[Federal Register Volume 59, Number 163 (Wednesday, August 24, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-20627]


[[Page Unknown]]

[Federal Register: August 24, 1994]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Social Security Administration

20 CFR Part 416

RIN 0960-AD35

 

Supplemental Security Income for the Aged, Blind, and Disabled; 
Treatment of Certain Royalties and Honoraria

AGENCY: Social Security Administration, HHS.

ACTION: Final rules.

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SUMMARY: In these final regulations we are amending the supplemental 
security income (SSI) regulations to reflect the provisions of section 
5034 of Pub. L. 101-508, the Omnibus Budget Reconciliation Act of 1990 
(OBRA '90). The provisions of this section change the treatment of 
certain royalties and honoraria from unearned income to earned income. 
In some cases, the statutory change will permit the individual to 
receive a larger SSI benefit, while in other cases there will be no 
effect or a reduced SSI benefit may result. We are also amending the 
SSI regulations to clarify the definition of royalties.

EFFECTIVE DATE: August 24, 1994. The provisions of section 5034 of Pub. 
L. 101-508 are effective for determinations of eligibility and benefit 
amount beginning December 1, 1991.

FOR FURTHER INFORMATION CONTACT: Regarding this document--Duane Heaton, 
Legal Assistant, 3-B-1 Operations Building, 6401 Security Boulevard, 
Baltimore, MD 21235, (410) 965-8470; regarding eligibility or filing 
for benefits--our national toll-free number, 1-800-772-1213.

SUPPLEMENTARY INFORMATION:

Background

    Section 5034 of OBRA '90, enacted November 5, 1990, amended section 
1612(a)(1) and (2) of the Social Security Act (the Act). Prior to this 
amendment, the Act provided that royalties were counted as unearned 
income under the SSI program unless the royalties were from self-
employment in a royalty-related trade or business. Honoraria also were 
counted as unearned income. As unearned income, any expenses of 
obtaining this income were not counted. Then, the first $20 of the SSI 
beneficiary's income in a month was excluded, and the remaining 
unearned income resulted in a dollar-for-dollar reduction in benefits.
    This OBRA '90 amendment provides that any royalties earned by an 
individual in connection with any publication of the work of the 
individual, as well as that portion of any honoraria received for 
services rendered, are earned income under the SSI program. The 
provisions of section 5034 are effective for determinations of 
eligibility and benefit amount as of December 1, 1991.
    As a result of this statutory provision, the statutory earned 
income exclusions, which in many cases are more generous than the 
unearned income exclusions, will now apply to such earnings. Under the 
earned income exclusions, SSA will exclude the first $65 of monthly 
earnings plus 50 percent of the remaining earnings per month. Other 
earned income exclusions, such as impairment-related work expenses, 
also may apply.
    In many cases, the application of the earned income exclusions will 
result in considering a smaller portion of the royalties and honoraria 
as countable income. However, in those cases in which the individual 
receives a royalty for the publication of his or her work and incurs a 
large amount of expenses in obtaining this income, but does not have a 
royalty-related trade or business, the individual may have a greater 
portion of his or her royalty treated as countable income. This is 
because there is no statutory or regulatory provision that permits the 
deduction of expenses from earned income that parallels the deduction 
of expenses for obtaining unearned income. Further, we believe the 
statute does not provide authority for us to permit, through 
regulations, the deduction of expenses from earned royalty income.
    Current regulations in Sec. 416.1121(c) state that royalties may 
include, among other things, payments to the owner of a mine, oil well, 
timber tract, or other natural resource for extraction of a product. In 
the past, we interpreted this provision to mean that royalties include 
the proceeds from timber sales as well as from timber leases.
    We are clarifying this section of the regulations to make it clear 
that proceeds from the conversion of a resource are not income. For 
example, the term royalties may include the proceeds from timber 
leases, but not from timber sales. A timber sale is the conversion of a 
resource from one form (timber) to another (cash) as provided for in 
Secs. 416.1103(c) and 416.1207(e). Thus, royalties would include fees 
for the use of the land, but not payments resulting from a sale.
    Under that definition of royalties, if an owner of timberland 
enters into a long-term lease agreement which permits the lessee to 
manage and cut timber, with payment to be dependent on the amount of 
timber actually harvested, the payments to the lessor would be 
considered royalties. However, a contract for the sale of standing 
timber would not result in royalties. We propose to amend the 
regulations to clarify the definition of royalties accordingly.

