[Federal Register Volume 59, Number 166 (Monday, August 29, 1994)]
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[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-21188]


  Federal Register / Vol. 59, No. 166 / Monday, August 29, 1994 /
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[[Page Unknown]]

[Federal Register: August 29, 1994]


                                                   VOL. 59, NO. 166

                                            Monday, August 29, 1994

DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Parts 272 and 273

[Amendment No. 350]
RIN 0584-AB39

 

Food Stamp Program: Miscellaneous Provisions of the Food, 
Agriculture, Conservation, and Trade Act Amendments of 1991 and Earned 
Income Tax Credit Amendment

AGENCY: Food and Nutrition Service, USDA.

ACTION: Final rule.

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SUMMARY: This rule implements several legislative provisions from the 
Food, Agriculture, Conservation, and Trade Act Amendments of 1991, the 
Mickey Leland Childhood Hunger Relief Act of 1993, and the Food Stamp 
Program Improvements Act of 1994. It finalizes provisions in a proposed 
rule published in the Federal Register on November 1, 1993. The 
provisions affect categorical eligibility of households receiving 
general assistance, monthly reporting and retrospective budgeting, and 
earned income tax credit resource exclusions. This rule also makes 
technical corrections to the Food Stamp Program regulations concerning 
waivers of retrospective budgeting requirements, self-employment 
income, verification, State agency action on reports and changes in 
reporting and budgeting status.

DATES: Effective Dates: This rule is effective October 28, 1994, except 
that 7 CFR 273.8(e)(12)(i) is effective January 1, 1991; 7 CFR 
273.8(e)(12)(ii) is effective September 1, 1994; 7 CFR 273.21(b) is 
effective March 25, 1994; and the amendments to 7 CFR 273.2(j) are 
effective February 1, 1992.
    Implementation Dates: The amendments made by this rule must be 
implemented October 28, 1994, except that 7 CFR 273.8(e)(12)(i) must be 
implemented January 1, 1991; 7 CFR 273.8(e)(12)(ii) must be implemented 
September 1, 1994; 7 CFR 273.21(b) must be implemented March 25, 1994; 
and the amendments to 7 CFR 273.2(j) must be implemented February 1, 
1992.

FOR FURTHER INFORMATION CONTACT:
Judith M. Seymour, Supervisor, Eligibility and Certification 
Regulations Section, Certification Policy Branch, Program Development 
Division, Food Stamp Program, Food and Nutrition Service, USDA, 3101 
Park Center Drive, Alexandria, Virginia 22302 or by telephone at (703) 
305-2496.

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 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 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. 
s2020(e)(10) and 7 CFR 273.15; (2) for State agencies--administrative 
procedures issued pursuant to 7 U.S.C. s2023 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 retailers and 
wholesalers--administrative procedures issued pursuant to 7 U.S.C. 
s2023 set out at 7 CFR 278.8.

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(s) to 7 CFR part 3105, subpart V (48 FR 29115; 
June 24, 1983; or 48 FR 54317, December 1, 1983, as appropriate), this 
Program is excluded from the scope of Executive Order 12372 which 
requires intergovernmental consultation with State and local officials.

Regulatory Flexibility Act

    This final rule has also been reviewed with regard to the 
requirements of the Regulatory Flexibility Act of 1980 (Pub. L. 96-354, 
94 Stat. 1164, September 19, 1980). Ellen Haas, Assistant Secretary for 
Food and Consumer Services, has certified that this rule would not have 
a significant economic impact on a substantial number of small 
entities. The changes would affect food stamp applicants and recipients 
and State and local agencies which administer the Food Stamp Program.

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1980 (44 U.S.C. 
3507), the reporting and recordkeeping requirements associated with 
monthly reporting and retrospective budgeting (MRRB) have been approved 
by the Office of Management and Budget (OMB) under OMB No. 0584-0064. 
The provisions in this final rule are related to certification and 
MRRB, but they do not impose additional reporting or recordkeeping 
requirements.

Public Comment

    The amendment to 7 CFR 273.21(b) discussed in this rule is being 
adopted as a final rule without prior notice and comment. This 
provision of the Food Stamp Program regulations responds to the 
direction of Congress in Section 101(a) of the Food Stamp Program 
Improvements Act of 1994 (Pub. L. 103-225), 7 U.S.C. 2015(c)(1), 
prohibiting State agencies from requiring monthly reporting for 
households residing on Indian reservations unless such a requirement 
was in existence on March 25, 1994, the date Pub. L. 103-225 was 
enacted. Because of the nondiscretionary nature of Section 101(a) of 
Pub. L. 103-225, Ellen Haas, Assistant Secretary for Food and Consumer 
Services, has determined, pursuant to 5 U.S.C. 553, that public comment 
on this provision prior to implementation is unnecessary as it would 
serve no practical purpose.

