[Federal Register Volume 59, Number 202 (Thursday, October 20, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-25977]
[[Page Unknown]]
[Federal Register: October 20, 1994]
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DEPARTMENT OF AGRICULTURE
Food and Nutrition Service
7 CFR Part 273
[Amendment No. 360]
Food Stamp Program: Resource Provision From the Mickey Leland
Memorial Domestic Hunger Relief Act of 1990
AGENCY: Food and Nutrition Service, USDA.
ACTION: Proposed rule.
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SUMMARY: This rule proposes to amend Food Stamp Program regulations to
implement a provision contained in the Mickey Leland Memorial Domestic
Hunger Relief Act of 1990 (the Leland Act) to expand the criteria by
which a resource can be considered inaccessible. The Department
originally published a proposed rule concerning this provision on
August 13, 1991 at 56 FR 40164. After reviewing the comments received,
the Department elected to withdraw the provision as originally proposed
and amend its proposal. Subsequently, on December 13, 1991, the Food
Stamp Act of 1977 was amended by the Food, Agriculture, Conservation,
and Trade Act Amendments of 1991 which refined the Leland Act provision
concerning inaccessible resources. In this proposed rulemaking, the
Department is addressing both statutory provisions dealing with
inaccessible resources.
DATES: Comments must be received on or before January 18, 1995, to be
assured of consideration.
ADDRESSES: Comments should be submitted to 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. Comments can also be sent via datafax to
Ms. Seymour at (703) 305-2454. All written comments will be open to
public inspection at the offices of the Food and Nutrition Service
during regular business hours (8:30 a.m. to 5:00 p.m., Monday through
Friday) in Room 718 at 3101 Park Center Drive, Alexandria, Virginia.
FOR FURTHER INFORMATION CONTACT: Judith M. Seymour, Supervisor,
Eligibility and Certification Regulations Section, at the above address
or at (703) 305-2496.
SUPPLEMENTARY INFORMATION:
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 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.
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 rule is not intended to have retroactive effect
unless so specified in the ``Effective Date'' paragraph of this
preamble. Prior to any judicial challenge to the provisions of this
rule or the application of its provisions all applicable administrative
procedures must be exhausted. In the Food Stamp Program the
administrative procedures are as follows:
(1) For program benefit recipients--state administrative procedures
issued pursuant to 7 U.S.C. 2020(e)(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 284 (for rules related to QC
liabilities);
(3) For retailers and wholesalers--administrative procedures issued
pursuant to 7 U.S.C. 2023 set out at 7 CFR 278.8.
Executive Order 12866
This proposed rule is issued in conformance with Executive Order
12866.
Regulatory Flexibility Act
This proposed rule has also been reviewed with respect to the
requirements of the Regulatory Flexibility Act of 1980 (Pub. L. 96-354,
94 Stat. 1164, September 19, 1980). The Administrator of the Food and
Nutrition Service (FNS) has certified that this proposal would not have
a significant economic impact on a substantial number of small
entities. State and local agencies that administer the Program will be
the most affected. Food stamp applicants and recipients will be
affected due to changes in excludable resources for purposes of the
Food Stamp Program.
Paperwork Reduction Act
This action does not contain reporting or record keeping
requirements subject to approval by the Office of Management and Budget
(OMB) under the Paperwork Reduction Act of 1980 (44 U.S.C. 3507).
Background
The Mickey Leland Memorial Domestic Hunger Relief Act (Food,
Agriculture, Conservation, and Trade Act of 1990, Title XVII, Pub. L.
101-624, 104 Stat. 3783); (hereinafter referred to as the Leland Act)
made several changes to the Food Stamp Act of 1977, as amended (7
U.S.C. 2011, et seq.) (the Act). This proposed rulemaking pertains to
Section 1719 of the Leland Act which amended Section 5(g) of the Act, 7
U.S.C. 2014(g)(5), to expand the criteria by which property can be
considered inaccessible to households in the calculation of their
resources for purposes of food stamp eligibility. The Department
originally published a proposed rule on August 13, 1991 at 56 FR 40164
regarding, in part, this Leland Act provision. The Department received
twenty comments on the proposal to amend 7 CFR 273.8(e) to incorporate
this provision. On December 13, 1991, Section 904 of the Food,
Agriculture, Conservation, and Trade Act Amendments of 1991 (Pub. L.
