[Federal Register Volume 60, Number 162 (Tuesday, August 22, 1995)]
[Rules and Regulations]
[Pages 43513-43517]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-20687]



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 Rules and Regulations
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  Federal Register / Vol. 60, No. 162 / Tuesday, August 22, 1995 / 
Rules and Regulations  


[[Page 43513]]


DEPARTMENT OF AGRICULTURE

Food and Consumer Service

7 CFR Parts 272 and 273

[Amdt. No. 357]
RIN 0584-AB91


Food Stamp Program: Disqualification Penalties for Intentional 
Program Violations

AGENCY: Food and Consumer Service, USDA.

ACTION: Final rule.

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

SUMMARY: This rule finalizes a proposed rulemaking published on August 
29, 1994. It amends Food Stamp Program regulations to implement section 
13942 of the Mickey Leland Hunger Relief Act, which increases the 
disqualification penalties for individuals who are found guilty in a 
Federal, State or local court of trading or receiving food stamp 
coupons for firearms, ammunition, explosives or controlled substances. 
This rule also implements a change which makes it easier for a State 
agency to conduct an administrative disqualification hearing by 
eliminating the proof of receipt requirement. In addition, this rule 
clarifies the Department's policy on the imposition of disqualification 
periods for intentional Program violations. Finally, this rule 
eliminates two model forms used in administrative disqualification 
hearings.

DATES: This rule is effective October 23, 1995, except that 7 CFR 
273.16(b) is effective retroactive to September 1, 1994.

FOR FURTHER INFORMATION CONTACT: James I. Porter, Supervisor, Issuance 
and Accountability Section, State Administration Branch, Program 
Accountability Division, Food Stamp Program, Food and Consumer Service, 
USDA, 3101 Park Center Drive, Alexandria, Virginia 22302, (703) 305-
2385.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This final rule has been determined to be not significant for 
purposes of Executive Order 12866, and therefore has not been reviewed 
by the Office of Management and Budget.

Executive Order 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 at 7 CFR part 3015, subpart V and related Notice (48 FR 29115, 
June 24, 1983), this Program is excluded from the scope of Executive 
Order 12372 which requires intergovernmental consultation with State 
and local officials.

Executive Order 12778

    This final rule has been reviewed under Executive Order 12778, 
Civil Justice Reform. This rule is intended to have preemptive effect 
with respect to any State or local laws, regulations or policies which 
conflict with its provisions or which would otherwise impede its full 
implementation. This rule is not intended to have retroactive effect 
unless so specified in the ``Implementation'' section of this preamble. 
Prior to any judicial challenge to the provisions of this final rule or 
the application of its provisions, all applicable administrative 
procedures must be exhausted.

Regulatory Flexibility Act

    This final rule has been reviewed with regard to the requirements 
of the Regulatory Flexibility Act of 1980 (Pub. L. 96-354, 94 Stat. 
1164, September 19, 1980). William E. Ludwig, Administrator of the Food 
and Consumer Service, has certified that this rule does not have a 
significant economic impact on a substantial number of small entities. 
The requirements will affect State and local agencies that administer 
the Food Stamp Program by simplifying the requirements for giving 
advance notice of hearing to food stamp recipients. It will also modify 
the penalties applicable to individuals who engage in Program 
misconduct.
Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1980 (44 U.S.C. 
3507), the reporting and recordkeeping burden associated with this 
final rule has been approved by the Office of Management and Budget 
(OMB) under OMB number 0584-0064. The provisions of this rule do not 
contain any additional reporting and/or recordkeeping requirements 
subject to OMB approval.

Background

    On August 29, 1994, the Department published a proposed rule at 59 
FR 44343 to implement section 13942 of the Mickey Leland Childhood 
Hunger Relief Act (Pub. L. 103-66) (Leland Act). Section 13942 of the 
Leland Act amended the Food Stamp Act of 1977 (7 U.S.C. 2011-2032) (the 
Act) to increase the disqualification penalties for certain types of 
intentional Program violations. In addition, the proposed rule included 
regulatory changes with regard to the delivery of administrative 
disqualification hearing notices and the initiation of disqualification 
periods for intentional Program violations. The proposed rule also 
included regulatory changes to eliminate two model forms used in 
administrative disqualification hearings.
    The Department received nine comment letters which addressed 
provisions of the proposed rule. All of the commenters were State 
agencies. The Food and Consumer Service has given careful consideration 
to all comments received. The major concerns of the commenters are 
discussed below. For additional information on the provisions discussed 
in this rule, the reader should refer to the preamble of the proposed 
rule at 59 FR 44343-46.