Background

    On December 4, 1991, the Department published final rulemakings 
entitled ``Categorical Eligibility and Application Provisions of the 
Mickey Leland Memorial Domestic Hunger Relief Act'' (56 FR 63605) and 
``Monthly Reporting and Retrospective Budgeting Amendments and Mass 
Changes'' (56 FR 63597). These rulemakings made changes to Food Stamp 
Program requirements concerning categorical eligibility and monthly 
reporting and retrospective budgeting (MRRB). On December 13, 1991, the 
Food, Agriculture, Conservation, and Trade Act Amendments of 1991 (Pub. 
L. 102-237 (105 Stat. 1818)) (FACT amendments) were enacted. That 
legislation required modification of provisions implemented in the 
December 4, 1991, rulemakings. In addition, various provisions of the 
Omnibus Budget Reconciliation Act of 1990 (Pub. L. 101-508) and Section 
13913 of the Mickey Leland Childhood Hunger Relief Act, Chapter 3, 
Title XIII of the Omnibus Budget Reconciliation Act of 1993, Pub. L. 
103-66 (1993 Leland Act), modified existing Food Stamp Program 
requirements concerning the treatment of Earned Income Tax Credits 
(EITC). Proposed rules to implement these legislative changes were 
published at 58 FR 58458 on November 1, 1993 and provided the public 
with 90 days to comment on the proposed provisions.
    In addition, on January 20, 1994, the Department held a public 
hearing at the FNS Headquarters office in Alexandria, Virginia. The 
purpose of the hearing was to provide for a public dialogue among the 
State agencies, advocacy groups, and other interested parties 
concerning the provisions of the 1993 Leland Act. The Department 
received eight written comments on the proposed provisions, seven from 
State agencies and one from a local agency. Two comments were received 
on the EITC provision (Section 13913 of the 1993 Leland Act) at the 
public hearing. The concerns raised by the commenters are discussed 
below. For additional information on the provisions discussed in this 
rule, the reader should refer to the preamble of the proposed rule, 58 
FR 58458-61.

Categorical Eligibility for Recipients of General Assistance (GA)

    Section 5(a) of the Food Stamp Act of 1977, as amended (the Act), 7 
U.S.C. 2014(a), provides that the recipients of certain types of GA 
payments are categorically eligible for Food Stamp Program benefits. 
That is, receipt of a payment from a qualifying program entitles the 
recipient to food stamp eligibility regardless of other income or 
resources.
    Under current regulations at 7 CFR 273.2(j)(4)(i), a GA program is 
considered appropriate for categorical eligibility if it:
    1. Has income and resource eligibility standards either separate 
from or included in the payment standard which do not exceed those of 
the food stamp, Aid to Families with Dependent Children (AFDC) or SSI 
programs;
    2. Provides GA benefits as defined in 7 CFR 271.2; and
    3. Provides assistance that is not limited to emergency assistance.
    Section 902 of the FACT amendments amended Section 5(a) of the Act 
to change the criteria for GA programs that confer categorical 
eligibility. Section 5(a) now specifies that, with certain exceptions, 
households shall be eligible for food stamps if each member receives 
benefits under a State or local GA program that complies with the 
standards established by the Secretary for ensuring that the program is 
based on income criteria comparable to or more restrictive than those 
under subsection 5(c)(2) of the Food Stamp Act and ``not limited to 
one-time emergency payments that cannot be provided for more than one 
month.'' Section 5(c)(2) contains the gross income limit of 130 percent 
of the poverty line, as defined in section 673(2) of the Community 
Services Block Grant Act (42 U.S.C. 9902(2)). Congress did not 
establish any resource standard for GA programs suitable for conferring 
categorical eligibility.
    The November 1, 1993, rulemaking proposed to amend 7 CFR 
273.2(j)(4)(i) to provide that a GA program must have the following 
characteristics in order for recipients of the GA program's benefits to 
be considered categorically eligible for food stamp benefits: 1) the 
program must have income eligibility standards at least as restrictive 
as the food stamp gross income limit specified in 7 CFR 273.9(a)(1); 2) 
the program must provide GA benefits as they are defined in the 
regulations at 7 CFR 271.2; and 3) the program must also provide 
benefits that are not limited to one-time emergency payments.
    The Department received three comments on this proposal, two 
supporting it and one requesting a clarification about the 
implementation date for local GA programs. The regulatory provisions 
concerning GA categorical eligibility were effective for State GA 
programs on February 1, 1992, and for local GA programs on August 1, 
1992. Subsequently, Section 902 of the FACT amendments concerning GA 
programs was made effective for both State and local GA programs on 
February 1, 1992 by Section 1101(d)(1) of the FACT amendments. 
Accordingly, the Department is adopting as proposed the modifications 
to provisions at 7 CFR 273.2(j)(4)(i).

