[Federal Register Volume 59, Number 167 (Tuesday, August 30, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-21346]


[[Page Unknown]]

[Federal Register: August 30, 1994]


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Part V





Department of Agriculture





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Food and Nutrition Service



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7 CFR Parts 271 and 273




Food Stamp Program: Certification Provisions of the Mickey Leland 
Childhood Hunger Relief Act; Proposed Rule
DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Parts 271 and 273

[Amendment No. 358]
RIN 0584-AB76

 
Food Stamp Program: Certification Provisions of the Mickey Leland 
Childhood Hunger Relief Act

AGENCY: Food and Nutrition Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This action proposes to amend Food Stamp Program regulations 
to implement several provisions of the Mickey Leland Childhood Hunger 
Relief Act. The provisions in this proposal would: simplify the 
household definition; establish eligibility for children who live with 
their food stamp eligible parents in a drug or alcohol rehabilitation 
center; exclude from resources the value of vehicles used to transport 
fuel or water; increase the fair market value exclusion of vehicles for 
determining a household's resource limit; exclude certain general 
assistance vendor payments; exclude the earnings of students under age 
22 who live with their parents; increase the maximum amount of the 
dependent care deduction; eliminate the current Federally imposed limit 
and require State agencies to establish a statewide limit on the 
dependent care reimbursement paid to participants in the Food Stamp 
Employment and Training Program; and require proration of benefits only 
after a break of more than one month in certification.

DATES: Comments on this proposed rulemaking must be received on or 
before October 31, 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, 3101 
Park Center Drive, Alexandria, VA 22302 or FAX (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 this proposed 
rulemaking should be addressed to Ms. Seymour at the above address or 
by telephone at (703) 305-2496.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This proposed rule has been determined to be significant and was 
reviewed by the Office of Management and Budget under Executive Order 
12866.

Executive Order 12372

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

Executive Order 12778

    This proposed 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 proposed 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 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 275 (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.

Regulatory Flexibility Act

    The Department has also reviewed this proposed rule in relation 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 
does not have a significant economic impact on a substantial number of 
small entities. The proposed requirements will affect food stamp 
applicants and recipients and the State and local agencies that 
administer the Program. Eligibility criteria will be simplified and 
some currently participating households will realize an increase in 
Program benefits.

Paperwork Reduction Act

    This proposed 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 action is required as a result of the Mickey Leland Childhood 
Hunger Relief Act which amends the Food Stamp Act of 1977, as amended, 
to include provisions that would: (1) Simplify the household 
definition; (2) establish eligibility for children who live with their 
food stamp eligible parents in a drug or alcohol rehabilitation center; 
(3) exclude from resources the value of vehicles used to transport fuel 
or water; (4) increase the fair market value exclusion of vehicles for 
determining a household's resource limit; (5) exclude certain general 
assistance vendor payments; (6) exclude the earnings of students under 
age 22 who live with their parents; (7) increase the maximum amount of 
the dependent care deduction; (8) eliminate the current Federally 
imposed limit and require State agencies to establish a statewide limit 
on the dependent care reimbursement paid to participants in the Food 
Stamp Employment and Training Program; and (9) require proration of 
benefits only in the initial month of certification.

Benefits

    This action would increase the number of potentially eligible food 
stamp recipients and would increase the benefit level of certain 
households that are affected by these provisions.

Costs

    It is estimated that this action would increase the cost of the 
Food Stamp Program by approximately $7 million in Fiscal Year 1994; 
$110 million in Fiscal Year 1995; $132 million in Fiscal Year 1996; 
$187 million in Fiscal Year 1997; and $207 million in Fiscal Year 1998.

Background

    On January 4, 1994, the Food and Nutrition Service (FNS) published 
a notice in the Federal Register announcing a public hearing on January 
20, 1994. The public hearing was scheduled to provide an opportunity 
for State agencies, advocacy groups, and other interested parties to 
engage in public dialogue on issues concerning the regulatory 
provisions that are to be published in connection with the Food Stamp 
Act of 1977 (Act) amendments made by the Mickey Leland Childhood Hunger 
Relief Act, Chapter 3, Title XIII, Omnibus Budget Reconciliation Act of 
1993, Pub. L. 103-66, enacted August 10, 1993 (Leland Act). All 
provisions of the Leland Act pertinent to the Food Stamp Program 
(Program) were included as topics of dialogue during the public 
hearing, including the provisions contained in this proposed 
rulemaking.

Simplifying the Household Definition for Households with Children and 
Others

    When the Food Stamp Act of 1977 was enacted, the concept of a 
``household'' was defined as: (1) An individual living alone; (2) an 
individual living with others but customarily purchasing food and 
preparing meals for home consumption separate and apart from the 
others; (3) an individual who is a boarder living with others and 
paying reasonable compensation to the others for meals for home 
consumption; (4) a group of individuals living together for whom food 
is customarily purchased in common and for whom meals are prepared 
together for home consumption; or (5) a group of individuals who are 
boarders, living with others and paying reasonable compensation to the 
others for meals for home consumption. Separate household status was 
not granted to a spouse of a household member, or to children under 18 
years of age under the parental control of a member of the household.
    Section 101 of the Omnibus Budget Reconciliation Act of 1981 (Pub. 
L. 97-35) amended section 3(i) of the Act to provide that parents and 
children living together could be considered as separate households if 
they purchase and prepare meals separately, but only if at least one 
parent is 60 years of age or older or is disabled. The final rule to 
implement this revision was published on March 28, 1986 (51 FR 10764).
    Section 142 of the Omnibus Budget Reconciliation Act of 1982 (Pub. 
L. 97-253) amended section 3(i) of the Act to provide that siblings 
living together had to be included in the same household unless at 
least one of the siblings is elderly or disabled and they purchased and 
prepared their meals separately. The Department construed the term 
``siblings'' to include natural, adopted, half or step-siblings. The 
final rule to implement this revision was published on March 28, 1986 
(51 FR 10764).
    In July 1987, section 802 of the Stewart B. McKinney Homeless 
Assistance Act (Pub. L. 100-77) (McKinney Act) amended section 3(i) of 
the Food Stamp Act to provide an exception to the parent-child rule 
which allows three generations living together to form two separate 
households if the parent with minor children and the minor children are 
purchasing and preparing meals separately from the minor children's 
grandparent(s). The McKinney Act also provided an exception to the 
sibling rule which allowed two siblings living together to form two 
separate households if one sibling is a parent of minor children in 
residence and the parent and minor children purchase and prepare meals 
separately from the parent's sibling. The Department considered 
children under 18 years of age who are under the parental control of an 
adult household member to be minors. In addition, section 802 of the 
McKinney Act specifically provided that such households be subject to 
reexamination at least once every six months. Accordingly, the 
Department published a final rule at 58 FR 58444 to implement these 
provisions.
    Section 13931 of the Leland Act amended section 3(i) of the Food 
Stamp Act to require that persons who live together and purchase food 
and prepare meals separately may apply as separate households, except 
for (1) spouses who live together, (2) parents and their children 21 
years of age or younger (who are not themselves parents living with 
their children or married and living with their spouses), and (3) 
children (excluding foster children) under 18 years of age who live 
with and are under the parental control of a person other than their 
parent. These groups shall be treated as a group of individuals who 
customarily purchase and prepare meals together for home consumption 
even if they do not do so. The parent/child and siblings provisions of 
7 CFR 273.1(a) are no longer valid. The provision of section 3(i) of 
the Act which grants separate household status to individuals who are 
60 years of age or older and unable to purchase food and prepare meals, 
was not changed.
    Congress amended the household definition for several reasons. 
According to the legislative history cited below, the current household 
definition was too ``convoluted,'' thereby making it ``needlessly 
complex and error-prone.'' In addition, the current household 
definition did not recognize that more and more families and 
individuals must share housing because of high housing costs or 
unemployment. The legislative history further states that the change in 
household definition would remove the burden imposed on relatives who 
``double up'' but still purchase food and prepare meals separately. 
(House Report No. 111, 103rd Congress, lst session (199), p.34). 
Congress also prohibited minor children who are under the parental 
control of an adult household member from establishing a separate 
household. This prohibition prevents minor children from being treated 
as separate households when they are in the care of adults, whether or 
not legal adoption has taken place.
    The Department is planning to retain the current language regarding 
the rule that, with a few exceptions, persons who live together and 
purchase food and prepare meals together are one household. The 
Department is proposing to revise the exceptions which require some 
related individuals to be included in the same household even if they 
purchase food and prepare meals separately. Under the proposal, spouses 
who live together must be considered one household. Natural, adopted, 
and stepchildren and other children under 18 years of age who are under 
the parental control of a member of the household, other than a parent, 
must be included in the same household as the parent or other person 
with parental control even if they purchase food and prepare meals 
separately unless the child is living with his or her own children or 
is married and living with his or her spouse. In addition, children 
ages 18, 19, 20, and 21 who are natural, adopted, or stepchildren must 
be included in the same household as the parent even if they purchase 
food and prepare meals separately, unless the child is living with his 
or her children or is married and living with his or her spouse.
    According to Food Stamp Program Policy Memo 3-93-6 dated March 26, 
1993, children under parental control for food stamp eligibility 
purposes are ``minors who are dependents--financial or otherwise--of 
the household as opposed to independent units.'' This definition was 
intended to transcend State laws which vary widely on parental control. 
The Department is proposing to amend this definition to specify that 
children who are married and living with their spouse are not under 
parental control and, further, that children who are living with 
children of their own are not under parental control. This will provide 
the same treatment for children under 18 living with an adult other 
than a parent that is provided for natural, adopted and stepchildren; 
i.e., they may be a separate household if they are living with their 
children or married and living with their spouse and they purchase and 
prepare their meals separately.
    The Department is proposing to amend 7 CFR 273.1(a)(2) (i)(B) 
through (D) accordingly. The Department is also proposing two 
conforming amendments. The first proposed conforming amendment would 
amend 7 CFR 273.1(a)(2)(ii) to include a reference to 7 CFR 
273.1(a)(2)(i)(C). The second proposed amendment would amend 7 CFR 
273.10(f)(2), which mandates certification periods of up to six months 
for households meeting the parent/child or siblings provision of 7 CFR 
273.1(a)(2)(i)(C) and (D). The Department proposes to remove this 
section because this requirement was removed from the Food Stamp Act 
when the household definition was changed. The Department is proposing 
no change to paragraph 7 CFR 273.1(a)(2)(i)(A) regarding the grouping 
of spouses since the rule is unaffected by the Leland Act.