102-237, 105 Stat. 1818); (hereinafter referred to as the 1991
Technical Amendments) further amended Section 5(g)(5) of the Act. In
light of the additional legislation, and after full consideration of
the comments received in response to the earlier proposed rule, the
Department has elected to re-propose the rule on the inaccessible
resources provision.
Following are explanations of current rules, the Department's
earlier proposal and the comments received, the 1991 Technical
Amendments, and the new proposal. We believe understanding these items
will lead to a better understanding of the re-proposal.
Current Rule
Currently, regulations at 7 CFR 273.8(c) describe both liquid and
non-liquid resources that are counted when determining a household's
eligibility for food stamps. Non-liquid resources such as land,
buildings, and licensed and unlicensed vehicles, with some exceptions,
are included as resources because they can be converted to cash.
However, not all property can be easily sold, and this has posed
significant problems for both State agencies administering the Food
Stamp Program and households applying for benefits. Except for the
provisions regarding vehicles, current regulations focus on the
accessibility/inaccessibility of resources. In establishing
inaccessibility, State agencies are compelled to require a household to
verify that the property it owns, which is not otherwise an exempt
resource, has little or no fair market value; cannot be sold because it
is jointly owned with non-household members who are unwilling to sell;
or is otherwise inaccessible. In many instances, households have found
it difficult to provide this verification. Further, in establishing
accessibility/inaccessibility, State agencies may be faced with
questions of state property law and probate law. The situation was
particularly difficult with heir property, i.e., an undivided
fractional interest in a decedent's property. It is apparent that the
treatment of heir property was the primary problem Congress was
addressing when it passed Section 1719 of the Leland Act, as the
legislative history contained in House Report No. 101-569, 101st
Congress, 2nd Session, Part 1, at 429-30, specifically refers to the
problems of heir property encountered by food stamp applicants and
State agencies.
Section 1719 of the Leland Act required the Department to
promulgate regulations requiring State agencies to develop standards
for identifying kinds of resources that, as a practical matter, a
household is unlikely to be able to sell for any significant return
because the household's interest is relatively slight or because the
cost of selling the household's interest would be relatively great.
Resources so identified were to be excluded as inaccessible resources
for food stamp purposes.
Our Earlier Proposal and Comments
In order to implement Section 1719, the Department proposed an
amendment to 7 CFR 273.8(e) that would have excluded as a resource
property that a household could not sell for any significant return
because the household's interest was relatively slight or because the
cost of selling the household's interest would have been greater than
the value of the property. The proposed rule provided that a property
would be excluded as a resource if it could not be sold for more than
$2,000 and the cost of selling the property exceeded 75 percent of the
expected sale price. State agencies would have been required to
establish standards for identifying the costs likely to be associated
with the sale of various types of property and the likely gross value
of such property as a guide for recipients and eligibility workers to
follow in determining if the property was accessible as a resource.
The August 13, 1991 proposed rulemaking generated twenty comments.
The general consensus of the comments was that the proposed rule
violated the intent of Congress by imposing criteria that a property is
considered an inaccessible resource if it could not be sold for more
than $2,000 and the cost of selling the property exceeded 75 percent of
the expected sale price. However, the Department found there was no
consensus among the commenters on how to amend the proposed rule to
determine what types of property should be excluded. For example, one
commenter suggested amending the proposed rule to say that the property
be considered inaccessible if it cannot be sold for $2000 or more or
the cost of selling the property is at least 75 percent or more of the
sale price. Another commenter recommended the definition of
inaccessible property be changed to include the following criteria:
(1) It is jointly owned by non- household and household members;
(2) It cannot be converted to cash without the consent of all
parties; and
(3) It cannot be converted to cash because all parties do not agree
to sell or all parties cannot be contacted to consult. A third
commenter suggested the final rule exclude property which is either
heavily mortgaged (such as over 75 percent of its value) or owned by
more than two people and exclude property where for whatever reason net
proceeds after paying all expenses (including co-owners and liens) in
selling the property would be less than $2000.