Monthly Reporting and Retrospective Budgeting--Households Residing on 
Indian Reservations

    Section 1723 of the 1993 Leland Act amended Section 6(c)(1)(A)(i) 
of the Act, 7 U.S.C. 2015(c)(1)(A)(i), to exempt households residing on 
Indian reservations from MRRB effective February 1, 1992. The 
Department implemented Section 1723 in a final rule amending 7 CFR 
273.21(b)(4) on December 4, 1991, 56 FR 63605.
    Since that time, several pieces of legislation have been enacted 
that affect this provision. Implementation of this provision was 
initially postponed by Section 908 of the FACT amendments until April 
1, 1993, and then by Public Law 103-11 (107 Stat 41) until February 1, 
1994. In the November 1, 1993, rulemaking, the Department proposed at 
58 FR 58459 to revise 7 CFR 272.1(g)(121)(ii) to delete the requirement 
to implement 7 CFR 273.21(b)(4) by February 1, 1992. Thus, proposed 7 
CFR 272.1(g)(121)(ii) addressed only the implementation of provisions 
concerning the design of the monthly report form. A new implementation 
date of February 1, 1994, was proposed for the mandatory exclusion of 
households residing on Indian reservations. Following publication of 
the proposed rule, Section 1 of Public Law 103-205 was enacted on 
December 17, 1993, again postponing implementation of the prohibition 
concerning MRRB on Indian reservations until March 15, 1994. State 
agencies were notified of this delay through an implementing memorandum 
dated January 6, 1994.
    On March 25, 1994, the Food Stamp Program Improvements Act of 1994 
(Pub. L. 103-225 (108 Stat. 106)) was enacted. Section 101(a) of that 
law modified the prohibition against monthly reporting for households 
residing on Indian reservations that had been added to section 
6(c)(1)(A) of the Act (7 U.S.C. 2015(c)(1)), by Section 1723 of the 
Leland Act. Section 6(c)(1)(C)(iii) now directs that State agencies 
which were not requiring households residing on Indian reservations to 
submit monthly reports on March 25, 1994, are prohibited from 
establishing monthly reporting requirements for these households. These 
households may be retrospectively budgeted. State agencies that were 
using monthly reporting on March 25, 1994, for households residing on 
Indian reservations may continue to do so if certain enumerated 
conditions are met. In this final rule, the Department is addressing 
the prohibition against establishing new monthly reporting for 
households residing on Indian reservations if no monthly reporting 
system was in place on March 25, 1994. The Department is including the 
prohibition in this rulemaking as a final rule without prior notice and 
comment because it is nondiscretionary and, therefore, consistent with 
5 U.S.C. 553, prior notice and comment would serve no practical 
purpose. The provisions in Section 101(a) of Pub. L. 103-225 dealing 
with the one-month grace period afforded reservation households for 
submitting required reports, 7 U.S.C. 2015(c)(1)(C) (i) and (ii), will 
be addressed in a future proposed rulemaking.
    The Department received one comment in response to the November 1, 
1993, proposed rule on this subject that is relevant despite the change 
in law brought about by Section 101(a) of Pub. L. 102-225. The 
commenter requested clarification of what is meant by ``residing on an 
Indian reservation.'' This provision applies to any household residing 
within the boundaries of an Indian reservation. As defined in Section 
3(j) of the Act (7 U.S.C. 2012(j)), ``reservation'' means the 
geographically determined area or areas over which a tribal 
organization (as the term is defined in subsection (p)) exercises 
governmental jurisdiction. Section 3(p) of the Act defines a tribal 
organization as ``the recognized governing body of an Indian tribe 
(including the tribally recognized intertribal organization of such 
tribes), as the term ``Indian tribe'' is defined in the Indian Self-
Determination Act (25 U.S.C. 450b(b)), as well as any Indian tribe, 
band, or community holding a treaty with a State government.''
    In this final rule, the Department is adopting as proposed on 
November 1, 1993, the revision to 7 CFR 272.1(g)(121)(ii) to delete the 
requirement to implement 7 CFR 273.21(b)(4) by February 1, 1992. The 
Department is not adopting the parenthetical phrase ``(beginning 
February 1, 1994)'' as proposed in 7 CFR 273.21(b). In order to 
implement the prohibition barring a State agency from establishing 
monthly reporting on Indian reservations if it was not doing so on 
March 25, 1994, the Department is revising 7 CFR 273.21(b) to prohibit 
establishing after March 25, 1994 any monthly reporting system for 
households residing on Indian reservations.