Increased Disqualification Penalties for Intentional Program 
Violations

    Section 13942 of the Leland Act requires that an individual be 
disqualified for 12 months for a first finding by a court, and 
permanently for a second finding by a court that the person has either 
traded or received controlled substances using food stamp coupons. This 
section of the Leland Act also requires that an individual be 
permanently disqualified for the first finding by a court that the 
individual has either traded or received firearms, ammunition, or 
explosives using food stamp coupons. Of the nine comment 

[[Page 43514]]
letters received, two commenters specifically supported this provision 
of the proposed rule. However, some commenters had concerns on the 
applicability of the increased penalties.
    Two commenters were concerned about the applicability of the 
increased penalties to deferred adjudications. The proposed rule would 
have applied the increased penalties in cases with deferred 
adjudication if a finding of culpability has been made. The first 
commenter felt that some deferred adjudications should not be subjected 
to the increased penalties and that specific criteria should be 
established for having deferred adjudications result in the same 
increased penalties as would apply to an adjudication by a court. The 
second commenter felt that the finding of culpability clause would 
require State agencies to conduct a difficult and costly analysis of 
the court order or terms of the deferred adjudication. The Department 
recognizes that there are complexities involved in making the proper 
determination of whether a finding of culpability exists. However, 
given the fact that the standard penalties are applied in instances of 
deferred adjudication, the Department believes the increased penalties 
should also be imposed when applicable in cases of deferred 
adjudication. Therefore, the Department has retained 7 CFR 273.16(b)(4) 
of the final rule, as proposed.
    One commenter requested clarification as to whether the penalties 
applied to non-recipients as well as recipients. Section 6(b)(1) of the 
Act refers to any ``person'' and not ``recipient'' in its discussion of 
applying disqualification penalties. The Act also provides that 
penalties apply to ``further participation in the Program.'' The 
language in the proposed rule at Sec. 273.16(b)(1), which discusses the 
application of the penalties, is consistent with the Act in that it 
uses ``individual'' and not ``recipient'' or ``household member.'' The 
disqualification penalties apply to any individual found to have 
committed an intentional Program violation regardless of whether he/she 
is a recipient. The provision in Sec. 273.16(a)(1) states that the 
disqualification shall take effect in such cases immediately after the 
individual applies and is found eligible to participate in the Program.
    One commenter recommended a revision to the proposed rule at 
Sec. 273.16(b)(5) to clarify the Department's intent. The commenter 
suggested using the phrase `` * * * fails to impose a disqualification 
or a disqualification period * * * '' instead of `` * * * fails to 
impose a disqualification period * * * '' as proposed in 
Sec. 273.16(b)(5). The reason for the suggested change, according to 
the commenter, is because questions have arisen regarding the 
Department's intent on whether a disqualification period should be 
imposed if the court finds that the intentional Program violation was 
committed but does not specify in the court order whether there should 
be a disqualification. The Department's longstanding position on this 
issue is to have the appropriate disqualification period imposed by the 
State agency unless it is expressly forbidden by the court or a 
different disqualification period is specified in the court order. 
Therefore, the Department is including in the final rule the 
clarification to 7 CFR 273.16(b)(5) suggested by the commenter.
    In addition to changes reflected in the final rule because of the 
comments received regarding this provision, the Department is revising 
a paragraph in the regulations for clarification purposes. This 
paragraph discusses the treatment of disqualifications which occurred 
prior to the implementation of the disqualification periods set forth 
in a February 15, 1983 rulemaking (48 FR 6836). The final rule provides 
clarification in 7 CFR 273.16(b)(6) and 7 CFR 273.16(i)(5) by referring 
to the actual implementation date (April 1, 1983) of the provision 
contained in the February 15, 1983 rulemaking instead of making 
reference to the paragraph containing the penalties. The change has no 
substantive effect and is for purposes of clarification only.
Advance Notice of Administrative Disqualification Hearings

