[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]


=======================================================================
-----------------------------------------------------------------------

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.

-----------------------------------------------------------------------

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