Monthly Reporting and Retrospective Budgeting--Prorating Supplements 
for New Household Members

    The final rulemaking, ``Monthly Reporting and Retrospective 
Budgeting Amendments and Mass Changes'' (56 FR 63597, December 4, 
1991), at 7 CFR 273.21(f)(1)(iii)(D), authorized a State agency, at its 
option, to provide a prorated supplement for a new household member in 
the month for which the change is reported for retrospectively budgeted 
households, if the State agency provided a prorated supplement for 
AFDC. The provision was effective January 3, 1992, and was to be 
implemented by July 1, 1992. This provision was a technical amendment 
that allowed State agencies to treat new household members consistent 
with its treatment of new household members for AFDC.
    Section 910(1) of the FACT amendments amended Section 9(c)(1) of 
the Act, 7 U.S.C. 2017(c)(1), to prohibit proration of benefits during 
the certification period except for the initial month. In a manner that 
would not conflict with Section 910(1), the Department wanted to allow 
State agencies the option to provide a supplement for a new household 
member in the month the change is reported. Therefore, the Department 
proposed on November 1, 1993, to revise 7 CFR 273.21(f)(1)(iii)(D) to 
allow State agencies the option to provide a supplement for the entire 
month for a new household member for the month in which the change was 
reported
    The Department received four comments on the proposal, two 
supporting it and two requesting clarification. The Department has 
revised the language of the proposed revision of 7 CFR 
273.21(f)(1)(iii)(D) to make it clear that State agencies are being 
given an option to add a new household member in the month the change 
is reported in a two-month system (the processing month) or the first 
day of the issuance month following the month the report is received. 
If the State agency opts to add a new household member in the 
processing month, a full supplement for that member shall be provided, 
rather than the prorated supplement specified in the December 4, 1991, 
rulemaking concerning MRRB. Accordingly, with the one change noted 
above, the proposed revision of 7 CFR 273.21(f)(1)(iii)(D) is adopted 
as final.

Earned Income Tax Credits

    Section 11111(b) of the Omnibus Budget Reconciliation Act of 1990 
(OBRA 1990) (Pub. L. 101-508) excluded an Earned Income Tax Credit 
(EITC) received as a lump sum or in payments under section 3507 of the 
Internal Revenue Code from income and resource consideration for the 
individual and his/her spouse for the month of its receipt and the 
following month for food stamp and certain housing programs purposes. 
Section 402 of the Hunger Prevention Act of 1988 (Pub. L. 100-435) 
amended Section 5(d)(14) of the Act, 7 U.S.C. 2014(d)(14), to exclude 
EITC payments from income. OBRA 1990 mandated that the exclusion of 
EITC payments from resources be implemented January 1, 1991. The 
Department proposed in the November 1, 1993, rulemaking to add a 
paragraph (xii) to 7 CFR 273.8(e)(11) to exclude any Federal EITC 
received as a lump sum or as payments under section 3507 of the 
Internal Revenue Code from resource consideration for the month of its 
receipt and the following month beginning January 1, 1991. The 
Department did not receive any comments on this proposal. Therefore, 
the Department is adopting as final the proposal to exclude from 
resources any Federal EITC for the month of its receipt and the 
following month. However, as discussed below, the exclusion will 
replace the provision that is currently located at 7 CFR 273.8(e)(12).
    Section 13913 of the 1993 Leland Act amended Section 5(g)(3) of the 
Food Stamp Act, 7 U.S.C. 2014(g)(3), to extend the exclusion of any 
household member's EITC as a resource for 12 months, if the household 
was participating at the time of the receipt of the EITC and provided 
the household remains on the program continuously during that time. In 
accordance with Section 13193 of the 1993 Leland Act, the Department 
proposed on November 1, 1993, to modify 7 CFR 273.8(e)(11)(xii) to 
exclude the EITC payment received by a participating household 
consistent with the conditions of exclusion specified in Section 13913 
of the 1993 Leland Act, beginning September 1, 1994. The Department 
also proposed that continuous participation include breaks in 
participation of one month or less due to administrative reasons, such 
as delayed recertifications or missing or late monthly reports, as 
recommended in the legislative history at 139 Cong. Rec. H6032, August 
4, 1993.
    The Department received five comments on this provision. One 
commenter requested the Department to clarify whether the exclusion 
applied to State and local EITC payments as well as the Federal EITC. 
Unlike the two-month exclusion of the EITC for applicants and 
participants enacted by Section 11111(b) of OBRA 1990, the 12-month 
exclusion for participants provided for in Section 13913 of the 1993 
Leland Act is not restricted to the Federal EITC. The proposed 
regulatory language has been revised to reflect that the 12-month 
exclusion applies to any EITC while the two-month exclusion applies 
only to the Federal EITC. Two commenters requested that the exclusion 
be a total exclusion, not limited to 12 months. As the law specifically 
establishes a 12-month exclusion, the Department is unable to make the 
exclusion permanent. One commenter requested that the continuous 
participation provision be eliminated. That commenter also requested 
two clarifications, (1) whether the month of receipt was the first 
month of the exclusion and (2) whether breaks resulting from one month 
suspensions for ineligibility were included in the administrative 
reasons. The final commenter requested that ``continuous 
participation'' be modified to allow for breaks in participation of 
longer than one month. For purposes of this exclusion, the month of 
receipt would be the first month of the exclusion. As ``continuous 
participation'' is required by section 13913 of the Leland Act, that 
requirement cannot be eliminated. House Report No. 103-111 (May 23, 
1993), p. 29, states that ``[i]t is not intended that households that 
reapply within one month of their termination from the program be 
denied this exclusion.'' Further, it is evident that Congress intended 
that the only time a break in participation would not result in the 
loss of the exclusion is when the break is for administrative reasons 
and provided the household continues to meet the income and resource 
eligibility criteria (Congressional Record, H6032, August 4, 1993). The 
Department believes the intent of Congress was to continue to allow the 
exclusion for administrative reasons only and for one month only. 
Consequently, the Department is adopting as proposed the requirement 
that the household participate continuously except for breaks of one 
month or less resulting from administrative reasons.
    The Department proposed that the 12-month EITC exclusion be located 
in the Program regulations together with the two-month EITC exclusion 
at 7 CFR 273.8(e)(11)(xii). In the final rule we are placing both EITC 
exclusions in 7 CFR 273.8(e)(12). The two-month exclusion is designated 
7 CFR 273.8(e)(12)(i), and the 12-month exclusion is at 7 CFR 
273.8(e)(12)(ii). It is necessary to designate the exclusions 
separately because the two-month exclusion is in the Internal Revenue 
Code while the 12-month exclusion is in the Food Stamp Act, the two 
exclusions have different implementing dates, and the two exclusions 
affect different categories of recipients. Therefore, in this final 
rule, the Department is removing an obsolete exclusion and adding new 7 
CFR 273.8(e)(12) (i) and (ii).

