[Federal Register Volume 61, Number 202 (Thursday, October 17, 1996)]
[Rules and Regulations]
[Pages 54282-54292]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-26068]


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DEPARTMENT OF AGRICULTURE
7 CFR Parts 271, 272, 273, and 275

[Amendment No. 362]
RIN 0584-AB58


Food Stamp Program; Child Support Deduction

AGENCY: Food and Consumer Service, USDA.

ACTION: Final rule.

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SUMMARY: This rule implements a provision of the 1993 Mickey Leland 
Childhood Hunger Relief Act establishing a deduction for households 
that make legally obligated child support payments to or for a 
nonhousehold member. The provision results in increased benefits for 
households that pay child support, thereby enabling more parents to 
meet their legal obligation. A proposed rule was published December 8, 
1994.

DATES: The provisions of this rule are effective December 16, 1996.

FOR FURTHER INFORMATION CONTACT: Margaret Werts Batko, Assistant Branch 
Chief, Certification Policy Branch, Program Development Division, Food 
and Consumer Service, USDA, 3101 Park Center Drive, Alexandria, 
Virginia, 22302, or (703) 305-2516.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

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

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

Regulatory Flexibility Act

    This rule has been reviewed with regard to the requirements of the 
Regulatory Flexibility Act of 1980 (5 U.S.C. 601-612). Ellen Haas, 
Under Secretary for Food, Nutrition, and Consumer Services, has 
certified that this rule will not have a significant economic impact on 
a substantial number of small entities. State and local welfare 
agencies will be the most affected to the extent that they administer 
the Program.

Paperwork Reduction Act

    This final rule contains information collection requirements 
subject to review by the Office of Management and Budget (OMB) under 
the Paperwork Reduction Act of 1995 (Pub. L. 104-13). The reporting and 
recordkeeping burden associated with the application, certification, 
and continued eligibility of food stamp applicants is approved under 
OMB No. 0584-0064.
    To receive the child support deduction authorized by 7 CFR 273.9(d) 
of this rule, households must report the child support obligation and 
amounts paid on the application form and provide verification. The 
methodology used to determine the current burden estimates for all 
applications assumes that every applicant will complete every line item 
on the application form. The model food stamp application and the model 
application worksheet were revised in 1995 to include a line for the 
child support deduction and the associated burden is included in the 
current burden estimate of .2290 hours per response. Therefore, the 
amendment to 7 CFR 273.9(d) made by this rule to add a child support 
deduction does not alter the current burden estimate.
    Section 273.12(a) of this rule requires that households report 
changes in the legal obligation to pay child support during the 
certification period; changes in the amount of child support paid must 
be reported when the household applies for recertification. The rule 
allows State agencies to require households to report child support 
information monthly or quarterly. Section 273.10(f) provides that 
households that are not required to report the amount of child support 
paid during the certification period on a monthly or quarterly report 
shall be certified for no more than 6 months. State agencies that 
currently require

[[Page 54283]]

monthly reporting by some categories of households may require monthly 
reporting households entitled to the child support deduction to report 
changes in child support on that report. This option does not alter the 
current burden estimate for the monthly report form of .1617 hours per 
response because these households are already included in the number of 
households used to determine household burden associated with the 
monthly report form.
    State agencies that do not use monthly reporting to obtain 
information about child support payments may require households to 
report child support information quarterly. State agencies may use the 
change report form currently used for reporting other changes or may 
develop a separate report form. The change report form will also be 
used for households that do not report monthly or quarterly to report 
changes in the child support obligation. The current estimate of burden 
hours assumes that every household will submit at least one change 
report form during its certification period. Therefore, the estimated 
number of reports received is related to the length of a household's 
certification period. Under this rule, some households would be 
recertified or submit a quarterly report in lieu of a change report. 
The current burden estimate for the change report form already takes 
into account the variations in the length of certification periods. 
Therefore, the requirement to report certain changes in child support 
is not expected to alter the current burden estimate of .1617 hours per 
response for the change report form.
    Comments. Comments are invited on: (a) whether the proposed 
collection of information is necessary for the proper performance of 
the functions of the agency, including whether the information will 
have practical utility; (b) the accuracy of the agency's estimate of 
the burden of the proposed collection of information, including the 
validity of the methodology and assumptions used; (c) ways to enhance 
the quality, utility and clarity of the information to be collected; 
and (d) ways to minimize the burden of the collection of information on 
those who are to respond, including through the use of appropriate 
automated, electronic, mechanical, or other technological collection 
techniques or other forms of information technology. Comments may be 
sent to Wendy Taylor, OIRM, Room 404-W, Office of Management and 
Budget, Paperwork Reduction Project (OMB No. 0584-0064), Washington, 
D.C. 20503 and Department of Agriculture, Clearance Officer, OIRM, AG 
Box 7630, Washington, D.C. 20250. Comments and recommendations on the 
proposed information collection must be received by December 16, 1996.

