[Federal Register Volume 59, Number 115 (Thursday, June 16, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-14713]


[[Page Unknown]]

[Federal Register: June 16, 1994]


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DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Parts 272 and 273

[Amendment No. 355]
RIN 0584-AB79

 

Food Stamp Program: Utility Reimbursement Exclusion

AGENCY: Food and Nutrition Service, USDA.

ACTION: Interim Rule and request for comments.

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SUMMARY: This action excludes certain utility reimbursements made by 
the Department of Housing and Urban Development (HUD) and Farmers Home 
Administration (FmHA) from income consideration in determining Food 
Stamp Program eligibility and benefits. This action will result in 
increased benefits to households that receive the reimbursements, a 
consistent nationwide policy, greater consistency in the treatment of 
housing and energy assistance payments, and more consistency with the 
Aid to Families with Dependent Children (AFDC) Program.

DATES: This rule is effective and must be implemented no later than 
August 1, 1994. Comments must be received on or before August 15, 1994 
to be assured of consideration.

ADDRESSES: Comments should be submitted to Judith M. Seymour, 
Eligibility and Certification Regulation Section, Certification Policy 
Branch, Program Development Division, Food and Nutrition Service, USDA, 
3101 Park Center Drive, Alexandria, Virginia, 22302. Comments may also 
be datafaxed to the attention of Ms. Seymour at (703) 305-2454. All 
written comments will be open for public inspection at the office of 
the Food and Nutrition Service during regular business hours (8:30 a.m. 
to 5 p.m., Monday through Friday) at 3101 Park Center Drive, 
Alexandria, Virginia, Room 720.

FOR FURTHER INFORMATION CONTACT: Questions regarding the proposed 
rulemaking should be addressed to Ms. Seymour at the above address or 
by telephone at (703) 305-2496.

SUPPLEMENTARY INFORMATION:

Classification

Executive Order 12866

    The Food and Nutrition Service is issuing this interim rule in 
conformance with Executive Order 12866 and it has been designated 
``economically significant.''

Executive Order 12372

    The Food Stamp Program is listed in the Catalog of Federal Domestic 
Assistance under No. 10.551. For the reasons set forth in the final 
rule in 7 CFR part 3015, Subpart V and related Notice (48 FR 29115), 
this Program is excluded from the scope of Executive Order 12372 which 
requires intergovernmental consultation with State and local officials.

Regulatory Flexibility Act

    This rule has been reviewed with regard to the requirements of the 
Regulatory Flexibility Act of 1980 (5 U.S.C. 601-612). Ellen Haas, the 
Assistant Secretary for Food and Consumer Services, has certified that 
this rule does not have a significant economic impact on a substantial 
number of small entities. State and local welfare agencies will be the 
most affected to the extent that they administer the Program.

Paperwork Reduction Act

    This rule does not contain reporting or recordkeeping requirements 
subject to approval by the Office of Management and Budget (OMB) under 
the Paperwork Reduction Act of 1980 (44 U.S.C. 3507).

Regulatory Impact Analysis

Need for Action
    This rule is required to eliminate inconsistent policies resulting 
from litigation, promote equity in the treatment of housing and energy 
assistance, and increase consistency with the Aid to Families with 
Dependent Children program.
Benefits
    This action increases benefits to low-income households responsible 
for paying utility expenses separately from their rent who receive 
utility reimbursements from HUD and FmHA.
Costs
    It is estimated that this action will increase the cost of the Food 
Stamp Program by approximately $13 million for each month of its 
implementation in FY 1994 and $160 million in FY 1995.

Executive Order 12778

    This rule has been reviewed under Executive Order 12778, Civil 
Justice Reform. This rule is intended to have preemptive effect with 
respect to any State or local laws, regulations or policies which 
conflict with its provisions or which would otherwise impede its full 
implementation. This rule is not intended to have retroactive effect 
unless so specified in the ``Effective Date'' paragraph of this 
preamble. Prior to any judicial challenge to the provisions of this 
rule or the application of its provisions, all applicable 
administrative procedures must be exhausted. In the Food Stamp Program 
the administrative procedures are as follows: (1) For Program benefit 
recipients--State administrative procedures issued pursuant to 7 U.S.C. 
2020(e)(1) and 7 CFR 273.15; (2) for State agencies--administrative 
procedures issued pursuant to 7 U.S.C. 2023 set out at 7 CFR 276.7 (for 
rules related to non-quality control (QC) liabilities) or Part 284 (for 
rules related to QC liabilities); (3) for Program retailers and 
wholesalers--administrative procedures issued pursuant to 7 U.S.C. 2023 
set out at 7 CFR 278.8.