Miscellaneous Technical Changes

Budgeting Waivers--7 CFR 273.21(a)(4)

    Section 273.21(a)(4) of the regulations allows FNS to approve 
waivers of the Food Stamp Program budgeting requirements to conform 
food stamp budgeting procedures to AFDC's budgeting procedures. 
However, this section has not been updated to incorporate the 
additional households excluded from retrospective budgeting that are 
listed in 7 CFR 273.21(b). In order to conform 7 CFR 273.21(a)(4) to 7 
CFR 273.21(b), the Department proposed to revise the language in 7 CFR 
273.21(a)(4) to prohibit waivers under 7 CFR 273.21(a)(4) for all 
households in 7 CFR 273.21(b). One comment was received supporting the 
proposal. We are adopting the provision at 7 CFR 273.21(a)(4) as 
proposed.

Self-Employment Income--7 CFR 273.21(f)(2)(i)

    The Department proposed to revise 7 CFR 273.21(f)(2)(i) to require 
that self-employment income be budgeted such that the income would not 
affect more benefit months than the number of months over which it was 
prorated. This proposal would have corrected an omission in the Monthly 
Reporting and Retrospective Budgeting Amendments and Mass Changes final 
rulemaking (56 FR 63597) published December 4, 1991. Under the 
proposal, prorated self-employment income would be treated in the same 
fashion that prorated contract and prorated nonexcluded educational 
income is treated. One comment opposing the provision was received. 
Despite the opposing comment, the Department is adopting the provision 
because it makes the treatment of prorated self-employment income 
similar to other prorated income and more equitably treats households 
with such income.
    Prorated contract and nonexcluded educational income are required 
to be budgeted retrospectively. In response to a request from a State 
agency, we proposed at 7 CFR 273.21(f)(2) (i), (ii), and (iii) to 
require that prorated self-employment, contract, and nonexcluded 
educational income be prospectively budgeted, provided that the income 
not affect more benefit months than the number of months in the period 
over which it is prorated. We indicated in the November 1, 1993, 
proposed rule that we were interested in hearing from States that are 
using retrospective budgeting as to whether they prefer to 
retrospectively or prospectively budget these types of income. The 
Department received eight comments on this proposal. Six commenters 
preferred that we continue to require these types of income to be 
retrospectively budgeted because continuous regulatory changes are 
greater problems than individual case problems presented by 
retrospective budgeting. One State agency requested that we switch to 
prospective budgeting and described one particular problem that 
retrospective budgeting created. One commenter recommended that we give 
State agencies the option to prospectively or retrospectively budget 
these types of income. One commenter who preferred to have the income 
continue to be retrospectively budgeted requested that State agencies 
be given the option to prospectively or retrospectively budget such 
income, rather than adopt the proposal to require prospective 
budgeting. The Department has considered the comments and has decided 
to revise the proposed provision to permit State agencies to opt to 
either prospectively or retrospectively budget such income. Such option 
must be made on a State-wide, not a case-by-case, basis. The Department 
has revised 7 CFR 273.21(f)(2) (i), (ii), and (iii) accordingly to 
allow State agencies to prorate self-employment, contract, and 
nonexcluded educational income either prospectively or retrospectively.
    For consistency with the prorated income proposal, the Department 
proposed at 7 CFR 273.21(f)(2)(iv) that prorated deductible expenses be 
budgeted prospectively. Again for consistency, the Department has 
changed the provision at 7 CFR 273.21(f)(2)(iv) to allow State agencies 
the option to either prospectively or retrospectively budget prorated 
deductible expenses. State agencies may choose a different budgeting 
procedure for deductions than income. However, such option must be made 
on a State-wide, not a case-by-case, basis.