Executive Order 12778

    This 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 Dates 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.

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 establish a child support deduction for households that pay legally 
obligated child support to a nonhousehold member.

Benefits

    The child support deduction will increase the number of potentially 
eligible food stamp recipients and will increase the benefit level of 
households eligible for the deduction.

Costs

    It is estimated that this action will increase the cost of the Food 
Stamp Program by $125 million in Fiscal Year 1996; $130 million in 
Fiscal Year 1997; and $145 million in Fiscal Year 1998.

Background

    On December 8, 1994, we published a proposed rule at 59 FR 63265 to 
implement section 13921 of 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), which amends 
section 5(e) of the Food Stamp Act to add a deduction for legally 
obligated child support payments made by a household member to or for a 
nonhousehold member.
    We accepted comments through February 6, 1995, and received letters 
from 27 commenters, including State and local welfare agencies, State 
child support enforcement (CSE) agencies, and State employees. We are 
not addressing comments that are technical or beyond the scope of this 
rulemaking or comments on the requirement to establish a deduction. The 
requirement to establish a deduction is mandated by statute and is not 
subject to comment. All other comments are addressed below.

1. Allowable Deductions

    A. Legal obligation. We proposed to add a new paragraph to 7 CFR 
273.9(d) to provide that households would be eligible for a deduction 
for child support paid by a household member to or for a nonhousehold 
member, provided the household member was legally obligated to pay 
child support. Section 273.2(f)(10)(xii) of the proposed rule provided 
that a legal obligation entitling a payor to the deduction could be 
established by a court or administrative order or a legally enforceable 
separation agreement. Alimony payments would not be deductible.

Comments

    Three of the seven comments on this provision supported the 
proposal. Two commenters suggested that payments be allowed even if 
they are not legally obligated and another indicated that a deduction 
should be allowed for the full amount paid even if the payment exceeds 
the amount the household member is legally obligated to pay. Commenters 
also requested clarification of the terms ``legally enforceable 
separation agreement'' and ``administrative process'' as an alternative 
to a court order.

Response

    The Leland Act allows a deduction only for ``legally obligated'' 
child support; therefore, we are unable to allow a deduction for 
amounts the household member is not legally obligated to pay. State 
agencies may determine what constitutes a legal obligation to pay child 
support under State law. As used in the proposed rule, a ``legally 
enforceable separation agreement'' is a contract between the parties 
that would be enforceable through court action. State agencies may 
apply State law to determine what is an enforceable contract. The term 
``administrative process'' refers to the process authorized by State 
law for establishing an obligation to pay child support and determining 
the amount of child support. We believe the term ``legally obligated 
child support payments'' is consistent with the legislation and 
sufficiently broad to allow application of State law and procedures. As 
indicated below in the discussion of verification requirements, we are 
not including in this final rule