1991 Technical Amendment
In December 1991, Section 904 of the 1991 Technical Amendments
amended Section 5(g)(5) of the Food Stamp Act by adding to the end of
this paragraph the following new sentences:
A resource shall be so identified [as inaccessible] if its sale
or other disposition is unlikely to produce any significant amount
of funds for the support of the household. The Secretary shall not
require the State agency to require verification of the value of a
resource to be excluded under this paragraph unless the State agency
determines that the information provided by the household is
questionable.
The Current Proposal
The Department has carefully considered Section 1719 of the Leland
Act, the Congressional intent evidenced in House Report No. 101-529,
101st Congress, 2nd Session, part 1, the comments regarding the August
13, 1991 proposed rule, and the language in Section 904 of the 1991
Technical Amendments. As a result, this proposed rulemaking is
significantly different from the Department's previous proposed rule on
this subject.
The regulations at 7 CFR 273.8(d) already exclude jointly-owned
resources that can be shown to be inaccessible. An example is a bank
account that is jointly-owned by food stamp applicant household and
non-household members which, by State law, is determined to be
inaccessible wholly or in part to the food stamp household. Also,
certain types of property are excluded from consideration as a resource
including property that the household is making a good faith effort to
sell (7 CFR 273.8(e)(8)). The Department believes that the amendments
to Section 5(g)(5) of the Act were not intended to supplant the
existing regulations on inaccessible resources. Rather, these
amendments were intended to provide an additional exclusion for
resources such as heir property or other property which is unlikely to
produce a significant return or significant funds for the support of
the household.
In Section 1719 of the Leland Act, Congress required that household
resources unlikely to be sold for any significant return because the
household's interest is relatively slight or because the cost of
selling the household's interest would be relatively great be excluded
from income for Food Stamp eligibility purposes. The legislative
history of this provision did not provide any further guidance as to
how this was to be implemented. The floor debate indicated that it
would not be necessary for State agencies to determine the exact fair
market value for a resource for such resource to be considered
inaccessible. Cong. Rec. H11862, October 23, 1990, remarks of
Congressman Hatcher. The 1991 Technical Amendments added to the Leland
Act provision the requirement that a resource be excluded as
inaccessible if its sale or other disposition is unlikely to produce
any significant amount of funds for the support of the household. The
legislative history of this provision also did not provide any
definitive guidance as to what Congress intended by ``any significant
return''. The floor debates indicated that the term was to include
``any significant amount of money to buy food for the household'' and
that ``[N]o arbitrary sale price of percent-of-value test may be
imposed.'' Cong. Rec. S18326, November 26, 1991, remarks of Senator
Leahy. The Department is proposing to define ``any significant return''
as being one half the resource limit for the household. The Department
believes that some value above which the resource must be sold must be
established for uniform administration of the program. The Act requires
that the standards of eligibility be uniform for all participants, 7
USC 2014(b), and provides that the Secretary shall issue such
regulations, consistent with the terms of the Act, that the Secretary
deems necessary or appropriate for the effective and efficient
administration of the Food Stamp Program. 7 USC 2013(c). Given this,
and the lack of clarity of the statute and legislative history, the
Department believes that it is reasonable to establish ``significant
return'' or ``significant funds'' to mean one half of the household
resource limit.
For food stamp purposes, households are permitted to have up to
$2,000 in resources ($3,000 for households if at least one member is
aged 60 or older). (For categorically-resource-eligible households, the
issue of accessibility is irrelevant.) Current data show that the
average value of countable resources for all food stamp households is
less than $100. Ninety-five percent of all food stamp households have
$1,000 or less in countable resources. As very few households
participating in the food stamp program have resources exceeding
$1,000, the Department believes that a resource that would yield a
return of $1,000 (or $1,500, as appropriate) would be a significant
return for a household that is otherwise eligible for food stamps.