Verification--7 CFR 273.21(i)

    The Department proposed in 7 CFR 273.21(i) to allow State agencies 
to request verification for any item on the monthly report that has 
changed or appears questionable. The Department also sought comments on 
an alternate proposal in the November 1, 1993 proposed rule. That 
proposal would allow State agencies to request that verification be 
submitted with the monthly report form for any item that has changed or 
can be expected to change on a frequent basis. The Department received 
five comments, two supporting the option in the rule and two supporting 
the alternate proposal in the preamble. One commenter supported both 
provisions under the aegis of increased State agency latitude. As there 
was no consensus of option among the commenters, the Department has 
adopted the provision as proposed in 7 CFR 273.21(i) to allow State 
agencies to request verification for any item on the monthly report 
that has changed or appears questionable.

State Agency Action on Reports--7 CFR 273.21(j)(3)

    The Department proposed to revise the first sentence in 7 CFR 
273.21(j)(3)(iii) to clarify that when an item is required to be 
verified by the State agency and the household fails to provide that 
verification, the actions in (A) through (E) will be taken as 
appropriate. One comment was received supporting the proposal. 
Accordingly, the provision at 7 CFR 273.21(j)(3)(iii) is being adopted 
as proposed.

Changes in Reporting/Budgeting Status--7 CFR 273.21(r)

    The current regulatory language at 7 CFR 273.21(r)(2)(i) states 
that the first month of prospective budgeting would be the first month 
that the household was no longer required to file a monthly report. The 
Department proposed to revise 7 CFR 273.21(r)(2)(i) to state that the 
household's benefits shall be prospectively budgeted no later than the 
first issuance month for which no monthly report was submitted. Three 
commenters supported the proposal. The provision at 7 CFR 
273.21(r)(2)(i) is being adopted as proposed.

Additional Changes

    For clarification, the Department proposed to delete the provision 
on verification from 7 CFR 273.9(d)(5)(i), adding a reference to 7 CFR 
273.2(f)(1), and adding the verification provisions for homeless 
households to 7 CFR 273.2(f)(1). Two commenters supported the proposal. 
The provisions at 7 CFR 273.9(d)(5)(i) and 7 CFR 273.2(f)(1) are being 
adopted as proposed.
    The Department proposed technical corrections and revisions to 7 
CFR 272.1(g)(121)(iii), 7 CFR 273.2(j) and (j)(4)(iv)(A), 7 CFR 
273.9(d)(5)(i) and (ii), 7 CFR 273.9(d)(6)(i)(A) and (ii)(C), 7 CFR 
273.21(r)(1)(i) and (2)(ii), and 7 CFR 273.21(s). The Department 
received one comment supporting these technical corrections and 
revisions. The corrections to 7 CFR 273.21(r) have already been made by 
the Federal Register. We are adopting the other provisions as proposed.

Implementation

    The Department did not receive any comments on the implementation 
schedule as proposed. The major provisions have implementation dates 
required by law. The remaining changes are mostly technical in nature. 
The Department proposed that those provisions without legislatively-
mandated effective dates would effective and must be implemented on the 
effective date of the final rule.
    Accordingly, this action amends 7 CFR 272.2(g) to add a new 
paragraph to address implementation requirements for this final action. 
The two-month EITC provision at 7 CFR 273.8(e)(12)(i) was effective and 
must be implemented according to statute retroactive to January 1, 
1991. The 12-month EITC provision at 7 CFR 273.8(e)(12)(ii) will be 
effective and must be implemented on September 1, 1994. The prohibition 
at 7 CFR 273.21(b) against establishing new monthly reporting 
requirements for households residing on Indian reservations if no 
monthly reporting system was in place on March 25, 1994, was effective 
and should have been implemented on that date. The provision in 7 CFR 
273.2(j) concerning categorical eligibility for GA recipients was 
effective and must be implemented retroactive to February 1, 1992. The 
remaining provisions are effective and must be implemented October 28, 
1994.
    State agencies were required to implement certain provisions of 
this final rule by FNS implementing memoranda as follows:
    1. The two-month EITC provision at 7 CFR 273.8(e)(12)(i) adopts the 
corresponding provisions of the FNS implementing memorandum dated 
February 22, 1991. For the period of January 1, 1991, through March 31, 
1991, quality control reviewers did not code errors if the eligibility 
worker had failed to implement the EITC resource exclusion for the 
sample month. Quality control variances for this provision were 
excluded for 60 days from April 1, 1991 in accordance with 7 CFR 
275.12(d)(12).
    2. The provision at 7 CFR 273.2(j) concerning categorical 
eligibility for GA recipients adopts the corresponding provisions of 
the FNS implementing memorandum dated December 27, 1991. Quality 
control variances for this provision were excluded for 60 days from the 
required implementation date of February 1, 1992, in accordance with 7 
CFR 273.12(d)(12).
    3. The provision at 7 CFR 273.21(b) against establishing new 
monthly reporting requirements for households residing on Indian 
reservations adopts the corresponding provisions of the FNS 
implementing memorandum dated March 31, 1994. Quality control variances 
for this provision are excluded for 120 days from the required 
implementation date, in accordance with 7 CFR 275.12(d)(12), as 
modified by 7 U.S.C. 2025(c)(3)(A).
    No other variance exclusions are applicable for these provisions.
    Quality control variances resulting from implementation of the 
remaining provisions of this final rule will be excluded for 120 days 
from the required implementation date, in accordance with 7 CFR 
275.12(d)(12), as modified by 7 U.S.C. 2025(c)(3)(A).