Public Participation and Effective Date

    The provisions of this rulemaking are required to be effective and 
implemented no later than August 1, 1994. Because of the need to 
establish a consistent nationwide policy with respect to the treatment 
of the specified utility reimbursements, Ellen Haas, Assistant 
Secretary for Food and Consumer Services, has determined, pursuant to 5 
U.S.C. 553, that public comment on this rulemaking prior to 
implementation is impracticable. However, because we believe that the 
administration of the rule may be improved by public comment, comments 
are solicited on this rule for 60 days. All comments will be analyzed, 
and any appropriate changes to the rule will be incorporated in the 
subsequent publication of a final rule.

Background

    The HUD utility reimbursements excluded from Food Stamp Program 
(Program) income consideration by this rule are provided pursuant to 
the United States Housing Act of 1937 (the Housing Act), 42 U.S.C. 
1437, to comply with a provision of the Housing Act (42 U.S.C. 
1437a(a)(1)) that requires HUD to limit the shelter costs of tenants in 
Federally assisted housing to 30 percent of their income. In 
calculating a tenant's rent payment, HUD has interpreted the term 
``rent'' to include the cost of utilities and other services, including 
electricity, gas, heating fuel, water and sewerage, and trash and 
garbage collection (24 CFR 813.102, 965.472, 965.476). In some housing, 
utilities are included in the tenant's rent. In units in which the 
utilities are paid directly by the tenant, HUD permits a deduction to 
be made from the rent paid to the owner on account of the separate 
payment being made to the utility supplier. This deduction, provided 
for in 24 CFR 813.102 and 913.102, for the estimated value of utilities 
and charges for other housing services payable directly by the family 
is called a ``utility allowance.'' The amount of the utility allowance 
is based, not on an individual family's expenses, but on a community-
wide standard. Therefore, the tenant's actual utility costs may be more 
or less than the allowance.
    For most tenants, the amount of the utility allowance is less than 
the amount they are required to pay toward their rent including 
utilities. In most cases, the utility allowance involves no direct 
payment to the household, but is merely a credit reducing the 
household's contribution to the landlord. If the utility allowance 
exceeds the rent that can be charged for a dwelling, the excess is paid 
in the form of a ``utility reimbursement'' or rebate to the household.
    Similar reimbursements are made to some rural low-income households 
by the Farmers Home Administration (FmHA) of the Department of 
Agriculture as part of its Rental Assistance Program which provides, 
pursuant to 7 CFR pt. 1930, subpt. C; pt. 1944, subpt. E, loans for 
housing in rural areas. Under the FmHA Program, the borrower (the owner 
of the property) may apply for Rental Assistance for each tenant in the 
project who meets the eligibility criteria. The Rental Assistance 
payment equals the difference between 30 percent of the household's 
income and the sum of the rent plus the utility allowance for the 
project. If the tenant pays the utilities, the total Rental Assistance 
payment from FmHA is made to the owner, who is obligated to pass on to 
the tenant the portion allocated to utilities. When FmHA's utility 
allowance is more than 30 percent of the household's adjusted income, 
the landlord is obligated to forward the difference to the tenant as a 
utility reimbursement.
    Under section 5(d) of the Food Stamp Act of 1977 (7 U.S.C. 
2014(d)), any income received by the household directly or indirectly 
must be counted in determining the household's eligibility and 
benefits, except for the exclusions listed in the Act. Neither the Food 
Stamp Act nor current regulations specifically address the treatment of 
HUD and FmHA utility reimbursements. It is clear that Federal energy 
assistance payments are excluded by section 5(d)(11) of the Food Stamp 
Act. However, the HUD and FmHA reimbursements are not provided 
specifically for energy assistance alone. Current policy requires 
counting these HUD utility reimbursements as income. This policy is 
applicable nationwide except in jurisdictions in which the 
reimbursements are excluded by judicial decision.
    In the past, it was our policy that utility reimbursements did not 
qualify as energy assistance. In response to questions concerning the 
payments, we issued Policy Memo 90-6 addressing HUD payments and Policy 
Memo 3-91-04 regarding FmHA payments. Policy Memo 90-6 provides that 
any amount paid by HUD directly to the household as a utility 
reimbursement or indirectly to the utility provider must be counted as 
income to the household. Under Policy Memo 3-91-04, the utility 
reimbursement paid by the landlord to the tenant is counted as income 
to the household.
    This policy has been maintained over several years and has been 
successfully defended in court on a number of occasions. While we 
believe the current policy is a permissible interpretation of the 
statute, we believe it is not in the best interest of the Program to 
continue to litigate this issue. In reexamining the policy, we have 
determined that there are several compelling reasons to change the 
policy so as to exclude the utility reimbursements in the future.
    First, although the HUD and FmHA utility reimbursements are not 
provided specifically for energy assistance, a substantial portion of a 
household's utility expense is for heating and cooling. A change in 
policy to exclude the utility reimbursements is not inconsistent with 
the specific exclusion in section 5(d)(11) of the Food Stamp Act and 7 
CFR 273.9(c)(11) for Federal energy assistance. Excluding the utility 
reimbursements under the existing regulatory provision would achieve 
consistency in the treatment of Federal energy assistance.
    Second, the current policy is inconsistent with the policy of the 
Aid to Families with Dependent Children (AFDC) Program in most States. 
Increasing consistency between the Food Stamp and AFDC Programs is a 
Department priority because it makes the Programs simpler to administer 
and more understandable to households.
    Maintaining the current policy also causes inconsistent treatment 
of households in subsidized housing between those in traditional 
housing whose utilities are included in their rent and households who 
are responsible for paying their own utility expenses. Excluding the 
utility reimbursements would provide greater consistency in treatment 
of various forms of housing assistance.
    Finally, a change in policy eliminates the need to maintain at 
least two distinct and conflicting policies for the foreseeable future 
because courts in some jurisdictions have affirmed the current policy 
and others have found it insupportable.
    Therefore, this rule amends 7 CFR 273.9(c)(11) to provide that 
payments or allowances made for the purpose of providing energy 
assistance under any Federal law, including HUD and FmHA 
reimbursements, are excluded from income. We are making a conforming 
amendment to 7 CFR 273.10(d)(1)(i) to provide that a utility expense 
which is reimbursed or paid by an excluded payment, including HUD or 
FmHA utility payments, shall not be deductible. In accordance with 
Section 5(e) of the Act, 7 U.S.C. 2014(e), households that receive 
these payments will be entitled to use a standard utility allowance 
that includes a heating or cooling component only if they incur heating 
or cooling costs that exceed the amount of the excluded payment.