[[Page 54284]]

the proposed examples of a legal obligation.
    The proposed rule would have provided in Sec. 273.9(d)(7) that a 
deduction be allowed for child support payments paid by a household 
member ``to or for a nonhousehold member. * * *'' Subsequent to 
publication of the proposed rule, it came to our attention that an 
obligation to pay child support may continue even if the child or the 
child and other parent are in the same household as the individual 
paying the child support. This may occur, for example, if the child 
moves back and forth between parents or if the payor has a continuing 
obligation to make arrearage payments to the State Child Support 
Enforcement (CSE) agency after the family is reunited.
    The regulation as proposed would not have prohibited allowing the 
deduction when a legally obligated child support payment was made to an 
individual or agency outside the household even if the child for whom 
the support was paid was a household member. Therefore, we believe 
there is no need to revise the proposed language. No deduction would be 
allowed, of course, if a child support payment is made to a household 
member.
    B. Vendor payments. The proposed rule provided in new 
Sec. 273.9(d)(7) that payments a noncustodial parent makes to a third 
party (such as a landlord or utility company) on behalf of the 
nonhousehold member (vendor payments) would be included in the 
deduction. Also, the rule proposed that legally obligated vendor 
payments made by the noncustodial parent to obtain health insurance for 
the child would be deductible.

Comments

    Eight commenters addressed vendor payments and several had 
questions regarding how the allowable portion of the noncustodial 
parent's health insurance premium would be determined. One commenter 
recommended that a deduction be allowed for any vendor payment made by 
a noncustodial parent on behalf of a nonhousehold member. A State 
agency asked whether a deduction is allowed when the noncustodial 
parent pays a landlord but the method of payment (whether the payment 
is to be made directly to or for the nonhousehold member or indirectly 
as a vendor payment) is not specified in the court order or separation 
agreement. Other commenters recommended that vendor payments for 
clothes or groceries not be deductible. Some commenters recommended 
that vendor payments paid in lieu of alimony or spousal support be 
allowed as a deduction, while other commenters believed these payments 
should not be deductible. Other commenters were concerned that the 
types of payments considered to be child support would be different for 
food stamp and CSE purposes.

Response

    We are not providing detailed requirements for determining the 
amount of the allowable health insurance premium because this may vary 
with the type of coverage and the nature of the obligation. We believe 
State agencies are in a better position to work out a method that is 
reasonable and not overly burdensome. Employers or insurers could be 
contacted for information regarding the best proration method.
    The household member may make vendor payments for various expenses 
of the nonhousehold member, but unless the household member is legally 
obligated to pay the expense, the payments are not deductible. A 
legally obligated payment is deductible whether it is made as a vendor 
payment or as a direct payment to or for the nonhousehold member. 
Absence of designation of a method of payment (directly to the 
household or indirectly to a provider) in the court order or separation 
agreement does not prevent the payment from being deductible as long as 
it can be verified. We are unable to allow vendor payments obligated 
under an alimony or spousal support order because the Leland Act limits 
the deduction to child support payments.
    Child support is generally paid through a court or State child 
support enforcement agency or directly to the household containing the 
child. We consulted with the Office of Child Support Enforcement of the 
U.S. Department of Health and Human Services in developing both the 
proposed rule and this final rule. Unlike the Food Stamp Program, CSE 
does not earmark payments made toward various aspects of a child 
support obligation, but instead reflects the total child support paid. 
A household member may be required to pay rent or medical expenses on 
behalf of a nonhousehold member, for example, but the amount would be 
included in the total amount the household member is ordered to pay 
instead of being itemized in the CSE record. Therefore, the payments 
shown in the CSE record may not match those reported and verified by 
the household.
    Despite potential inconsistencies between CSE records and food 
stamp records of child support payments, we believe households should 
be allowed a deduction for child support paid by vendor payments. We 
believe the intent of Congress is to allow vendor payments if the 
household member has a legal obligation to pay them. As reported in the 
preamble to the proposed rule at 59 FR 63266, the legislative history 
of the Leland Act states: ``Since the purpose of this amendment is to 
encourage absent parents to live up to the full extent of their child 
support obligations, the value of legally binding child support that is 
provided in-kind, such as payments of rent directly to the landlord, 
would also be eligible for this deduction.'' See 114 Congressional 
Record S10726, August 6, 1993.
    To satisfy the requirement that the deduction be allowed only for 
legally obligated child support and the desire of Congress to include 
vendor payments as allowable deductions, we are clarifying in this rule 
that any legally obligated payments made, whether directly to or for 
the nonhousehold member or indirectly as a vendor payment, are 
deductible. We are not adopting the examples of vendor payments 
included in the proposed rule (health insurance payments and payments 
to utility providers or landlords) because they are discussed in the 
preamble and are not needed in the final rule.
    The proposed rule included references to verification and reporting 
requirements in new Sec. 273.9(d)(7). Since these requirements are 
contained in other sections of current regulations, we are removing any 
reference to verification and reporting requirements from 
Sec. 273.9(d)(7) in the final rule.
    The proposed requirement to allow a deduction for legally obligated 
child support payments made to third parties is adopted as final at 
Sec. 273.9(d)(7), with clarifications and removal of unnecessary 
language.
    C. Arrearages. The proposed rule provided in new Sec. 273.9(d)(7) 
that households with at least a 3-month record of child support 
payments would be eligible for a deduction for amounts paid toward 
child support arrearages in addition to the current month's obligation. 
Households with less than a 3-month record would not be allowed a 
deduction for arrearages, or back payments.