Eligibility of Children of Parents Participating in Drug or Alcohol 
Treatment Programs

    Under section 3(i) of the Food Stamp Act, food stamp benefits are 
authorized for narcotic addicts or alcoholics who live under the 
supervision of a private non-profit institution for the purpose of 
regular participation in a drug or alcoholic treatment program. Current 
regulations at 7 CFR 273.1(f)(2) (i) and (ii) permit residents of 
alcohol or drug treatment centers to apply as a one-person household 
and be certified for food stamps through the use of an authorized 
representative who is an employee of and designated by the publicly 
operated community mental health center or the private non-profit 
organization or institution that is administering the treatment and 
rehabilitation program. According to the Act at section 3(i) and 7 CFR 
273.1(e), spouses and children living with residents of alcohol or drug 
treatment centers are not eligible if the center provides the majority 
of their meals. If the center does not provide the majority of their 
meals, the spouses and children may qualify for food stamps as a 
separate household.
    Since the implementation of this regulation, there have been 
changes in some drug and alcohol treatment centers' policy regarding 
addicts and their children. Previously, addicts with children were 
required to leave them with family or friends, or place them in foster 
care since children were not permitted to remain with their parents 
during treatment. Now, several residential treatment programs permit 
addicts with children to live as a family unit while the parents 
participate in treatment.
    While some residential treatment programs accept addicts and their 
children, the Food Stamp Act did not authorize benefits for these 
children even though their parents were eligible for food stamps when 
the center provided the majority of their meals. In the past, the 
Department received several waiver requests from State agencies to add 
children who live with their parent(s) while the parent(s) is (are) a 
resident(s) of an alcohol or drug treatment center to the parent's food 
stamp household. But the provisions of the Food Stamp Act did not 
permit the Department to waive the regulations for these children.
    Section 13932 of the Leland Act amended the Food Stamp Act to 
provide Food Stamp Program eligibility to children living with their 
eligible parent(s) in a drug or alcohol treatment center regardless of 
whether or not the center provides the majority of the children's 
meals. The children would be considered part of the parent's household.
    Under the household definition stated in section 13931 of the 
Leland Act, parents and their natural, adopted or stepchildren 21 years 
of age or younger are considered one household except when the child 
under 21 is living with his/her children or is married and living with 
his/her spouse. Then the child's household can be considered a separate 
household from that of the parent(s).
    In the case of parents and children living in a drug or alcohol 
treatment center, the circumstances are different. In the course of 
discussion during the January 20, 1994 public hearing, one State agency 
representative asked that children and parents living in residential 
drug or alcohol treatment programs be considered separate households. 
The State agency representative explained that the State agency 
provided different funding amount for meals served to adults and 
children living in residential drug or alcohol treatment centers. 
Permitting separate household status for the parents and children 
residing in these treatment centers would provide the State agency with 
an easy method for calculating and issuing food stamp benefits.
    The Department has considered these comments and believes that 
there are significant problems with this suggested policy of granting 
separate household status to parents and children living in residential 
drug or alcohol treatment centers even though such a policy may be less 
complicated for a particular State agency. The revised household 
definition of section 13931 of the Leland Act requires parents and 
children under 21 years of age to be considered one household with two 
exceptions. Therefore, to provide separate household status to parents 
and children under 21 who live together in a residential drug or 
alcohol treatment center would violate section 13931 of the Leland Act.
    Moreover, under current regulations at 7 CFR 273.1(f)(2), residents 
of drug or alcohol treatment centers are permitted to apply for food 
stamps through an authorized representative. If parents and children 
living in a drug or alcohol treatment program were treated as separate 
households, problems resulting from the need for authorized 
representatives for both the parent and child could become very 
confusing. Under 7 CFR 273.1(f)(2), the authorized representative for 
residents of a drug or alcohol treatment center must be an employee of 
the institution administering the treatment program. The Department 
believes that it was the intent of Congress to include parents and 
children in the same household even when the parent is in a drug or 
alcohol treatment center. By including the parent and child in the same 
household, the parent's income would be counted only once and no 
authorized representative would be needed for the child. Currently, 
residents of a drug or alcohol treatment center are certified through 
an authorized representative of the center. The Department believes 
that the authorized representative of the center should represent the 
entire household while the household lives in the center and the center 
provides the majority of its meals.
    Therefore, the Department is proposing to amend 7 CFR 
273.1(e)(1)(ii) to extend food stamp eligibility to children of 
narcotic addicts or alcoholics who are residents of drug or alcohol 
treatment centers. Conforming language is also being proposed to 
include children of narcotic addicts or alcoholics in the ``Eligible 
foods'' definition of 7 CFR 271.2 so that these children will become 
eligible for meals served to eligible households by drug or alcohol 
rehabilitation centers. A conforming amendment is also being proposed 
to 7 CFR 273.1(f)(2).

Vehicles Necessary to Carry Fuel or Water

    Currently, a vehicle is totally exempt from being counted as a 
resource if it is used primarily (over 50 percent of the time) for 
income producing purposes; annually produces income consistent with its 
fair market value; necessary for long-distance travel, other than daily 
commuting, that is essential to the employment of a household member; 
used as the household's home; or is necessary to transport a physically 
disabled household member.
    Section 13923 of the Leland Act amended section 5(g)(2) of the Act 
to exclude from resources the value of a vehicle that a household 
depends upon to carry fuel for heating or water for home use when such 
transported fuel or water is the primary source of fuel or water for 
the household. It is the intent of Congress that households without 
heating fuel or piped water into their homes receive this resource 
exclusion without having to meet any additional tests concerning the 
nature, capabilities, or other uses of the vehicle. House Report No. 
111, 103rd Congress, 1st Session, p. 33.
    This proposed rule mirrors the language of section 13924 of the 
Leland Act and the accompanying legislative history. The Department 
believes the proposed regulation is general enough to permit State 
agencies the greatest flexibility. During the January 20, 1994 public 
hearing, some individuals illustrated the need for flexibility by 
stating that in remote areas of Alaska, households bring in their fuel 
and water by boat. Under this proposed rule, the State agency would 
have the flexibility to determine if the boat meets the vehicle 
exclusion requirement of section 13923 of the Leland Act because the 
Department does not define the term ``vehicle''.
    The Department is not proposing any specific verification 
requirements for determining if the value of a vehicle should be 
excluded under section 13924. However, the Department expects that 
State agencies will verify the need for a vehicle to carry fuel and 
water for the household's use and is soliciting comments on the best 
means of verification. Some State agencies may decide to add a question 
to their food stamp applications that asks if a household depends on a 
vehicle to carry water or fuel for heating. Other State agencies may 
instruct its eligibility workers to ask such a question at a 
household's certification interview.
    The Department understands that there will be some instances where 
households are hooked up to public utilities, such as heat and water, 
but are unable to use these utilities for whatever reason, such as non-
payment of utility bill. The Department believes that as long as a 
household is using a vehicle to carry fuel for heat or water, access to 
public utilities should have no bearing on the vehicle exemption.
    Accordingly, the Department is proposing to amend 7 CFR 273.8(h)(1) 
to add a new paragraph (vi) to exclude as a resource the value of a 
vehicle that a household depends upon to carry fuel for heating or 
water for home use when such transported fuel or water is the primary 
source of fuel or water for the household. Households will receive this 
resource exclusion without having to meet any additional tests 
concerning the nature, capabilities, or other uses of the vehicle. 
Furthermore, the household will not be required to provide documentary 
evidence, as required in 7 CFR 273.2(f)(4), unless the basis for the 
exclusion of the vehicle is questionable. If the basis for the 
exclusion of a vehicle is questionable, the State agency must require 
documentation showing that the vehicle is used to carry fuel for 
heating or water for home use. Also, the Department is proposing a 
technical amendment to 7 CFR 273.8(h)(6) to correct an oversight in the 
summary of how vehicles are handled. The Department failed to list 
vehicles necessary to transport a physically disabled household member 
as an exclusion. The Department proposes to add this exclusion in 
addition to the exclusion for a vehicle used to carry fuel or water.