Implementation

    This rule is effective and must be implemented no later than August 
1, 1994. For quality control purposes, any variances resulting from the 
implementation of the rule shall be excluded from error analysis for 
120 days from the required implementation date, in accordance with 7 
CFR 275.12(d)(2)(vii), as modified by section 13951(c)(2) of Pub. L. 
103-66. Section 13951(c)(2) extended the variance exclusion period of 
Section 16(c)(3)(A) of the Act, 7 U.S.C. 2025 (c)(3)(A), from a maximum 
of 90 days to 120 days. The provisions must be implemented for all 
households that newly apply for Program benefits on or after the 
required 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 back to the 
required implementation date. If for any reason a State agency fails to 
implement on the required implementation date, restored benefits shall 
be provided, if appropriate, back to the required implementation date 
or the date of application, whichever is later.

List of Subjects

7 CFR Part 272

    Alaska, Civil rights, Food stamps, Grant programs--social programs, 
Reporting and recordkeeping requirements.

7 CFR Part 273

    Administrative practice and procedure, Aliens, Claims, Food stamps, 
Fraud, Grant programs--social programs, Penalties, Records, Reporting 
and recordkeeping requirements, Social Security, Students.

    Accordingly, 7 CFR parts 272 and 273 are amended as follows:
    1. The authority citation for Parts 272 and 273 continues to read 
as follows: 

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

PART 272--REQUIREMENTS FOR PARTICIPATING STATE AGENCIES

    2. In Sec. 272.1, a new paragraph (g)(134) is added to read as 
follows:


Sec. 272.1  General terms and conditions.

 * * * * *
    (g) Implementation. * * *
    (134) Amendment No. 355. The provisions of Amendment No. 355 are 
effective and must be implemented on August 1, 1994. Any variance 
resulting from implementation of the provisions of this amendment shall 
be excluded from error analysis for 120 days from this required 
implementation date in accordance with 7 CFR 275.12(d)(2)(vii) as 
modified by section 13951(c)(2) of Pub. L. 103-66. The provisions must 
be implemented for all households that newly apply for Program benefits 
on or after the required 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 back 
to the required implementation date. If for any reason a State agency 
fails to implement on the required implementation date, restored 
benefits shall be provided, if appropriate, back to the required 
implementation date or the date of application, whichever is later.


PART 273--CERTIFICATION OF ELIGIBLE HOUSEHOLDS

Sec. 273.9  [Amended]

    3. In 273.9, the first sentence of paragraph (c)(11) introductory 
text is amended by adding the words ``, including utility 
reimbursements made by the Department of Housing and Urban Development 
and the Farmers Home Administration'' before the period.
    4. In 273.10, paragraph (d)(1)(i) is amended by adding a sentence 
at the end of the paragraph to read as follows:


Sec. 273.10  Determining household eligibility and benefit levels.

* * * * *
    (d) Determining deductions.
     * * *
    (1) Disallowed expenses.
    (i) * * * A utility expense which is reimbursed or paid by an 
excluded payment, including HUD or FmHA utility reimbursements, shall 
not be deductible.
* * * * *
    Dated: June 13, 1994.
Ellen Haas,
Assistant Secretary for Food and Consumer Services.
[FR Doc. 94-14713 Filed 6-15-94; 8:45 am]
BILLING CODE 3410-30-U