Comments

    Seven State agencies commented on this provision. Three supported 
the proposal to allow a deduction for back payments and felt that a 
deduction should be allowed even if the household had no payment 
record. Three State agencies were concerned that allowing a deduction 
for arrearages would result in a double deduction. They indicated that 
allowing a deduction for arrearages

[[Page 54285]]

could skew an average and would make estimating future arrearage 
payments difficult. One State agency asked if arrearages could be 
averaged into the prospective obligation even when the court order did 
not address the arrearage. Another State agency felt that the total 
amount of the monthly deduction should be no more than the amount of 
the current obligation on a monthly basis.
    One commenter suggested that if wages are being garnished for child 
support, the full amount should be allowed even if it includes 
arrearages and the household does not have a payment history yet 
because garnishment assures that it will be paid. Three commenters 
asked how one-time collections of past-due child support, such as tax 
refund intercepts, would be handled in estimating the deduction.

Response

    The Leland Act and its legislative history require that arrearage 
payments be allowed in calculating a household's child support 
deduction. The Leland Act specifies that a deduction is to be allowed 
for payments ``made.'' The legislative history at 114 Congressional 
Record S10725 indicates that the intent of the provision is to 
encourage the payment of child support: ``Now these payments are 
counted as income to the family that pays them and to the family that 
receives them. This is not only unfair, it is a disincentive for absent 
fathers to pay child support. We must remove current disincentives for 
absent parents to take responsibility for their children.* * *'' The 
Conference Report (House Report No. 213, 103d Congress, 1st Session, 
1993, p. 925) states: ``The managers do not intend for this procedure 
[averaging and retrospective budgeting] to deny a household a deduction 
for any child support actually paid.* * *'' Income used to pay child 
support for a child in another household depletes available income for 
support of the payor's household. The child support order or separation 
agreement need not require payment of arrearages since the initial 
obligation to pay already exists in the order or agreement; nor is a 
payment schedule necessary for the deduction to be allowed. The food 
stamp State agency may, however, work with the CSE agency and the 
household to establish such a schedule as the basis for anticipating 
the amount of deduction.
    We recognize that anticipating the amount of future arrearage 
payments will be difficult. That is why the proposed rule did not allow 
a deduction for arrearages to households without a payment history. 
However, we realize that this makes administration of the provision 
more complex. The intent of Congress was to minimize burdens on State 
agencies and households. Therefore, we have decided to allow a 
deduction for arrearages even for households without a payment history. 
State agencies will be able to anticipate the likelihood of future 
payments based on the household's available income. State agencies also 
have the option of budgeting the child support deduction 
retrospectively while budgeting other circumstances prospectively. 
Verification of payments received could be obtained, if necessary, from 
the payee. In addition, child support arrearages are collected through 
garnishment of wages or unemployment benefits in some cases, and 
verification of the garnishment will be readily available. As stated 
above, the deduction is intended for payments ``made.'' In the case of 
arrearages where no payment history has been established, the State 
agency should exercise additional caution when budgeting for the 
deduction. If the eligibility worker has no basis for expecting future 
payments toward arrearages, or no basis for expecting payments to equal 
those estimated by the applicant, no arrearage amount should be 
included in an average used to project the deduction for the 
certification period. Provisions for reducing the likelihood that 
households will receive an inappropriate deduction are described with 
the budgeting and reporting requirements below.
    No amount would be budgeted based on amounts collected through tax 
intercept. Unlike child support paid through garnishments from current 
income, child support collected through tax intercept is taken from a 
lump sum payment. The intent of the child support deduction is to make 
it possible for households to pay child support out of available 
income. We believe it would be inconsistent with this intent to allow a 
deduction for amounts collected through tax intercept.
    The proposed provision in new Sec. 273.9(d)(7) to allow a deduction 
for arrearage payments is adopted with a change to remove the 
requirement that households must have a payment history to receive the 
deduction.