Vehicles Needed To Seek and Continue Employment and For Household 
Transportation

    Current regulations at 7 CFR 273.8(h)(3), in accordance with 
section 5(g) of the Act, require that all licensed vehicles be 
evaluated to determine their fair market value over $4,500. The fair 
market value over $4,500 is counted as a resource for one vehicle per 
household and for vehicles used for work, training or education, or to 
seek work. For other vehicles, the fair market value over $4,500 or the 
equity value, whichever is greater, is counted as a resource. 7 CFR 
273.8(h) excludes a vehicle as a resource if the vehicle is used 
primarily for income producing purposes; annually produces income 
consistent with its fair market value; is necessary for long-distance 
travel that is essential to employment; is used as a household's home; 
or is necessary to transport a physically disabled household member.
    The Department has received numerous comments from State agencies, 
the general public and advocate groups about the $4,500 fair market 
value resource exclusion, which has remained unchanged since the 
enactment of the Food Stamp Act of 1977. The comments expressed the 
belief that the $4,500 fair market value resource exclusion is too low 
and does not accurately reflect changes due to inflation, and thus was 
detrimental to food stamp households.
    Section 13923 of the Leland Act amended section 5(g)(2) of the Act 
to increase the fair market value resource exclusion of vehicles in the 
following manner. The current $4,500 fair market value resource 
exclusion will remain in effect through August 31, 1994. On September 
1, 1994, the resource exclusion will increase to $4,550 and be 
effective through September 30, 1995. On October 1, 1995, the resource 
exclusion will increase again to $4,600 and be effective through 
September 30, 1996. On October 1, 1996 and on every October 1 
thereafter, the fair market value resource exclusion of vehicles shall 
be adjusted annually, using a base of $5,000, to reflect changes in the 
new car component of the Consumer Price Index (CPI) for All Urban 
Consumers as published by the Bureau of Labor Statistics for the 12-
month period ending the preceding June 30th, rounded to the nearest 
$50.
    In order to implement Section 13923 of the Leland Act, the 
Department is proposing to amend 7 CFR 273.8(h)(3) in accordance with 
the timetable prescribed by Section 13923. The Department would provide 
the yearly fair market value resource exclusion for the period 
beginning October 1, 1996 and thereafter to State agencies on an annual 
basis.

General Assistance (GA) Vendor Payments--7 CFR 273.9(c)(1)

    Current regulations at 7 CFR 273.9(b)(2)(i) require State agencies 
to count payments from GA programs (as defined in 7 CFR 271.2) as 
unearned income even if provided in the form of a third-party payment, 
unless the vendor payment is specifically exempt under 7 CFR 
273.9(c)(1).
    Section 13915 of the Mickey Leland Childhood Hunger Relief Act (the 
1993 Leland Act), Chapter 3, Title XIII of the Omnibus Budget 
Reconciliation Act of 1993 (Pub. L. 103-66, 107 Stat. 674, enacted 
August 10, 1993), amended section 5(k)(1)(B) of the Food Stamp Act of 
1977, as amended (the Act), 7 U.S.C. 2014(k)(1)(B), to change the 
treatment of GA vendor payments. As amended, section 5(k)(1)(B) 
provides that GA provided to a third party on behalf of a household by 
a State or local government shall be considered money payable directly 
to the household if the assistance is provided in lieu of a benefit 
payable to the household for housing expenses (exclusive of energy or 
utility-cost assistance) under a State or local general assistance 
program or another basic assistance program comparable to GA (as 
determined by the Secretary). Previously, assistance provided for 
living expenses was included as income, with specified exceptions.
    House Report 103-111, p. 30 (May 25, 1993) indicates that 
administration of the current provision requiring that GA assistance 
provided for living expenses be counted as income is complex. It also 
states that a recipient's need for food stamp assistance is not 
materially affected by many of the vendor payments, such as a voucher 
for gasoline to get to a job interview or a one-time payment to a 
utility company to prevent a shutoff of service.
    In addition, the House Report indicates that Congress wanted to 
reduce the number of GA vendor payments counted as income in States 
that provide some GA in cash. Under section 1722 of the Food, 
Agriculture, Conservation, and Trade Act of 1990, (Pub. L. 101-624), GA 
vendor payments are excluded from income pursuant to section 5(k)(1)(H) 
of the Act, 7 U.S.C. 2014(k)(1)(H), in States in which, by State law, 
no cash assistance is provided. Section 13915 of the 1993 Leland Act 
would reduce the differences in treatment of GA payments from one State 
to another.
    The 1993 Leland Act did not remove the provision of section 5(k)(2) 
that the requirement to count public assistance (PA) or GA payments 
shall not apply to certain energy assistance, assistance provided by a 
State or local housing authority, emergency assistance for migrant or 
seasonal farmworker households during the period such households are in 
the job stream, housing assistance payments made to a third party on 
behalf of a household residing in transitional housing for the 
homeless, or special or emergency assistance.
    Therefore, we are proposing to amend 7 CFR 273.9(c)(1)(ii) to 
require that housing assistance provided to a third party on behalf of 
a household by a State or local GA program or another basic assistance 
program comparable to GA (as defined in Sec. 271.2) shall be counted as 
income, unless the assistance is one of the following:
    a. Assistance provided for utility costs. The exclusion is not 
limited to the costs identified in 7 CFR 273.9(d)(5) as allowable costs 
for the purposes of the excess shelter deduction.
    b. Energy assistance.
    c. Assistance provided by a State or local housing authority.
    d. Emergency assistance for migrant or seasonal farmworker 
households in the job stream.
    e. Transitional housing assistance for the homeless.
    f. Emergency or special assistance over and above the normal grant.
    g. Assistance provided under a GA program if no payments are made 
under the program in cash.
    Current regulations at 7 CFR 273.9(c)(1)(ii) address both PA and GA 
vendor payments. The Food Stamp Program regulations at 7 CFR 271.2 
define GA as assistance financed by State or local funds ``as part of a 
program which provides assistance to cover living expenses or other 
basic needs intended to promote the health or well-being of 
recipients.'' PA is defined in that section to mean certain specified 
programs authorized under the Social Security Act of 1935, such as Aid 
to Families with Dependent Children (AFDC) and aid to the aged, blind 
and disabled. The 1993 Leland Act did not make any changes in the 
provisions of section 5(k) of the Act concerning treatment of PA vendor 
payments. Therefore, PA and GA vendor payments must be treated 
differently, and we are proposing in this rule to separate the 
provisions for treatment of PA and GA vendor payments. Because of the 
need to reorganize part of 7 CFR 273.9(c)(1) to distinguish between 
treatment of GA and PA payments, we are proposing to take advantage of 
this opportunity to restructure 7 CFR 273.9(c)(1) in its entirety. We 
are proposing this reorganization to make specific vendor payment 
exclusions easier to locate in the regulations. We are not proposing 
any changes in the requirements of the section except those required by 
the 1993 Leland Act related to the GA vendor payments. We are proposing 
minor changes in the language of the section for clarity. We are also 
proposing to remove the reference in current 7 CFR 273.9(c)(1)(iii) to 
the experimental housing allowance programs in Green Bay, Wisconsin, 
and South Bend, Indiana, because the programs are no longer in 
existence.
    Under the proposed reorganization of Sec. 273.9(c)(1), the 
provisions for excluding vendor payments would be divided into seven 
paragraphs as follows:
    (i) PA vendor payments;
    (ii) GA vendor payments;
    (iii) Department of Housing and Urban Development vendor payments;
    (iv) Vendor payments for educational assistance;
    (v) Vendor payments that are reimbursements;
    (vi) Vendor payments made under demonstration projects; and
    (vii) Other vendor payments.

