2)(C) of the Social Security Act, to expand FCS' authority to

verify and match SSNs and EINs with other Federal agencies or

instrumentalities of the United States to more effectively administer

and enforce the FSP, as well as other Federal laws and regulations.

For currently authorized firms, the provisions of this rule are

effective February 25, 1997 and will be implemented beginning February

25, 1997. Because of the legal notice requirements related to the use

of EINs and SSNs, currently authorized firms will receive notices of

the expanded information sharing provisions of this rule, and will be

given the opportunity to withdraw from FSP participation if they do not

want to be subject to these new provisions. Firms that remain

authorized 60-days after the date of the notice, will be subject to the

information sharing provisions. However, firms that withdraw or were

disqualified from FSP participation prior to the implementation date on

the notice will not be subject to the expanded information sharing

provisions of this rule, unless such firms participate in the FSP at a

future date subsequent to implementation of this rule.

Comments were solicited on the provisions of the proposed

rulemaking through June 12, 1995. This final action addresses the

commentors' concerns. Readers should refer to the proposed rule for a

more complete understanding of this final action.

The Department received three comment letters on the proposed rule,

two representing Federal agencies and one representing a State agency.

All three commentors were supportive of the proposed provisions, and

two offered constructive suggestions to clarify certain provisions of

the proposed rule.

A State agency commented that the proposed rule will assist law

enforcement and investigative agencies in their efforts to investigate

food stamp trafficking, as well as other crimes associated with

trafficking.

A Federal agency commented on the need to clarify certain

requirements in the proposed rule regarding how information is

requested. The proposed rule required that requests be submitted in

writing and include the specific provisions of laws and regulations

being enforced. The recommendation was that written requests include

electronic communications. This commentor also recommended that the

final rule allow standing agreements between FCS and other agencies to

document that such information is being accessed for bona fide law

enforcement purposes, without citing specific provisions of law.

It is the view of the Department that written requests include

electronic communications. The Department also believes that formal

agreements between government agencies may be a better way to document

the bona fide need for the information. In such situations, individual

written requests for access to FCS information may not be necessary.

The Department has made this clear in the final rule by adding the

appropriate language.

[[Page 68121]]

The Department of Agriculture's Office of Inspector General (OIG)

expressed concern that the proposed rule restricted its authority to

share information for enforcement of the Food Stamp Act, while other

government entities could access information to enforce all laws and

regulations under their respective jurisdictions. OIG also requested

that the final rule include language to give it special authority to

release information in certain circumstances.

The Department agrees that OIG and other USDA agencies may be

allowed access to information needed to enforce Departmental laws and

regulations. Appropriate clarifying language is included in the final

rule. Authority for OIG or other agencies to release FCS information

will be addressed in written agreements with individual agencies.

OIG was also concerned about the effective date of this rule. The

proposed rule provides that stores authorized to participate in the FSP

on August 15, 1994, and stores authorized after that date will be

subject to the rule. OIG was concerned that a possible interpretation

might be that stores initially authorized before August 15, 1994, that

continue participating after implementation, would not be subject to

this rule. This was not the Department's intent; thus, the final rule

states that all stores participating in the FSP after implementation

shall be subject to the provisions in this rule. This rule also affects

unauthorized entities and individuals accepting and redeeming food

stamps illegally, except that the sharing of EINs and SSNs for such

firms will be limited to those firms which were previously sanctioned

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

amended (7 U.S.C. 2021 or 2024).

The Department has made minor revisions to clarify the meaning of a

few provisions in the proposed rule in order to avoid any confusion. A

reference to ``applicant'' under paragraph (q) that was inappropriate

has been replaced with the appropriate term, ``retail food store.'' The

Department also clarified a reference in the proposed rule involving

the Special Supplemental Food Program for Women, Infants and Children

(WIC). Current regulations afford WIC special information sharing

status. This rule's expanded information sharing negates the need to

treat WIC as a special situation; therefore, the sentence involving the

treatment of WIC in the proposed rule has been removed.