    The Department proposed giving State agencies the option to deliver 
advance notices of administrative disqualification hearings via first 
class mail. The current regulations at 7 CFR 273.16(e)(3)(i) require 
that, if notices are mailed, they must be sent via certified mail--
return receipt requested, and proof of receipt must be obtained. The 
proposed rule essentially eliminates the proof of receipt requirement. 
Of the nine comment letters received, six commenters specifically 
supported this provision of the proposed rule. However, some commenters 
had concerns regarding its applicability.
    One commenter supported this proposal as a State agency option, 
rather than a requirement, citing that flexibility is necessary because 
of differences between State agencies in Program administration. The 
proposed rule would, in fact, make it an option by stating that, if 
mailed, the notice would be sent either via first class or certified 
mail-return receipt requested. The Department is keeping this as an 
option in the final rule.
    One commenter suggested that the Department add a qualifier to 
specify that returned first class mail constitutes failure to provide 
advance notice of an administrative disqualification hearing. In this 
manner, the commenter felt that the rule would be clear that the 
hearing would be canceled in such an event. The current regulations at 
7 CFR 273.16(e)(4) state that if the affected individual ``* * * cannot 
be located * * * the hearing shall be conducted without the household 
member being represented.'' This is not being changed in the final 
rule.
    The Department proposed to make non-receipt of an advance notice a 
good cause criterion under 7 CFR 273.16(e)(4). Under the proposal, if 
the household member shows non-receipt of the notice in a timely 
fashion, any previous decision determined in absentia would no longer 
remain valid and the State agency would conduct a new hearing. The 
Department received a comment concerning the issue of what constituted 
a ``showing of non- receipt'' of the hearing notice in order to request 
a new hearing. The Department has determined that the circumstances in 
which non-receipt constitutes a good cause should be left up to each 
State agency to decide. This is being done to increase the degree of 
State agency flexibility in this area. However, each State agency's 
policy regarding the required circumstances shall be consistently 
applied within the State agency. This is reflected in 7 CFR 
273.16(e)(3)(ii) in the final rule.
    The Department also received three comments concerning the issue of 
what is considered ``timely fashion'' for individuals to show non-
receipt of an advance notice. Two commenters stated that ``timely 
fashion'' needs to be defined. One commenter was concerned about the 
relevance to the current regulations at 7 CFR 273.16(e)(4) which state 
that the household has 10 days from the date of the scheduled hearing 
to present reasons indicating good cause for failure to appear at the 
hearing. The commenter suggested that the existing 10-day limit for 
presenting good cause be eliminated. The Department feels that the 
existing 10- day limit should remain intact for circumstances in which 
the individual is claiming good cause based upon circumstances other 
than non-receipt of the notice of the hearing. However, because mailing 
the hearing decision acts as a notice to the recipient of what 
occurred, the Department has determined that it is more meaningful to 
define ``timely 

[[Page 43515]]
fashion'' for a good cause claim of non-receipt of the notice of 
hearing as being within 30 days after the date of the written notice of 
the hearing decision. This is reflected in 7 CFR 273.16(e)(4) in the 
final rule.