Student Earned Income Exclusion--7 CFR 273.9(c)(7)

    Current regulations at 7 CFR 273.9(c)(7) require State agencies to 
exclude from household income the earned income of children who are 
members of the household, students at least half-time, and under 18. 
The exclusion applies during temporary interruptions in school 
attendance, provided the child's enrollment will resume following the 
break. If the child's earnings or amount of work performed cannot be 
differentiated from that of other household members, the total earnings 
are prorated equally among the working members and the child's pro rata 
share is excluded.
    Under current regulations, individuals are considered children if 
they are under the parental control of another household member. The 
exclusion does not apply if the student has formed a separate 
household. No distinction is made between students who live with their 
parents in a separate food stamp household and students who live 
separately from parents. In addition, the regulations do not specify 
what type of educational institution the student must be attending 
(high school, college, vocational training, etc.).
    Section 13911 of the 1993 Leland Act amended section 5(d)(7) of the 
Act, 7 U.S.C. 2014(d)(7), to exclude ``income earned by a child who is 
a member of the household, who is an elementary or secondary school 
student, and who is 21 years of age or younger * * *.'' The legislative 
history (House Report 103-111, pp. 27-28) indicates that the provision 
is intended to assist families with high school students whose 
education has been delayed (for example, students who have to learn 
English in the classroom) and who have not been able to complete high 
school before age 18. Under current rules, the income of these students 
would be counted in determining the eligibility and benefits of the 
household and could result in a reduction in the family's benefits or 
ineligibility. The Report also indicates at p. 28 that ``[t]he 
Committee wishes to emphasize that this amendment in no way changes 
current law regarding those students who live away from home and have 
formed a separate household.''
    Several issues have arisen in connection with the current provision 
that will continue to be relevant under the changes proposed to 
implement section 13911 of the 1993 Leland Act. One issue has been 
whether a student has to be under the parental control of a household 
member, as currently required, for his or her income to be excluded. 
Parental control was the issue in a 1989 lawsuit filed in the United 
States District Court for the District of Maine (Dion v. Commissioner, 
Maine Department of Social Services v. Sullivan and Yeutter. The case 
involved a high school student under 18 with a child. The student and 
child lived with the student's parents but were certified as a separate 
food stamp household. The State agency did not exclude the student's 
earnings from part-time work because the student was not under parental 
control. The District Court decided that the parental control provision 
of the current regulations was invalid because the Act does not 
expressly contain such a limitation. This decision was subsequently 
upheld by the First Circuit Court of Appeals, 933 F.2d 13 (1st Cir. 
1991).
    The statutory language of section 13911 does not specifically 
restrict the student income exclusion to students living with their 
parents or under the parental control of another adult. Under a literal 
reading of the amended statute, the exclusion would apply to any high 
school or elementary school student under 22, even if the student was 
living separately from his or her parents. The House Report at p. 28 
indicates, however, that the exclusion was not intended to apply to 
students who have established a separate residence. Both the House 
Report and the Dion decision support allowing the exclusion to students 
who live with their parents but who may have a separate food stamp 
household. This is a middle position between the extremes of an 
unrestricted exclusion and one limited to students under parental 
control, and it is the position we are proposing to adopt. We invite 
comments concerning the best way to implement this provision so as to 
limit the income exclusion to the households Congress intended to help 
without placing an unnecessary administrative burden on households and 
State agencies.
    In this rule we are proposing to amend 7 CFR 273.9(c)(7) to provide 
that the earned income of elementary or high school students who are 21 
years of age or younger and living with their parents (rather than in a 
separate living arrangement) shall be excluded. The exclusion would 
apply if the student is in the same food stamp household as a natural, 
adoptive or step-parent or is under the parental control of another 
member of the same food stamp household. The exclusion would also be 
allowed if the student is in a separate food stamp household but is 
living with a natural, adoptive or step-parent. Parental control would 
not be a factor if the student is in a separate food stamp household.
    Another issue concerning the income of students that has come to 
our attention is whether to require that students be attending school 
at least half-time for the exclusion to apply. The legislative history 
of section 13911 of the 1993 Leland Act did not address this issue. 
However, because the legislation extends the exclusion to students age 
21 and under, we believe it is important that the exclusion be limited 
only to those students who are seriously pursuing a regular high school 
diploma or General Equivalency Diploma (GED). According to House Report 
103-111, Congress intended this income exclusion to assist households 
in which a student's education has been delayed. Frequently, students 
who have dropped out of school for a time decide to obtain a GED 
instead of a regular high school diploma. These students may be earning 
sufficient income to adversely affect the household's benefits if the 
earnings were counted. Therefore, we are proposing that the earned 
income of elementary or high school students be excluded if the student 
is attending school (including GED classes) at least half-time.
    A related issue is the point at which a student's earnings must be 
counted. For example, a household applies on June 10, and the student 
will be 21 on June 20. Or, a household is certified through December 
31, and the student turns 21 on August 10. This issue was addressed in 
Policy Memo 84-6 dated October 24, 1983, which has since been 
rescinded. The Policy Memo provided that if a student turned 18 in the 
month of application, the caseworker should determine at the time of 
the interview how much income the student received or anticipated 
receiving after turning 18. That amount would be counted as income to 
the household, and any amount received prior to the 18th birthday would 
be excluded. For participating households, the Policy Memo provided 
that the student's earned income should not be counted before he or she 
turned 18. Because it would not be feasible to determine and count only 
the portion of a month's income that was received after the birthday 
for an ongoing household, the income would be counted in the month the 
student turned 18 only if the change occurred on the first of the 
month.
    A rule published in the Federal Register on December 4, 1991 (56 FR 
63597), amended the regulations for retrospective budgeting to 
incorporate the provisions of Policy Memo 84-6 for retrospectively 
budgeted households into the regulations. Current regulations at 7 CFR 
273.21(j)(1)(vii)(A) provide that the earned income of a student is 
counted only if the student is 18 years of age or older ``at the 
beginning of the budget month.'' By way of providing an example, the 
preamble to the rule (56 FR at 63602) clarifies that in a two-month 
retrospective budgeting system, if a student turns 18 during the month 
of September, the student's earned income is not counted until the 
month of October becomes the budget month. That is when the student is 
18 years of age at the beginning of the budget month.
    An objection was raised to the provision in Policy Memo 84-6 that 
required State agencies to treat applicant and ongoing households 
differently. For the month of application, workers were required to 
count the income received by a student after he turned 18. However, in 
an ongoing household, the income was not to be counted unless the 
student turned 18 on the first of the month.
    To make the requirements for applicant and ongoing households and 
prospective and retrospective budgeting procedures the same, we are 
proposing to add a new paragraph (E) to 7 CFR 273.10(e)(2)(i) to 
provide that for prospective eligibility and benefit determination, the 
earned income of a high school or elementary school student shall be 
counted beginning with the month following the month in which the 
student turns 22. We are also proposing to amend 7 CFR 
273.21(j)(1)(vii) to provide for retrospective eligibility and 
budgeting purposes that the income of an elementary or secondary 
student shall be counted beginning with the budget month after the 
month in which the student turns 22. In the examples above, the 
earnings of the student who will be 22 in the middle of June, the month 
of application, would not be included in household income until July. 
The earnings of the student who turns 22 in August in the middle of the 
certification period would not be included in household income until 
September. Eligibility workers would have to be alert to a change in 
the age of a student during the certification period. Under this 
proposal, a student's earnings would be included in budget month income 
the month following the month the student turns 22 under both 
prospective and retrospective budgeting and at application and during 
the certification period. Under retrospective budgeting, the effect of 
including a student's earnings would not be reflected in the allotment 
until the issuance month corresponding to the budget month following 
the month in which the student becomes 22.
    This rule proposes to amend 7 CFR 273.9(c)(7) to provide that the 
earned income of an elementary or secondary school student shall be 
excluded if the student is (1) 21 years of age or younger; (2) living 
in the same food stamp household with a natural, adoptive or step-
parent, under the parental control of another member of the same food 
stamp household other than a parent, or in a separate food stamp 
household but living with a natural, adoptive or step-parent; and (3) 
attending school (including GED classes) at least half-time. We are 
retaining the provisions of the current regulations regarding the 
continuation of the exclusion during temporary interruptions in school 
attendance and the proration of income when the child's share cannot be 
differentiated. We are also proposing to amend 7 CFR 273.10(e)(2)(i) 
and 7 CFR 273.21(j)(1)(vii)(A) to provide that the earnings of 
elementary and secondary school students shall not be counted until the 
month following the month in which the student becomes 22. For clarity, 
we propose to amend the phrase in the first sentence of 7 CFR 
273.21(j)(1)(vii)(A) regarding averaged income to add a reference to 7 
CFR 273.21(f), which specifies the circumstances under which 
retrospectively budgeted income may be averaged.