The Department has also added clarifying language to clearly

distinguish between the two different laws implemented by this rule.

One law (amending the Food Stamp Act) addresses information, excluding

SSNs and EINs, provided by applicants and participating firms that can

be shared with both Federal and State law enforcement or investigative

agencies. The other law (amending the Social Security Act and the

Internal Revenue Code) addresses information involving SSNs and EINs

that can only be shared with certain Federal agencies and

instrumentalities of the United States. Clarifying language has also

been added to the final rule to define ``a law enforcement or

investigative agency'' and ``an FCS initiated match.'' Editorial

changes in the final rule were also made to provide a more orderly

presentation.

Finally, because a regulation published on October 15, 1996

redesignated paragraph (q) to (r) in Sec. 278.1, this rule makes the

conforming changes.

List of Subjects in 7 CFR Part 278

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

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

Penalties.

Accordingly, 7 CFR part 278 is amended as follows:

PART 278--[AMENDED]

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

follows:

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

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

CONCERNS AND INSURED FINANCIAL INSTITUTIONS

2. In Sec. 278.1:

a. The heading and the introductory text of paragraph (r) is

revised;

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

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

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

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

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

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

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

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

and ``(26 CFR 301.6109-2)'' and adding in its place the designation

(d)(2);

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

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

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

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

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

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

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

``(26 CFR 301.6109)'' and adding in its place the designation (e);

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

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

``(26 CFR 301.6109-2)'' and adding in its place the designation (f);

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

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

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

h. A new paragraph (r)(4) is added.

The revisions and additions read as follows:

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

* * * * *

(r) Use and disclosure of information provided by firms. With the

exception of EINs and SSNs, the contents of an initial application, or

other information required to be submitted by retail food stores and

wholesale food concerns to determine continued eligibility, such as

ownership information and sales and redemption data, may be disclosed

to and used by Federal and State law enforcement and investigative

agencies for the purpose of administering or enforcing the Food Stamp

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

the Food Stamp Act or such other law. Such disclosure and use shall

also include companies or individuals under contract for the operation

by, or on behalf of FCS to accomplish an FCS function. Such purposes

include the audit and examination of such information by the

Comptroller General of the United States authorized by any other

provision of law. Any person who publishes, divulges, discloses, or

makes known in any manner or to any extent not authorized by Federal

law or regulations any information obtained under this paragraph shall

be fined not more than $1,000 or imprisoned not more than 1 year, or

both. Safeguards with respect to employee identification numbers (EINs)

are contained in paragraph (r)(2) of this section. Safeguards with

respect to Social Security numbers (SSNs) are contained in paragraph

(r)(3) of this section.

(1) Criteria for requesting information. FCS shall determine what

information can be disclosed and which government

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agencies have access to that information based on the following

criteria:

(i) Federal and State law enforcement or investigative agencies or

instrumentalities administering or enforcing specified Federal and

State laws, or regulations issued under those laws, have access to

certain information maintained by FCS. Such agencies or

instrumentalities must have among their responsibilities the

enforcement of law or the investigation of suspected violations of law.

However, only certain Federal entities have access to information

involving SSNs and EINs in accordance with paragraph (r)(1)(ii) of this

section;

(ii) Except for SSNs and EINs, information provided to FCS by

applicants and authorized firms participating in the FSP may be

disclosed and used by qualifying Federal and State entities in

accordance with paragraph (r)(1)(i) of this section. The disclosure of

SSNs and EINs is limited only to qualifying Federal agencies or

instrumentalities which otherwise have access to SSNs and EINs based on

law and routine use. Release of information under this paragraph shall

be limited to information relevant to the administration or enforcement

of the specified laws and regulations, as determined by FCS;