Section 5(g)(5) also provides that the return must be determined to
be not significant either (1) because the household's interest is
relatively slight or (2) because the cost of selling the household's
interest would be relatively great. The legislative history does not
provide any direction to the Department in establishing the meaning of
relatively slight interest or relatively great cost of selling other
than a statement by Senator Leahy in the floor debates that no
``arbitrary sale price or percent-of-value test may be imposed''. Cong.
Rec. S18326, November 26, 1991. The Department recognizes that what
constitutes a ``relatively slight interest'' or a ``relatively great
cost of selling'' may vary, depending on the specific resource. The
ultimate inquiry is whether the resource, given the ownership interest
and/or the cost of sale, would produce a significant return or
significant amount of funds to the household, if sold.
The Department is proposing in 7 CFR 273.8(e) to prohibit applying
this provision to negotiable financial instruments such as stocks and
bonds. As a general matter, stocks and bonds are liquid resources which
are available to the household. Section 5(g)(5) is directed in part at
inaccessibility due the cost of selling being relatively great in
relation to the amount of funds that would be realized if the resource
were sold. In general, brokerage firms and other financial institutions
charge either a minimum fee or a small percentage of the sale when a
negotiable financial instrument is sold. The Department recognizes that
a household may own stock or some other negotiable financial instrument
that has decreased in value since the household acquired it. However,
regardless of the reduced value of that resource, it could not be
considered to be inaccessible because the cost of selling it would not
be ``relatively great'' unless the stock were basically worthless, and
thus would not be of value as a resource in any event.
The proposed distinction between negotiable financial instruments,
which could not be declared inaccessible under this proposal, and other
types of resources which, depending on the value of the resource and
the circumstances of each particular household's ownership interest in
the resource, could be found inaccessible, is given further support in
language found in the Congressional floor debates on the statutory
provision. Senator Leahy indicated that the ``availability'' of a
resource should be one of the determinants of whether that resource may
be declared inaccessible. Cong. Rec. S18325, November 26, 1991. By
their very nature, negotiable financial instruments, regardless of
either their current value or their value when purchased, are liquid
and available to the household in contrast to other nonliquid resources
such as real property.
This proposal retains the provision from the 1991 proposed rule
that would have required State agencies to develop standards to be used
to identify the kinds of resources that, as a practical matter, the
household is unlikely to sell for any significant return. Several
commenters said the proposed rule placed too heavy a burden on State
agencies by requiring them to develop these standards. The Department
understands these concerns; however, Section 5(g)(5)of the Act is clear
in requiring State agencies to develop such standards. In order to
emphasize this requirement, the Department is proposing to add a new
paragraph (18) to 7 CFR 273.8(e) that would require State agencies to
develop standards for identifying resources, that as a practical
matter, the household is unable to sell for any significant return
because the household's interest in the property is relatively slight
or because the cost of selling the household's interest would be
relatively great. State agencies are not required to submit these
standards to the Department for approval.
In developing their standards, the State agencies need to keep in
mind that verification of the inaccessibility of a resource that meets
the defined standard is necessary only if the information provided by
the household appears questionable. The 1991 Technical Amendments
prohibited requiring State agencies to require verification unless the
information provided appears questionable. Accordingly, the Department
is proposing in 7 CFR 273.8(e)(18) to require verification of
inaccessibility of resources only if the information provided by the
household is insufficient to clearly establish inaccessibility.
The Department would like to make it clear that this standard does
not invalidate any other provision regarding jointly-owned resources
and inaccessible resources, as described in 7 CFR 273.8(d).