Improving Access To Employment and Training Activities

    Under 7 CFR 273.9(d)(4), households are allowed to deduct from 
their income their actual dependent care expenses up to a maximum 
amount of $160 per month per dependent. These dependent care expenses 
must be necessary for a household member: (1) to accept or continue 
employment, (2) to participate in the Food Stamp Program's Employment 
and Training (E&T) Program or an equivalent effort by those not subject 
to E&T, or (3) to attend training or receive education or training 
which is preparatory to employment.
    Section 404 of the Hunger Prevention Act of 1988, Pub. L. 100-435 
(HPA), amended section 5(e) of the Act to increase the dependent care 
deduction for certain households and to provide that other households 
would not be entitled to the dependent care deduction. The HPA provided 
that households eligible for the dependent care deduction can deduct up 
to $160 a month per dependent rather than $160 per household, and 
specified that the dependent care deduction cannot be taken for 
dependent care expenses which are reimbursed under an employment and 
training program as specified in section 6(d)(4)(I) of the Act. 
Accordingly, the Department amended 7 CFR 273.9(d)(4) and 7 CFR 
273.10(e)(1)(i)(E) to implement HPA changes.
    On October 13, 1988, the Family Support Act of 1988, Pub. L. 100-
485, (Family Support Act) was enacted. Section 302 of Title III of the 
Family Support Act provides for Transitional Child Care (TCC) for 
eligible families which have ceased to receive Aid to Families with 
Dependent Children (AFDC) Program benefits as a result of increased 
hours or increased income from employment. Section 301 of Title III 
also specifies that any money received as payment for child care or any 
reimbursement for costs incurred for child care shall not be treated as 
income for purposes of any other Federal or federally assisted program 
that bases eligibility or the amount of benefits upon need. In response 
to Title III, the Department amended 7 CFR 273.10(d)(1)(i) to allow a 
deduction for only the portion of child care expense which is not 
reimbursed or not paid for by the Job Opportunities and Basic Skills 
Training (JOBS) program under Title IV-F of the Social Security Act (42 
U.S.C. 681, et seq.) or the Transitional Child Care (TCC) program. 
(Provisions of the Family Support Act authorizing TCC are found in 
section 402(g)(1) of the Social Security Act, 42 U.S.C. 602(g)(1).) 
With the enactment of the Leland Act, additional modifications to Food 
Stamp Program regulations are required in the areas of the dependent 
care deduction and the amount allowed for E&T dependent care and other 
work-related reimbursements.

Dependent Care Deduction

    Section 13922 of the Leland Act amended section 5(e) of the Act by 
replacing the $160 a month maximum dependent care deduction with a two-
tier maximum dependent care deduction. For each child under the age of 
two, the maximum monthly dependent care deduction is $200; for all 
other dependents, the maximum monthly dependent care deduction is $175. 
Implementation of the two-tier maximum dependent care deduction shall 
take effect and shall be implemented on September 1, 1994. In its 
discussion on implementing the two-tier maximum dependent care 
deduction, Congress urged that implementation be conducted in ways that 
will minimize administrative burdens on State agencies. For example, 
when a child reaches his or her second birthday before the end of a 
certification period, the State agency should not be required to reduce 
the maximum monthly dependent care deduction from $200 to $175 until 
the household's next recertification (House Conference Report No. 213, 
103rd Congress, 1st Session (1993), p. 926).
    Therefore, the Department is proposing to amend 7 CFR 273.9(d)(4) 
and 7 CFR 273.10(e) by replacing the $160 a month maximum dependent 
care deduction with the $200 a month maximum dependent care deduction 
for each child under two years of age and $175 a month maximum 
dependent care deduction for each other dependent. The Department is 
also adding a requirement that whenever a child reaches his or her 
birthday during the certification period, the maximum dependent care 
deduction shall be adjusted no later than the next regularly scheduled 
recertification.
    Additionally, the Department is proposing a conforming change to 7 
CFR 273.10(d)(1)(i) to replace the term ``child care expense'' with the 
term ``dependent care expense'' in order to clarify that it is 
dependent care expenses reimbursed by the JOBS or TCC programs which 
are not deductible for food stamp households, not just child care 
expenses.

Dependent Care Reimbursement for the Food Stamp Employment and Training 
Program

    Since 1971, individuals who are not specifically exempted by the 
Act have been required to register for work at the time of application 
as a condition of eligibility for food stamp benefits. Currently, 7 CFR 
273.7(a) requires that they register at application and once every 12 
months thereafter.
    In April 1987, State agencies began operating the Food Stamp 
Employment and Training (E&T) Program, a program aimed specifically at 
improving food stamp recipients' ability to gain employment, increase 
earnings and reduce their dependency on public assistance. State 
agencies operate a variety of employment and training activities, 
including job search and job search training, self-employment efforts, 
and vocational and education activities.
    Work registrants are the most job ready of the food stamp 
population and comprise approximately 8 percent of all food stamp 
recipients. Of those food stamp recipients who register for work, about 
70 percent are subject to the E&T requirements.
    Certain work registrants are exempted from E&T participation by 
State agencies and are not required to participate in the program. Food 
stamp recipients may also volunteer to participate in the E&T program.
    Current regulations at 7 CFR 273.7(d)(1)(ii) require State agencies 
to provide payments or reimbursements to participants in the Food Stamp 
E&T program for certain expenses that are reasonably necessary and 
directly related to participation in the E&T program. The Federal 
government matches half the amount State agencies spend to reimburse 
participants under 7 CFR 273.7(d)(1)(ii)(B) for the actual costs of 
transportation and other costs (excluding dependent care) that are 
determined by the State agency to be necessary and directly related to 
participation in the E&T program. Therefore, the Federal government 
will pay up to $12.50 of the $25 per month. State agencies may 
supplement this amount, but without Federal matching funds.
    State agencies must also provide payments or reimbursements to E&T 
participants for dependent care expenditures of up to $160 per 
dependent per month. The Federal government will pay up to $80 of the 
$160 per month. A reimbursement cannot be provided for a dependent age 
13 or older unless the dependent is physically and/or mentally 
incapable of caring for himself or herself or is under court 
supervision. The Federal government will not reimburse more than the 
actual cost of dependent care expenses up to $80 per dependent per 
month, regardless of how many household members are participating in 
E&T. Finally, an E&T participant is not entitled to the reimbursement 
for dependent care expenditures if a member of the participant's food 
stamp household provides the dependent care services.

Changes to Dependent Care Reimbursements

    Section 13922 of the Leland Act amended section 6(d) of the Food 
Stamp Act to remove the $160 cap on dependent care reimbursements to 
participants in the E&T program. In place of the cap, State agencies 
must reimburse the actual costs of dependent care expenses up to a 
limit set by the State agency. Section 13922 stipulates that the 
statewide limit set by the State agency cannot be less than the limit 
for the dependent care deduction under section 5(e) of the Act, that 
is, $200 per month for each dependent under age 2 and $175 per month 
for each other dependent. In no event may the reimbursement exceed the 
applicable local market rate as determined by procedures consistent 
with the JOBS Program. Thus, the State agency must reimburse actual 
costs for dependent care up to either the local market rate or the 
statewide limit set by the State agency, whichever is lower. The 
Department will continue to match State agency expenditures for 
reimbursements at the 50 percent level.
    An example will help to explain the above provision. Assume that a 
State agency sets a statewide limit of $250, which is higher than the 
dependent care deduction, on the amount of dependent care costs it will 
reimburse. In City A, the local market rate is also $250. Thus, the 
State agency would reimburse a participant in the E&T program for 
actual costs up to $250. In City B, the local market rate is $225. Even 
if the actual cost for dependent care is $250, the State agency will 
only reimburse the participant for $225, the local market rate, as the 
State agency cannot provide reimbursement payments which exceed the 
local market rate. In City C, the local market rate is $275. The State 
agency would reimburse the participant for $250, the statewide limit. 
In any of the scenarios above, if the actual cost of dependent care was 
less than the statewide limit of $250, the State agency would only 
reimburse the actual cost of care. Hence, the State agency must pay the 
lowest of the actual cost of dependent care, the local market rate, or 
the statewide limit. The State agency may supplement this amount, but 
without Federal matching funds.
    Persons determined by the State agency to have actual monthly 
expenses that are reasonably necessary and directly related to 
participation in the E&T program which exceed the allowable 
reimbursement amount (i.e., exceed the local market rate) will continue 
to be considered by the State agency to have good cause for 
nonparticipation in an E&T component.