Imposition of Disqualification Penalties

    The proposed rule clarifies existing regulations at 7 CFR 
273.16(a), (e), (f) (g) and (h) by stating that an individual 
disqualified while not currently participating in the Food Stamp 
Program would have his/her disqualification period begin immediately 
after applying for and becoming eligible to receive benefits. This 
clarification became necessary because the use of the word 
``postponed'' in the current regulations, when compared to 
``immediately'' in the Act, became a cause of confusion which led to 
some court suits.
    Of the nine comments received for this proposed rule, two 
commenters specifically supported this proposal. However, two other 
commenters had concerns regarding its applicability.
    The first commenter stated that ``immediately'' should be 
interpreted to signify that the disqualification period begins once the 
appropriate State agency staff becomes aware that the individual to be 
disqualified has returned to the Program. The commenter further stated 
that this is a problem if the State agency is not promptly notified by 
the court of the decision. While the Department recognizes that 
disqualifying individuals may require coordination among various 
agencies within the State, the Department feels that allowing the 
disqualification to be delayed simply because the appropriate 
individuals within the State agencies are unaware of its existence is 
unfair to the individual being disqualified.
    The second commenter suggested a wording change in 
Sec. 273.16(a)(1) of the proposed rule. The commenter recommended 
changing ``nonparticipants,'' in the last sentence of this section, to 
``persons not eligible to participate in the Program.'' The reason for 
the suggestion, according to the commenter, is for consistency 
purposes. The Department concurs that a wording change is necessary for 
clarification purposes. However, the Department feels that the change 
suggested by the commenter needs to be expanded. The basis for this is 
that the commenter's wording may suggest that the decision on the 
timing of the disqualification when the intentional Program violation 
determination is made is based on whether the individual is eligible to 
participate. This implies that an eligibility determination must be 
completed at the time the intentional Program violation determination 
is rendered. This is not the Department's intent. The wording used in 7 
CFR 273.16(a)(1) in the final rule, ``* * * persons not currently 
certified to participate in the Program * * *,'' accurately describes 
the Department's intent because there is no implication of a test of 
eligibility.
Model Forms

    The proposed rule would eliminate reference to the Food and 
Consumer Service providing two model forms currently used in the 
administrative disqualification hearing process. Most State agencies 
have designed their own State-specific forms based on regulatory 
requirements, thus reducing the effectiveness of and need for these 
models. No comments were received regarding this proposal. As part of 
an ongoing effort to do away with unnecessary Federal forms while 
affording State agencies maximum flexibility, the Department will no 
longer be providing these model forms.

Implementation

    No comments were received on the implementation dates. The 
provision relating to the increased penalties at 7 CFR 273.16(b) is 
effective and was to be implemented no later than September 1, 1994. 
Current regulations at 7 CFR 273.2(b)(ii) and 7 CFR 273.16(d) require 
that the notice of disqualification penalties be included on the Food 
Stamp application form. Therefore, the Department, on March 16, 1994, 
issued an implementation memorandum requiring notice of the enhanced 
intentional Program violation disqualification penalties to be included 
on the Food Stamp application form by September 1, 1994.
    The remaining provisions are effective and must be implemented 
October 23, 1995.

List of Subjects

7 CFR Part 272

    Alaska, Civil rights, Food stamps, Grant programs--social programs, 
Penalties, Reporting and recordkeeping requirements, Social security, 
Students.

7 CFR Part 273

    Administrative practice and procedure, Aliens, Claims, Food Stamps, 
Fraud, Grant programs--social programs, Penalties, Reporting and 
recordkeeping requirements, Social security, Students.

    Accordingly, 7 CFR parts 272 and 273 are amended as follows:
    1. The authority citation of Parts 272 and 273 continues to read as 
follows:

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

PART 272--REQUIREMENTS FOR PARTICIPATING STATE AGENCIES

    2. In Sec. 272.1, a new paragraph(g)(142) is added to read as 
follows:


Sec. 272.1  General terms and conditions.

* * * * *
    (g) Implementation. * * *
    (142) Amendment No. 357. The provisions of Amendment No. 357 are 
effective and must be implemented as follows:
    (i) The provision relating to the increased penalties at 7 CFR 
273.16(b) is effective and must be implemented retroactive to September 
1, 1994. This includes providing notification of the increased 
penalties on the application form.
    (ii) The remaining provisions are effective and must be implemented 
October 23, 1995.