(iii) Requests for information must be submitted in writing,

including electronic communication, and must clearly indicate the

specific provision of law or regulations which would be administered or

enforced by access to requested information, and the relevance of the

information to those purposes. If a formal agreement exists between FCS

and another agency or instrumentality, individual written requests may

be unnecessary. FCS may request additional information if needed to

clarify a request;

(iv) Disclosure by FCS is limited to: Information about applicant

stores and concerns with applications on file; information about

authorized stores participating in the FSP; and information about

unauthorized entities or individuals illegally accepting or redeeming

food stamps;

(v) Requests for information disclosure by FCS may involve a

specific store or concern, or some or all stores and concerns covered

by paragraph (r)(1)(iv) of this section. In addition, FCS may sign

agreements allowing certain government entities direct access to

appropriate FCS data, with access to EINs and SSNs limited only to

other Federal agencies and instrumentalities that otherwise have access

to such numbers.

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

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

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

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

applicants who previously have been sanctioned or convicted under

sections 12 and 15 of the Food Stamp Act of 1977, as amended, (7 U.S.C.

2021 or 2024). The Department also may share EINs with other Federal

agencies and instrumentalities that otherwise have access to EINs if

the Department determines that such sharing would assist in verifying

and matching such information against information maintained by such

other agency or instrumentality. Any such information shared pursuant

to this paragraph may be used by the Department or such other agency or

instrumentality for the purpose of effective administration and

enforcement of the Food Stamp Act of 1977, as amended, or for the

purpose of investigating violations of other Federal laws or enforcing

such laws. See Treas. Reg. Sec. 301.6109-2 (b) and (c) (26 CFR

301.6109-2 (b) and (c)).

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

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

States, who otherwise have access and whose duties or responsibilities

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

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

violations of other Federal laws or enforcing such laws. See Treas.

Reg. Sec. 301.6109-2(d)(1) (26 CFR 301.6109-2(d)(1)).

* * * * *

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

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

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

stores and concerns for use in determining those applicants who

previously have been sanctioned or convicted under section 12 or 15 of

the Food Stamp Act of 1977, as amended, (7 U.S.C. 2021 or 2024). The

Department may use this determination of sanctions and convictions in

administering sections 12 and 15 of the Food Stamp Act of 1977, as

amended, (7 U.S.C. 2018, 2021). The Department also may share SSNs with

other Federal agencies and instrumentalities if the Department

determines that such sharing would assist in verifying and matching

such information against information maintained by the Department or

such other agency or instrumentality. Any such information shared

pursuant to this paragraph shall be used for the purpose of effective

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

amended, or for the purpose of investigating violations of other

Federal laws or enforcing such laws.

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

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

States, who otherwise have access, and whose duties or responsibilities

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

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

violations of other Federal laws or enforcing such laws. Such access

shall also include companies or individuals under contract for the

operation by, or on behalf of FCS to accomplish an FCS function.

* * * * *

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

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

matches of retailer data with other Federal and State agencies' files

for the purpose of verifying information provided by applicant and

participating firms, and for the purposes of administering and

enforcing other Federal or State laws. Such matches could involve all

firms participating after implementation for the purpose of verifying

information such as, but not limited to, SSNs and retail sales data.

* * * * *

3. In Sec. 278.9, a new paragraph (l) is added to read as follows:

Sec. 278.9 Implementation of amendments relating to the participation

of retail food stores, wholesale food concerns and insured financial

institutions.

* * * * *

(l) Amendment No. 335. Expanded authority to use and disclose

information about firms participating in the FSP under CFR 278.1(r) for

currently authorized firms is effective and will be implemented

beginning February 25, 1997 but not before 60-days after the date of

notices to such firms, notifying them of the changes. The only

exception to the above is that such disclosure of information shall not

apply to firms that are withdrawn or are disqualified from FSP

participation prior to implementation, unless such firms participate in

the FSP at a future date subsequent to the implementation date.

Dated: December 18, 1996.

William E. Ludwig,

Administrator, Food and Consumer Service.

[FR Doc. 96-32998 Filed 12-26-96; 8:45 am]

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