Defining the Statewide Limit

    Section 13922(b) of the Leland Act directs each State agency to 
establish a statewide limit on reimbursable dependent care expenses. 
The statewide limit may be any amount the State agency chooses provided 
it is equal to or higher than the amount of the dependent care 
deduction under 7 CFR 273.9(d)(4), that is, at least $200 per month for 
dependents under age 2 and $175 per month for all other dependents. The 
statewide limit may be a single amount of at least $200 per month or it 
may be two different amounts (one for dependents under age 2 and 
another for dependents age 2 and over). Additionally, the State agency 
may establish different statewide limits for dependents with special 
needs and for full-time and part-time care.
    The statewide limit would be used only when it is lower than both 
the local market rate and the actual cost of care. If the local market 
rate is lower than either the statewide limit or the actual cost, the 
statewide limit would not affect how much the State agency must pay--it 
is obligated to pay the local market rate. Likewise, if the actual cost 
of dependent care is lower than either the statewide limit or the local 
market rate, the State would pay for actual expenditures.
    The statewide limit would apply equally to four categories of care 
(center care, group family care, family day care and in-home care) in 
all areas of the State. Unless the State agency chooses to establish a 
different statewide limit for children with special needs or physically 
or mentally disabled adults, the same limit would apply to these 
categories of dependents.
    The Department is proposing that State agencies, in revising their 
current E&T reimbursement procedures to include a statewide limit, 
adopt the limit(s) already established and in use by State IV-A 
agencies pursuant to section 402(g) of the Social Security Act (49 
Stat. 620 (42 U.S.C. 301 et seq.)) and specify the limit(s) in their 
State E&T Plans.

Defining the Local Market Rate

    Section 13922 of the Leland Act also directs State agencies to 
determine local market rates using procedures consistent with section 
402(g) of the Social Security Act (42 U.S.C. 602(g). Section 402(g) 
programs set local market rates at the 75th percentile of the cost of 
child care based on a survey of actual charges in a local area. This 
process is described in 45 CFR 255.4(a) (2) and (3), in accordance with 
42 U.S.C. 602(g)(3)(B)(i).
    Under section 402(g), local market rates are determined for the 
same four categories of care that apply to the statewide limit, i.e., 
center care, group family care, family day care and in-home care. Local 
market rates must also vary according to the age or special needs of 
the child. For example, rates must reflect care for infants, toddlers, 
preschool, and school children. Finally, local market rates must also 
differentiate between full-time and part-time care, and reflect 
considerations for reductions in the cost of care for additional 
children from the same family.
    The Department is proposing that State agencies, in revising their 
current E&T reimbursement procedures, adopt the local market rates for 
child care already established and in use by State IV-A agencies. This 
would alleviate the need for the State agencies to conduct separate 
surveys and determinations as described above. State agencies would be 
required to specify local market rates in their E&T State Plans. 
However, a description of the methodology used to establish the local 
market rates would not be required.
    Food Stamp E&T reimbursements may be used to pay the cost of care 
for a broader range of dependents than allowed under section 402(g) 
programs. Section 402(g) programs provide child care for AFDC-eligible 
dependents who are: Under age 13; physically or mentally incapable of 
caring for themselves; or under court supervision, to the extent that 
such child care is necessary to permit AFDC-eligible family members to 
work or attend educational or training programs. AFDC child care is 
generally limited to dependents under age 18, due to AFDC eligibility 
criteria.
    In accordance with 7 CFR 273.7(d)(1)(ii), dependent care 
reimbursements must be provided under the E&T program for dependents 
who are: Age 13 or younger; physically and/or mentally incapable of 
caring for themselves; or under court supervision, regardless of the 
age of the dependent. Therefore, State agencies would be required to 
establish separate local market rates that address the cost of care for 
dependents over age 18 (or no longer AFDC-eligible) who are physically 
and/or mentally incapable of caring for themselves or under court 
supervision, as this type of care is not addressed under section 
402(g). State agencies would not be required to follow the procedures 
under section 402(g) for determining local market rates for this type 
of care. The separate local market rates established by the State 
agency would be included in the E&T State Plan.
    Fifty percent Federal funding will be available to State agencies 
for the actual cost of dependent care up to the local market rate or 
the statewide limit established by the State agency. State agencies 
would not pay an amount lower than the lowest of the actual cost of 
care, the statewide limit, or the local market rate.
    The Department is proposing that two paragraphs be added to 7 CFR 
273.7(c)(4) of the current regulations. They would require that State 
agencies include the dependent care statewide limit(s) and the local 
market rates to be used in determining dependent care reimbursement 
amounts in their State E&T Plans.
    The Department is also proposing that 7 CFR 273.7(d)(1)(ii)(A) be 
amended by removing the current $160 cap on dependent care 
reimbursements. Instead, State agencies would reimburse participants in 
the E&T program for dependent care expenses up to the actual cost of 
dependent care, the local market rate, or the statewide limit, 
whichever is lowest. Fifty percent Federal funding will continue to be 
available to State agencies for the actual cost of dependent care up to 
the local market rate or the statewide limit, whichever is lower.

Proration of Benefits--7 CFR 273.10(a)

    Current regulations at 7 CFR 273.10(a)(2) require that if an 
application for recertification is submitted after a household's 
certification period has expired, the application shall be considered 
an initial application and the household's benefits for the first month 
shall be prorated in accordance with 7 CFR 273.10(a)(1)(ii). Section 
13916 of the 1993 Leland Act amended Section 8(c)(2)(B) of the Food 
Stamp Act, 7 U.S.C. 2017(c)(2)(B), to eliminate proration of first 
month's benefits if a household is recertified for food stamps after a 
break in participation of less than one month.
    Current regulations at 7 CFR 273.10(a)(1)(ii) require that a 
household's benefit level for the initial month of certification be 
based on the day of the month it applies for benefits and that the 
household receive benefits from the date of application to the end of 
the month. Prior to the enactment of the 1993 Leland Act, ``initial 
month of certification'' referred to the first month for which an 
allotment is issued to a household following any period in which such 
household was not participating in the Food Stamp Program. Section 
13916 of the 1993 Leland Act, however, revised the definition of 
``initial month'' to now mean the first month for which an allotment is 
issued to a household following any period of more than one month in 
which such household was not participating in the Food Stamp Program. 
Therefore, if a household reapplies for benefits after a break in 
participation of less than one month, that month of application is not 
considered an initial month, and the household's benefits for that 
month cannot be prorated. Current regulations already prohibit the 
proration of first month's benefits for migrant and seasonal farmworker 
households that apply for benefits within 30 days following the end of 
their last certification period. The Department is proposing to revise 
7 CFR 273.10(a)(1)(ii) and (2)(i) to prohibit the proration of first 
month's benefits for all households that apply for benefits after a 
break in participation of less than one month.
    The Department is also proposing to remove from the regulations 
paragraphs (a)(2) (ii) and (iii) of 7 CFR 273.10. Both provisions, 
which prohibit proration in the first month of a household's new 
certification period, have been made moot by Section 13916 of the 1993 
Leland Act.

Implementation

    Section 13971 of the Leland Act requires implementation of the 
provisions contained in this proposed rule on September 1, 1994. 
Therefore, we are proposing that the amendments made by this rule be 
effective and implemented on September 1, 1994. State agencies would be 
required to adjust the cases of ongoing households at the next 
recertification, at household request, or when the case is next 
reviewed, whichever comes first, and provide restored benefits back to 
the required implementation date. If for any reason a State agency 
fails to implement on the required date, restored benefits shall be 
provided, if appropriate, back to the required implementation date or 
the date of application, whichever is later. Variances resulting from 
implementation of the provisions of the final rule would be excluded 
from error analysis for 120 days from the required implementation date, 
in accordance with section 13951 of the Leland Act.

List of Subjects

7 CFR Part 271

    Administrative practice and procedure, Food stamps, Grant programs-
social programs.