Application of This Rule to Vehicles
Three commenters on the August 13, 1991 proposed rulemaking
discussed whether or not vehicles could be identified as inaccessible
resources under this provision. The Department believes that it is very
clear from the statutory language and the legislative history of the
inaccessible resource provision that it was not the intent of Congress
to include vehicles. Neither Section 1719 of the Leland Act or Section
904 of the 1991 Technical Amendments nor their legislative history made
any reference to vehicles when discussing the resources to be dealt
with under Section 5(g)(5)of the Act. On pages 429 and 430 of House
Report No. 101-569, the reasons for the legislative provision are
spelled out. This legislative history specifically mentions heir
property and the problems associated with attempting to assess the
value of such property as the primary reason for the statutory
amendments.
Historically, vehicles have always been treated differently than
all other resources under the Act. Section 5(g)(2) of the Act continues
to require that the fair market value of vehicles be the test of
whether any portion of their value is counted as a resource despite the
addition of Section 5(g)(5) to the Act. Moreover, the Congressional
Budget Office estimated that there would be no cost involved in
implementing the inaccessible resources provision. The cost of
including vehicles under the inaccessible resources provision would be
substantial. The Department estimates that the cost would be over $1
billion over the next five years. Therefore, the Department does not
believe that it was Congressional intent to include vehicles as an
inaccessible resource under this provision.
Implementation
Section 1781 of the Leland Act required the Department to
promulgate a final rule to implement Section 1719 of the Leland Act by
October 1, 1991, with implementation required the first day of the
month 120 days after publication of implementing regulations. Thus, the
latest date for implementation of Section 1719 of the Leland Act was
February 1, 1992. The 1991 Technical Amendments require Section 904 to
be effective and implemented no later than February 1, 1992. In
response to these implementation requirements, and since final
regulations would not be issued before that date, the Department issued
a memorandum, dated December 27, 1991, notifying State agencies of
these provisions and the February implementation date. State agencies
were advised to exercise their best judgment regarding procedures for
applying these provisions. Clarification that the standard did not
apply to vehicles was provided to all State agencies in January 1992.
Whatever standards State agencies have used between February 1, 1992
and the publication of the final rule meet the requirements of the Act,
provided that such standards were not applied to vehicles. Recognizing
that the statutory amendments regarding inaccessible resources have
already been implemented through the above described memoranda and in
order to provide for the orderly implementation of the specific
provision of this proposed rule, the Department is proposing to require
that this rule be effective in any given State upon implementation by
the State agency but in no event later than the first day of the month
120 days after publication of the final rule.
List of Subjects in 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 Part 273 is proposed to be amended as follows:
PART 273--CERTIFICATION OF ELIGIBLE HOUSEHOLDS
1. The authority citation of Part 273 continues to read as follows:
Authority: 7 U.S.C. 2011-2032.
2. In Sec. 273.8, a new paragraph (e)(18) is added to read as
follows:
Sec. 273.8 Resource eligibility standards.
* * * * *
(e) Exclusions from resources. * * *
(18) State agencies shall develop clear and uniform standards for
identifying kinds of resources that, as a practical matter, the
household is unable to sell for any significant return because the
household's interest is relatively slight or because the costs of
selling the household's interest would be relatively great. A resource
shall be so identified if its sale or other disposition is unlikely to
produce any significant amount of funds for the support of the
household. This provision does not apply to negotiable financial
instruments or vehicles. The determination of whether any part of the
value of a vehicle is included as a resource shall be handled using the
provisions of paragraph (h) of this section. The State agency may
require verification of the value of a resource to be excluded if the
information provided by the household is questionable. The following
definitions shall be used in developing these standards:
(i) Significant return shall be any return, after estimated costs
of sale or disposition, and taking into account the ownership interest
of the household, that is estimated to be one half or more of the
applicable resource limit for the household; and
(ii) Any significant amount of funds shall be funds amounting to
one half or more of the applicable resource limit for the household.
* * * * *
Dated: October 13, 1994.
Ellen Haas,
Assistant Secretary for Food and Consumer Services.
[FR Doc. 94-25977 Filed 10-19-94; 8:45 am]
BILLING CODE 3410-30-U