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 procedures, Aliens, Claims, Food 
stamps, Grant programs-social programs, Penalties, Reporting and 
recordkeeping requirements, Social security, Students.

    Accordingly, 7 CFR Parts 272 and 273 are amended as follows:
    1. The authority citation of 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. Paragraph (g)(121)(ii) is revised.
    b. Paragraph (g)(121)(iii) is amended by adding the word ``by'' 
after the word ``implemented''.
    c. A new paragraph (g)(137) is added. The revision and addition 
read as follows:


Sec. 272.1  General terms and conditions

* * * * *
    (g) Implementation. * * *
    (121) Amendment No. 336. * * *
    (ii) The delegation of the responsibility for design of the monthly 
report from (Sec. 273.21(h)(3) and Sec. 273.21(j)(1)(ii) of this 
chapter) must be implemented by February 1, 1992.
* * * * *
    (137) Amendment No. 350. The provisions of Amendment No. 350 are 
effective and must be implemented as follows:
    (i) The provision at Sec. 273.8(e)(12)(i) of this chapter is 
effective and must be implemented according to statute retroactive to 
January 1, 1991.
    (ii) The provision at Sec. 273.8(e)(12)(ii) of this chapter will be 
effective and must be implemented on September 1, 1994.
    (iii) The provision at Sec. 273.21(b) of this chapter against 
establishing new monthly reporting requirements for households residing 
on Indian reservations if no monthly reporting system was in place on 
March 25, 1994 is effective and must be implemented according to 
statute retroactive to March 25, 1994.
    (iv) The provision in Sec. 273.2(j) of this chapter concerning 
categorical eligibility for GA recipients is effective and must be 
implemented according to statute retroactive to February 1, 1992.
    (v) The remaining provisions are effective and must be implemented 
October 28, 1994.

PART 273--CERTIFICATION OF ELIGIBLE HOUSEHOLDS

    3. In Sec. 273.2:
    a. A new paragraph (f)(1(xi) is added.
    b. The title of paragraph (j)(2) is revised.
    c. Paragraph (j)(4)(i) is revised; and
    d. Paragraph (j)(4)(iv)(A) is amended by removing the word 
``eligible'' and adding the word ``ineligible'' in its place. The 
addition and revisions read as follows:


Sec. 273.2  Application processing.

* * * * *
    (f) Verification. * * *
    (1) Mandatory Verification. * * *
    (xi) Shelter costs for homeless households. Homeless households 
claiming shelter expenses greater than the standard estimate of shelter 
expenses (as defined in Sec. 273.9(d)(5)(i)) must provide verification 
of these shelter expenses. If a homeless household has difficulty in 
obtaining traditional types of verification of shelter costs, the 
caseworker shall use prudent judgment in determining if the 
verification obtained is adequate. For example, if a homeless 
individual claims to have incurred shelter costs for several nights and 
the costs are comparable to costs typically incurred by homeless people 
for shelter, the caseworker may decide to accept this information as 
adequate information and not require further verification.
* * * * *
    (j) * * *
    (2) Categorically eligible PA and SSI households. * * *
* * * * *
    (4) * * *
    (i) Certification of qualifying programs. Recipients of benefits 
from programs that meet the criteria in paragraphs (j)(4)(i)(A) through 
(j)(4(i)(C) of this section shall be considered categorically eligible 
to receive benefits from the Food Stamp Program. If a program does not 
meet all of these criteria, the State agency may submit a program 
description to the appropriate FNS regional office for a determination. 
The description should contain, at a minimum, the type of assistance 
provided, the income eligibility standard, and the period for which the 
assistance is provided.
    (A) The program must have income standards which do not exceed the 
gross income eligibility standard in Sec. 273.9(a)(1). The rules of the 
GA program apply in determining countable income.
    (B) The program must provide GA benefits as defined in Sec. 271.2 
of this part.
    (C) The program must provide benefits which are not limited to one-
time emergency assistance.
* * * * *
    4. In Sec. 273.8, paragraph (e)(12) is revised to read as follows:


Sec. 273.8  Resource eligibility standards.