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 271 and 273 are proposed to be amended as 
follows:
    1. The authority citation for Parts 271 and 273 continues to read 
as follows:

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

PART 271--GENERAL INFORMATION AND DEFINITIONS


Sec. 271.2  [Amended]

    2. In 271.2, in the definition of ``Eligible foods'', paragraph (4) 
is amended by removing the words ``eligible households'' and adding in 
their place the words ``narcotic addicts or alcoholics and their 
children who live with them''.

PART 273--CERTIFICATION OF ELIGIBLE HOUSEHOLDS

    3. In Sec. 273.1:
    a. Paragraphs (a)(2)(i) (B) and (C) are revised.
    b. Paragraph (a)(2)(i)(D) is removed.
    c. Paragraph (a)(2)(ii) is amended by removing the reference to 
``(a)(2)(i)(A) and (a)(2)(i)(B)'' and adding in its place a reference 
to ``(a)(2)(i)(A), (a)(2)(i)(B), and (a)(2)(i)(C)''.
    d. Paragraph (e)(1)(ii) is amended by adding the words ``and their 
children who live with them'' after the words ``Narcotic addicts or 
alcoholics''.
    e. Paragraph (f)(2) is amended by adding the words ``and their 
children who live with them'' after the words ``(as defined in 
Sec. 271.2)''.
    The revision reads as follows:


Sec. 273.1  Household concept.

    (a) Household definition. * * *
    (2) Special definition:
    (i) * * *
    (B) Children (excluding foster children) under 18 years of age who 
live with and are under the parental control of a household member 
other than their parent. Children are considered to be under parental 
control for purposes of this provision if the children are financially 
or otherwise dependent on a member of the household. Children who are 
living with their children or who are married and living with their 
spouse are considered to be independent units and not under parental 
control; thus they may be considered a separate household if they 
purchase food and prepare meals separately.
    (C) Parents living with their natural, adopted or stepchildren 21 
years of age or younger (who are not themselves parents living with 
their children or married and living with their spouses). Children 21 
years of age or younger who are parents themselves and living with 
their children or who are married and living with their spouses may be 
considered separate households if they purchase food and prepare meals 
separately.
* * * * *
    4. In Sec. 273.7:
    a. A new paragraph (c)(4)(xiv) is added.
    b. A new paragraph (c)(4)(xv) is added.
    c. Paragraph (d)(1)(ii)(A) is amended by revising the first, 
seventh, and last sentences.
    The additions and revisions read as follows:


Sec. 273.7  Work Requirements.

* * * * *
    (c) State agency responsibilities. * * *
    (4) * * *
    (xiv) The statewide limit(s) for dependent care reimbursements as 
established by the State agency. The limit(s) shall not be less than 
the dependent care deduction amounts specified under Sec. 273.9(d)(4).
    (xv) The local market rates of dependent care providers in the 
State. State agencies shall adopt the local market rates already 
established by programs under section 402(g) of the Social Security 
Act. State agencies shall establish separate local market rates for 
categories of care relevant to food stamp E&T which are not addressed 
under section 402(g) of the Social Security Act and include such rates 
in the E&T State Plan.
* * * * *
    (d) Federal financial participation. * * *
    (1) Employment and training grants. * * *
    (ii) * * *
    (A) The costs of such dependent care expenses that are determined 
by the State agency to be necessary for the participation of a 
household member in the E&T program up to the actual cost of dependent 
care, the local market rate, or the statewide limit, whichever is 
lowest. * * * If more than one household member is required to 
participate in the E&T program, the State agency shall provide 
reimbursement for the actual cost of dependent care, the local market 
rate, or the statewide limit, whichever is lowest, for each dependent 
in the household, regardless of the number of household members 
participating in the E&T program. * * * A State agency may claim 50 
percent of costs for dependent care services provided or arranged by 
the State agency up to the actual cost of dependent care, the local 
market rate, or the statewide limit, whichever is lowest.
* * * * *
    5. In Sec. 273.8:
    a. Paragraph (h)(1) is amended by removing the period at the end of 
paragraph (h)(1)(v) and adding in its place the word ``; or'' and 
adding a new paragraph (h)(1)(vi).
    b. Paragraph (h)(3) is revised.
    c. Paragraph (h)(6) is amended by revising the first sentence of 
the paragraph.
    The additions and revisions read as follows:


Sec. 273.8  Resource eligibility standards.

* * * * *
    (h) Handling of licensed vehicles. * * *
    (1) * * *
    (vi) Necessary to carry fuel for heating or water for home use when 
such transported fuel or water is the primary source of fuel or water 
for the household. Households shall receive this resource exclusion 
without having to meet any additional tests concerning the nature, 
capabilities, or other uses of the vehicle. Households shall not be 
required to furnish documentation, as mandated by Sec. 273.2(f)(4), 
unless the exclusion of the vehicle is questionable. If the basis for 
exclusion of the vehicle is questionable, the State agency may require 
documentation from the household, in accordance with Sec. 273.2(f)(4).
* * * * *
    (3) Each licensed vehicle not excluded under paragraph (h)(1) of 
this section shall be evaluated individually to determine its fair 
market value resource exclusion limit, and that portion of the resource 
exclusion limit which exceeds $4,500 for FY 1993, shall be attributed 
in full toward the household's resource level regardless of any 
encumbrances. The $4,500 fair market value resource exclusion limit for 
licensed vehicles shall remain in effect through August 31, 1994. On 
September 1, 1994 through September 30, 1995, the fair market value 
resource exclusion limit shall be increased to $4,550. On October 1, 
1995 through September 30, 1996, the fair market value resource 
exclusion limit shall be increased to $4,600. On October 1, 1996 and 
each October 1 thereafter, using a base of $5,000, the fair market 
value resource exclusion limit for licensed vehicles shall be adjusted 
to reflect changes in the new car component of the Consumer Price Index 
for All Urban Consumers published by the Bureau of Labor Statistics for 
the 12-month period ending on June 30 preceding the date of such 
adjustment and rounded to the nearest $50. Any value in excess of the 
appropriate fair market value resource exclusion limit shall be 
attributed in full toward the household's resource level, regardless of 
any encumbrances on the vehicle. For example, in November 1994 a 
household owning an automobile with a fair market value of $5,550 shall 
have $1,000 applied toward its resource exclusion level. Any value in 
excess of $4,550 (the fair market value resource exclusion limit for 
that time period) shall be attributed to the household's resource 
level, regardless of the amount of the household's investment in the 
vehicle, and regardless of whether or not the vehicle is used to 
transport household members to and from employment. Each vehicle shall 
be appraised individually. The fair market value resource exclusion 
limit of two or more vehicles shall not be added together to reach a 
total fair market value resource exclusion in excess of the fair market 
value resource exclusion for the appropriate time period.
* * * * *
    (6) In summary, each licensed vehicle shall be handled as follows: 
First, the vehicle shall be evaluated to determine if it is an income 
producer, a home, necessary to transport a disabled household member, 
or necessary to carry fuel for heating or water for home use. * * *
* * * * *
    6. In Sec. 273.9:
    a. Paragraph (c)(1) is revised.
    b. The first sentence of paragraph (c)(7) is revised and the last 
sentence is removed.
    c. Paragraph (d)(4) is amended by removing the words ``$160 per 
month, per dependent'' in the last sentence and adding in their place 
the words ``$200 a month for each dependent child under two (2) years 
of age and $175 a month for each other dependent'' and by adding a new 
sentence to the end of the paragraph.
    The revisions read as follows:


Sec. 273.9  Income and deductions.

