[Federal Register Volume 59, Number 163 (Wednesday, August 24, 1994)]
[Unknown Section]
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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