* * * * *
    (e) Exclusions from resources. * * *
    (12) Earned income tax credits shall be excluded as follows:
    (i) A Federal earned income tax credit received either as a lump 
sum or as payments under section 3507 of the Internal Revenue Code for 
the month of receipt and the following month for the individual and 
that individual's spouse.
    (ii) Any Federal, State or local earned income tax credit received 
by any household member shall be excluded for 12 months, provided the 
household was participating in the Food Stamp Program at the time of 
receipt of the earned income tax credit and provided the household 
participates continuously during that 12-month period. Breaks in 
participation of one month or less due to administrative reasons, such 
as delayed recertification or missing or late monthly reports, shall 
not be considered as nonparticipation in determining the 12-month 
exclusion.
* * * * *


Sec. 273.9  [Amended]

    5. In Sec. 273.9:
    a. Paragraph (d)(5)(i) is amended by removing the word ``calendar'' 
in the first sentence, and adding the words ``in accordance with 
Sec. 273.2(f)(1)(xi) of this chapter'' after the word ``verified'' in 
the eighth sentence, and by removing the ninth and tenth sentences.
    b. The title of paragraph (d)(5)(ii) is revised to read ``Household 
shelter deduction''.
    c. Paragraph (d)(6)(i)(A) is amended by removing the reference to 
``(d)(5)(iii)'' and adding in its place a reference to 
``(d)(5)(ii)(C)''.
    d. The fourth sentence of the undesignated paragraph following 
paragraph (d)(6)(ii)(C) is amended by removing the reference to 
``(d)(5)(iii)'' and adding in its place a reference to 
``(d)(5)(ii)(C)''.
    6. In Sec. 273.21:
    a. Paragraph (a)(4) is revised.
    b. Paragraph (b) is revised.
    c. Paragraph (f)(1)(iii)(D) is revised, a new sentence is added 
following the first sentence in paragraph (f)(2)(i), and in paragraphs 
(f)(2)(ii), (f)(2)(iii), and (f)(2)(iv) the words ``either 
prospectively or'' are added before the word ``retrospectively''.
    d. The second sentence in paragraph (i) is revised.
    e. The introductory text of paragraph (j)(3)(iii) is revised.
    f. The last sentence of paragraph (r)(2)(i) is revised.
    g. In paragraph (s), the word ``of'' after the word ``same'' is 
removed.
    The revisions and additions read as follows:


Sec. 273.21  Monthly Reporting and Retrospective Budgeting (MRRB).

    (a) System design. * * *
    (4) Budgeting waivers. FNS may approve waivers of the budgeting 
requirements of this section to conform to budgeting procedures in the 
AFDC program, except for households excluded from retrospective 
budgeting under paragraph (b) of this section.
    (b) Included and excluded households. The establishment of either a 
monthly reporting or retrospective budgeting system is a State agency 
option. Certain households are specifically excluded from both monthly 
reporting and retrospective budgeting. A household that is included in 
a monthly reporting system must be retrospectively budgeted. Households 
not required to submit monthly reports may have their benefits 
determined on either a prospective or retrospective basis at the State 
agency's option, unless specifically excluded from retrospective 
budgeting.
    (1) The following households are excluded from both monthly 
reporting and retrospective budgeting:
    (i) Migrant or seasonal farmworker households.
    (ii) Households in which all members are homeless individuals.
    (iii) Households with no earned income in which all adult members 
are elderly or disabled.
    (2) Households residing on an Indian reservation where there was no 
monthly reporting system in operation on March 25, 1994 are excluded 
from monthly reporting.
* * * * *
    (f) Calculating allotments for households following the beginning 
months--(1) Household composition. * * *
    (iii) * * *
    (D) The State agency may add new members to the household effective 
either the month the household reports the gain of a new household 
member or the first day of the issuance month following the month the 
household reports the gain of a new member. The benefits shall not be 
prorated.
* * * * *
    (2) Income and deductions. * * *
    (i) * * * Such income shall be budgeted either prospectively or 
retrospectively and shall not affect more benefit months than the 
number of months in the period over which it is annualized or prorated. 
* * *
* * * * *
    (i) Verification. * * * The State agency may designate that 
verification be submitted for any item that has changed or appears 
questionable.
    (j) State agency action on reports. * * *
    (3) Incomplete filing. * * *
    (iii) When a State agency requires verification for the item listed 
and the household does not provide the verification, the State agency 
shall take the following actions:
* * * * *
    (r) Procedures for households that change their reporting and 
budgeting status. * * *
    (2) Households which are no longer subject to MRRB. * * *
    (i) Procedures for households exempt from MRRB. * * * The State 
agency shall begin determining the household's benefits prospectively 
no later than the first issuance month for which a household has not 
submitted a monthly report for the budget month.
* * * * *
    Dated: August 2, 1994.
Ellen Haas,
Assistant Secretary for Food and Consumer Services.
[FR Doc. 94-21188 Filed 8-26-94; 8:45 am]
BILLING CODE 3410-30-M