* * * * *
    (c) Income exclusions. * * *
    (1) Any gain or benefit which is not in the form of money payable 
directly to the household, including in-kind benefits and certain 
vendor payments. In-kind benefits are those for which no monetary 
payment is made on behalf of the household and include meals, clothing, 
housing, or produce from a garden. A vendor payment is a money payment 
made on behalf of a household by a person or organization outside of 
the household directly to either the household's creditors or to a 
person or organization providing a service to the household. Payments 
made to a third party on behalf of the household are included or 
excluded as income in accordance with this paragraph.
    (i) Public assistance (PA) vendor payments. PA vendor payments are 
counted as income unless they are made for:
    (A) medical assistance;
    (B) child care assistance;
    (C) energy assistance as defined in paragraph (c)(11) of this 
section;
    (D) emergency assistance (including, but not limited to housing and 
transportation payments) for migrant or seasonal farmworker households 
while they are in the job stream;
    (E) housing assistance payments for households living in 
transitional housing for the homeless;
    (F) emergency and special assistance. PA provided to a third party 
on behalf of a household which is not specifically excluded from 
consideration as income under the provisions of paragraphs (c)(1)(i)(A) 
through (c)(1)(i)(E) of this section shall be considered for exclusion 
under this provision. To be considered emergency or special assistance 
and excluded under this provision, the assistance must be provided over 
and above the normal PA grant or payment, or cannot normally be 
provided as part of such grant or payment. If the PA program is 
composed of various standards or components, the assistance would be 
considered over and above the normal grant or not part of the grant if 
the assistance is not included as a regular component of the PA grant 
or benefit or the amount of assistance exceeds the maximum rate of 
payment for the relevant component. If the PA program is not composed 
of various standards or components but is designed to provide a basic 
monthly grant or payment for all eligible households and provides a 
larger basic grant amount for all households in a particular category, 
e.g., all households with infants, the larger amount is still part of 
the normal grant or benefit for such households and not an ``extra'' 
payment excluded under this provision. On the other hand, if a fire 
destroyed a household item and a PA program provides an emergency 
amount paid directly to a store to purchase a replacement, such a 
payment is excluded under this provision. If the PA program is not 
composed of various standards, allowances, or components but is simply 
designed to provide assistance on an as-needed basis rather than to 
provide routine, regular monthly benefits to a client, no exclusion 
would be granted under this provision because the assistance is not 
provided over and above the normal grant, it is the normal grant. If it 
is not clear whether a certain type of PA vendor payment is covered 
under this provision, the State agency shall apply to the appropriate 
FNS Regional Office for a determination of whether the PA vendor 
payments should be excluded. The application for this exclusion 
determination must explain the emergency or special nature of the 
vendor payment, the exact type of assistance it is intended to provide, 
who is eligible for the assistance, how the assistance is paid, and how 
the vendor payment fits into the overall PA benefit standard. A copy of 
the rules, ordinances, or statutes which create and authorize the 
program shall accompany the application request.
    (ii) General assistance (GA) vendor payments. Vendor payments made 
under a State or local GA program or a comparable basic assistance 
program are excluded from income except for some vendor payments for 
housing. A housing vendor payment is counted as income unless the 
payment is for:
    (A) assistance provided for utility costs;
    (B) energy assistance (as defined in paragraph (c)(11) of this 
section);
    (C) housing assistance from a State or local housing authority;
    (D) emergency assistance for migrant or seasonal farmworker 
households while they are in the job stream;
    (E) housing assistance for households living in transitional 
housing for the homeless;
    (F) emergency or special payments (as defined in paragraph 
(c)(1)(i)(F) of this section; or
    (G) assistance provided under a program in a State in which no GA 
payments may be made directly to the household in the form of cash.
    (iii) Department of Housing and Urban Development (HUD) vendor 
payments. Rent or mortgage payments made to landlords or mortgagees by 
HUD are excluded.
    (iv) Educational assistance vendor payments. Educational assistance 
provided to a third party on behalf of the household for living 
expenses shall be treated the same as educational assistance payable 
directly to the household.
    (v) Vendor payments that are reimbursements. Reimbursements made in 
the form of vendor payments are excluded on the same basis as 
reimbursements paid directly to the household in accordance with 
paragraph (c)(5) of this section.
    (vi) Demonstration project vendor payments. In-kind or vendor 
payments which would normally be excluded as income but are converted 
in whole or in part to a direct cash payment under a federally 
authorized demonstration project or waiver of provisions of Federal law 
shall be excluded from income.
    (vii) Other third-party payments. Other third-party payments shall 
be handled as follows: Moneys legally obligated and otherwise payable 
to the household which are diverted by the provider of the payment to a 
third party for a household expense shall be counted as income and not 
excluded. If a person or organization makes a payment to a third party 
on behalf of a household using funds that are not owed to the 
household, the payment shall be excluded from income. This distinction 
is illustrated by the following examples:
    (A) A friend or relative uses his or her own money to pay the 
household's rent directly to the landlord. This vendor payment shall be 
excluded.
    (B) A household member earns wages. However, the wages are 
garnished or diverted by the employer and paid to a third party for a 
household expense, such as rent. This vendor payment is counted as 
income. However, if the employer pays a household's rent directly to 
the landlord in addition to paying the household its regular wages, the 
rent payment shall be excluded from income. Similarly, if the employer 
provides housing to an employee in addition to wages, the value of the 
housing shall not be counted as income.
    (C) A household receives court-ordered monthly support payments in 
the amount of $400. Later, $200 is diverted by the provider and paid 
directly to a creditor for a household expense. The payment is counted 
as income. Money deducted or diverted from a court-ordered support or 
alimony payment (or other binding written support or alimony agreement) 
to a third party for a household's expense shall be included as income 
because the payment is taken from money that is owed to the household. 
However, payments specified by a court order or other legally binding 
agreement to go directly to a third party rather than the household are 
excluded from income because they are not otherwise payable to the 
household. For example, a court awards support payments in the amount 
of $400 a month and in addition orders $200 to be paid directly to a 
bank for repayment of a loan. The $400 payment is counted as income and 
the $200 payment is excluded from income. Support payments not required 
by a court order or other legally binding agreement (including payments 
in excess of the amount specified in a court order or written 
agreement) which are paid to a third party on the household's behalf 
shall be excluded from income.
* * * * *
    (7) The earned income (as defined in paragraph (b)(1) of this 
section) of a student under age 22 who attends elementary or secondary 
school or classes to obtain a General Equivalency Diploma at least 
half-time and lives with a natural, adoptive or step-parent, is under 
the control of a household member other than a parent, or is certified 
in a separate food stamp household but lives with a natural, adoptive 
or step-parent. * * *
* * * * *
    7. In Sec. 273.10:
    a. The third sentence of paragraph (a)(1)(ii) is amended by adding 
the words ``of more than one month, fiscal or calendar depending on the 
State's issuance cycle,'' after the words ``following any period'', 
replacing the comma after the words ``not certified for participation'' 
with a period, and removing the remainder of the sentence.
    b. The fourth sentence of paragraph (a)(1)(ii) is removed.
    c. Paragraphs (a)(2)(ii) and (a)(2)(iii) are removed, and paragraph 
(a)(2)(i) is redesignated as paragraph (a)(2).
    f. Newly redesignated paragraph (a)(2) is further amended by adding 
the words ``more than one month'' after the words ``If an application 
for recertification is submitted'' in the third sentence, and by adding 
a new sentence at the beginning of the paragraph.
    g. The sixth sentence of paragraph (d)(1)(i) is amended by removing 
the word ``child'' the first time it appears and adding ``dependent'' 
in its place.
    h. Paragraph (e)(1)(i)(E) is amended by removing the words 
``maximum amount of $160 per dependent'' and adding in their place the 
words ``maximum amount as specified under Sec. 273.9(d)(4) for each 
dependent''.
    i. A new paragraph (e)(2)(i)(E) is added.
    j. Paragraph (f)(2) is removed and reserved.
* * * * *
    The additions read as follows:


Sec. 273.10  Determining household eligibility and benefit levels.

* * * * *
    (d) Determining deductions. * * *
    (4) Anticipating expenses. * * * If a child in the household 
reaches his or her second birthday during the certification period, the 
$200 maximum dependent care deduction shall be adjusted in accordance 
with this section not later than the household's next regularly 
scheduled recertification.
* * * * *
    (e) Calculating net income and benefit levels. * * *
    (2) Eligibility and benefits.
    (i) * * *
    (E) If a household contains a student whose income is excluded in 
accordance with Sec. 273.9(c)(7) and the student becomes 22 during the 
month of application, the State agency shall exclude the student's 
earnings in the month of application and count the student's earnings 
in the following month. If the student becomes 22 during the 
certification period, the student's income shall be excluded until the 
month following the month in which the student turns 22.
* * * * *
    8. In Sec. 273.21, the first sentence of paragraph (j)(1)(vii)(A) 
is revised and a new sentence is added after the first sentence to read 
as follows:


Sec. 273.21  Monthly Reporting and Retrospective Budgeting (MRRB)

* * * * *
    (j) State agency action on reports.
    (1) Processing. * * *
    (vii) * * *
    (A) Earned and unearned income received in the corresponding budget 
month, including income that has been averaged in accordance with 
paragraph (f) of this section. The earned income of an elementary or 
secondary school student excluded in accordance with Sec. 273.9(c)(7) 
shall be excluded until the budget month following the month in which 
the student turns 22.
* * * * *
    Dated: August 25, 1994.
Ellen Haas,
Assistant Secretary for Food and Consumer Services.
[FR Doc. 94-21346 Filed 8-29-94; 8:45 am]
BILLING CODE 3410-30-U