Final Regulations

    We are revising Secs. 416.1110, 416.1111, and 416.1121 to reflect 
the statutory changes of section 5034 of OBRA '90 and the change in the 
definition of royalties as follows:
     Section 416.1110, which lists what we consider to be 
earned income, is revised by adding a new paragraph (e) to provide that 
payments of royalties to an individual in connection with any 
publication of the work of the individual are earned income. Also, that 
portion of honoraria received in consideration of services rendered is 
included as earned income. Honoraria that are earned income include 
rewards and donations received in consideration of services rendered 
for which no payment can be enforced by law.
     Section 416.1111, which explains how we count each type of 
earned income, is revised by adding paragraph (e), which provides that 
payments of royalties to an individual in connection with the 
publication of the work of the individual and honoraria, to the extent 
received for services rendered, count at the earliest of the following 
points: when received, credited, or set aside for the individual's use.
     Section 416.1121(c) is revised by clarifying the 
definition of royalties and adding a cross-reference to show that 
payments of royalties to an individual in connection with the 
publication of the work of the individual are treated differently from 
other royalties.

Public Comments

    These regulations were published as a Notice of Proposed Rulemaking 
on October 8, 1993 (58 FR 52464). A 60-day comment period was provided. 
We did not receive any public comments. We are, therefore, adopting the 
regulations as proposed.

Regulatory Procedures

Executive Order No. 12866

    We have consulted with the Office of Management and Budget (OMB) 
and determined that these rules do not meet the criteria for a 
significant regulatory action under E.O. 12866. Thus, they were not 
subject to OMB review.

Regulatory Flexibility Act

    We certify that these final regulations will not have a significant 
economic impact on a substantial number of small entities because these 
regulations affect only individuals and States. Therefore, a regulatory 
flexibility analysis as provided in Pub. L. 96-354, the Regulatory 
Flexibility Act, is not required.

Paperwork Reduction Act

    These final regulations impose no additional reporting and 
recordkeeping requirements subject to OMB clearance.

(Catalog of Federal Domestic Assistance: Program No. 93.807--
Supplemental Security Income)

List of Subjects in 20 CFR Part 416

    Administrative practice and procedure, Aged, Blind, Disability 
benefits, Public assistance programs, Reporting and recordkeeping 
requirements, Supplemental security income.

    Dated: June 28, 1994.
Shirley Chater,
Commissioner of Social Security.

    Approved: August 11, 1994.
Donna E. Shalala,
Secretary of Health and Human Services.

    For the reasons set out in the preamble, Part 416 of Title 20 of 
the Code of Federal Regulations is amended as follows:

PART 416--[AMENDED]

    1. The authority citation for Subpart K of Part 416 continues to 
read as follows:

    Authority: Secs. 1102, 1602, 1611, 1612, 1613, 1614(f), 1621, 
and 1631 of the Social Security Act; 42 U.S.C. 1302, 1381a, 1382, 
1382a, 1382b, 1382c(f), 1382j, and 1383; sec. 211 of Pub. L. 93-66, 
87 Stat. 154.

    2. Section 416.1110 is amended by adding a new paragraph (e) as 
follows:


Sec. 416.1110  What is earned income.

* * * * *
    (e) Certain royalties and honoraria. Royalties that are earned 
income are payments to an individual in connection with any publication 
of the work of the individual. (See Sec. 416.1110(b) if you receive a 
royalty as part of your trade or business. See Sec. 416.1121(c) if you 
receive another type of royalty.) Honoraria that are earned income are 
those portions of payments, such as an honorary payment, reward, or 
donation, received in consideration of services rendered for which no 
payment can be enforced by law. (See Sec. 416.1120 if you receive 
another type of honorarium.)
    3. Section 416.1111 is amended by adding a new paragraph (e) as 
follows:


Sec. 416.1111  How we count earned income.

* * * * *
    (e) Royalties and honoraria. We count payments of royalties to you 
in connection with any publication of your work, and honoraria, to the 
extent received for services rendered, at the earliest of the following 
points: when you receive them, when they are credited to your account, 
or when they are set aside for your use. (See Sec. 416.1111(b) if you 
receive royalties as part of your trade or business.)
    4. Section 416.1121 is amended by revising paragraph (c) to read as 
follows:


Sec. 416.1121  Types of unearned income.

* * * * *
    (c) Dividends, interest, and certain royalties. Dividends and 
interest are returns on capital investments, such as stocks, bonds, or 
savings accounts. Royalties are compensation paid to the owner for the 
use of property, usually copyrighted material or natural resources such 
as mines, oil wells, or timber tracts. Royalty compensation may be 
expressed as a percentage of receipts from using the property or as an 
amount per unit produced. (See Sec. 416.1110(b) if you receive 
royalties as part of your trade or business and Sec. 416.1110(e) if you 
receive royalties in connection with the publication of your work.)
* * * * *
[FR Doc. 94-20627 Filed 8-23-94; 8:45 am]
BILLING CODE 4190-29-P