PART 273--CERTIFICATION OF ELIGIBLE HOUSEHOLDS

    3. In Sec. 273.16:
    a. The last sentence of paragraph (a)(1) is revised;
    b. Paragraph (b) is revised;
    c. Paragraph (e)(3) is revised;
    d. The next to last sentence of paragraph (e)(4) is removed, and 
two sentences are added in its place;
    e. Paragraph (e)(8)(iii) is revised;
    f. The last sentence of paragraph (e)(9)(iii) is removed;
    g. Paragraph (f)(2)(iii) is revised;
    h. Paragraph (g)(2)(ii) is revised;
    i. Paragraph (h)(1)(ii)(C) is revised;
    j. Paragraph (h)(2)(ii) is revised; and
    k. The second sentence of paragraph (i)(5) is revised.
    The revisions and additions read as follows:


Sec. 273.16  Disqualification for intentional Program violation.

    (a) Administrative responsibility. (1) * * * For those persons not 
currently certified to participate in the Program at the time of the 
administrative disqualification or court decision, the disqualification 
period shall take effect immediately after the individual applies for 
and is determined eligible for Program benefits.
* * * * *
    (b) Disqualification penalties. (1) Individuals found to have 
committed an intentional Program violation either through an 
administrative disqualification hearing or by a Federal, State or local 
court, or who have signed either a waiver of right to an 

[[Page 43516]]
administrative disqualification hearing or a disqualification consent 
agreement in cases referred for prosecution, shall be ineligible to 
participate in the Program:
    (i) For a period of six months for the first intentional Program 
violation, except as provided under paragraphs (b)(2) and (b)(3) of 
this section;
    (ii) For a period of twelve months upon the second occasion of any 
intentional Program violation, except as provided in paragraphs (b)(2) 
and (b)(3) of this section; and
    (iii) Permanently for the third occasion of any intentional Program 
violation.
    (2) Individuals found by a Federal, State or local court to have 
used or received coupons in a transaction involving the sale of a 
controlled substance (as defined in section 102 of the Controlled 
Substances Act (21 U.S.C. 802)) shall be ineligible to participate in 
the Program:
    (i) For a period of twelve months upon the first occasion of such 
violation; and
    (ii) Permanently upon the second occasion of such violation.
    (3) Individuals found by a Federal, State or local court to have 
used or received coupons in a transaction involving the sale of 
firearms, ammunition or explosives shall be permanently ineligible to 
participate in the Program upon the first occasion of such violation.
    (4) The penalties in paragraphs (b)(2) and (b)(3) of this section 
shall also apply in cases of deferred adjudication as described in 
paragraph (h) of this section, where the court makes a finding that the 
individual engaged in the conduct described in paragraph (b)(2) or 
(b)(3) of this section.
    (5) If a court fails to impose a disqualification or a 
disqualification period for any intentional Program violation, the 
State agency shall impose the appropriate disqualification penalty 
specified in paragraphs (b)(1), (b)(2) or (b)(3) of this section unless 
it is contrary to the court order.
    (6) One or more intentional Program violations which occurred prior 
to April 1, 1983 shall be considered as only one previous 
disqualification when determining the appropriate penalty to impose in 
a case under consideration.
    (7) Regardless of when an action taken by an individual which 
caused an intentional Program violation occurred, the disqualification 
periods specified in paragraphs (b)(2) and (b)(3) of this section shall 
apply to any case in which the court makes the requisite finding on or 
after September 1, 1994.
    (8) State agencies shall disqualify only the individual found to 
have committed the intentional Program violation, or who signed the 
waiver of the right to an administrative disqualification hearing or 
disqualification consent agreement in cases referred for prosecution, 
and not the entire household.
    (9) Even though only the individual is disqualified, the household, 
as defined in Sec. 273.1, is responsible for making restitution for the 
amount of any overpayment. All intentional Program violation claims 
shall be established and collected in accordance with the procedures 
set forth in Sec. 273.18.
* * * * *
    (e) Disqualification hearings. * * *
    (3) Advance notice of hearing. (i) The State agency shall provide 
written notice to the individual suspected of committing an intentional 
Program violation at least 30 days in advance of the date a 
disqualification hearing initiated by the State agency has been 
scheduled. If mailed, the notice shall be sent either first class mail 
or certified mail-return receipt requested. The notice may also be 
provided by any other reliable method. If the notice is sent using 
first class mail and is returned as undeliverable, the hearing may 
still be held.
    (ii) If no proof of receipt is obtained, a timely (as defined in 
paragraph (e)(4) of this section) showing of nonreceipt by the 
individual due to circumstances specified by the State agency shall be 
considered good cause for not appearing at the hearing. Each State 
agency shall establish the circumstances in which non-receipt 
constitutes good cause for failure to appear. Such circumstances shall 
be consistent throughout the State agency.
    (iii) The notice shall contain at a minimum:
    (A) The date, time, and place of the hearing;
    (B) The charge(s) against the individual;
    (C) A summary of the evidence, and how and where the evidence can 
be examined;
    (D) A warning that the decision will be based solely on information 
provided by the State agency if the individual fails to appear at the 
hearing;
    (E) A statement that the individual or representative will, upon 
receipt of the notice, have 10 days from the date of the scheduled 
hearing to present good cause for failure to appear in order to receive 
a new hearing;
    (F) A warning that a determination of intentional Program violation 
will result in disqualification periods as determined by paragraph (b) 
of this section, and a statement of which penalty the State agency 
believes is applicable to the case scheduled for a hearing;
    (G) A listing of the individual's rights as contained in 
Sec. 273.15(p);
    (H) A statement that the hearing does not preclude the State or 
Federal Government from prosecuting the individual for the intentional 
Program violation in a civil or criminal court action, or from 
collecting any overissuance(s); and
    (I) If there is an individual or organization available that 
provides free legal representation, the notice shall advise the 
affected individual of the availability of the service.
    (iv) A copy of the State agency's published hearing procedures 
shall be attached to the 30-day advance notice or the advance notice 
shall inform the individual of his/her right to obtain a copy of the 
State agency's published hearing procedures upon request.
    (v) Each State agency shall develop an advance notice form which 
contains the information required by this section.
    (4) Scheduling of hearing. * * * In instances where good cause for 
failure to appear is based upon a showing of nonreceipt of the hearing 
notice as specified in paragraph (e)(3)(ii) of this section, the 
household member has 30 days after the date of the written notice of 
the hearing decision to claim good cause for failure to appear. In all 
other instances, the household member has 10 days from the date of the 
scheduled hearing to present reasons indicating a good cause for 
failure to appear. * * *
* * * * *
    (8) Imposition of disqualification penalties. * * *
    (iii) If the individual is not certified to participate in the 
Program at the time the disqualification period is to begin, the period 
shall take effect immediately after the individual applies for and is 
determined eligible for benefits.
* * * * *
    (f) Waived hearings. * * *
    (2) Imposition of disqualification penalties. * * *
    (iii) If the individual is not certified to participate in the 
Program at the time the disqualification period is to begin, the period 
shall take effect immediately after the individual applies for and is 
determined eligible for benefits.
* * * * *
    (g) Court Referrals. * * *
    (2) Imposition of disqualification penalties. * * *
    (ii) If the individual is not certified to participate in the 
Program at the time the disqualification period is to begin, the period 
shall take effect immediately 

[[Page 43517]]
after the individual applies for and is determined eligible for 
benefits.
* * * * *
    (h) Deferred adjudication. * * *
    (1) Advance notification. * *  *
    (ii) * * *
    (C) A warning that the disqualification periods for intentional 
Program violations under the Food Stamp Program are as specified in 
paragraph (b) of this section, and a statement of which penalty will be 
imposed as a result of the accused individual having consented to 
disqualification.
* * * * *
    (2) Imposition of disqualification penalties. * * *
    (ii) If the individual is not certified to participate in the 
Program at the time the disqualification period is to begin, the period 
shall take effect immediately after the individual applies for and is 
determined eligible for benefits.
* * * * *
    (i) Reporting requirements. * * *
    (5) * * * However, one or more intentional Program violations which 
occurred prior to April 1, 1983 shall be considered as only one 
previous disqualification when determining the appropriate penalty to 
impose in a case under consideration, regardless of where  the  
disqualification(s)  took place. * * *
* * * * *
    Dated: August 15, 1995.
George A. Braley,
Acting Administrator, Food and Consumer Service.
[FR Doc. 95-20687 Filed 8-21-95; 8:45 am]
BILLING CODE 3410-30-U