2. Verification

    A. Household verification. The proposed rule would have added a new 
mandatory verification requirement to the regulations at 7 CFR 
273.2(f)(1). The proposed rule provided that the State agency would 
verify the household's legal obligation to pay child support, the 
amount of the obligation, and the monthly amount of child support paid. 
The household would be responsible for providing verification of the 
legal obligation, the obligated amount, and the amount paid. According 
to the proposed rule, the State agency would be required to accept 
documentation verifying a household's actual payment, such as canceled 
checks, wage withholding statements, verification of withholding from 
unemployment compensation, and statements from the custodial parent 
regarding direct payments or vendor payments the household member pays 
or expects to pay. The proposed rule provided that documents 
establishing an obligation to pay would not be accepted as verification 
of the household's actual monthly child support payments. The proposed 
rule would also have amended 7 CFR 273.2(f)(8) to require verification 
at recertification of the amount of legally obligated child support a 
household member pays to a nonhousehold member.

Comments

    We received comments from five commenters relating to various 
aspects of the household verification requirements and three comments 
concerning possible disputes between payees and payors. One State 
agency agreed with the proposal to require that both the legal 
obligation and actual amount paid be verified. Another State agency 
thought there was an inconsistency between the provision in proposed 
Sec. 273.9(d)(7) that no deduction be allowed if the household fails or 
refuses to obtain necessary verification and the proposed requirement 
in new Sec. 273.2(f)(1)(xii) establishing the State agency's 
responsibility for verifying entitlement to the deduction and the 
amount. A State agency indicated that the responsibility for 
verification rests with the payor, with appropriate help from the 
worker. Another commenter asked what kind of verification should be 
accepted in new cases. One commenter indicated that the rule provided a 
clear definition of acceptable verification for a legal obligation to 
pay child support but not for a legally enforceable separation 
agreement. Another indicated that any amount collected by CSE 
establishes that it was legally obligated.
    One of the commenters indicated that many noncustodial parents do 
not keep good records and rely on the CSE agency to provide a record of 
child support payments. Another suggested that food stamp applicants 
without CSE cases who want the deduction should be required to open a 
CSE case. Making

[[Page 54286]]

payments through CSE would facilitate verification.
    Several commenters raised the issue of possible disputes between 
the custodial and noncustodial parents regarding the amount of child 
support received and paid if both parents are members of food stamp 
households. One State agency wanted to know if the State agency is 
obligated to compare the amount reported as child support income by the 
payee household with the amount claimed as a deduction by the payor 
household and to adjust the figures if the amounts differ. Commenters 
were concerned about how disputes would be resolved, and one suggested 
that no deduction be allowed if the amount of child support paid is 
disputed.

Response

    We are modifying the proposed requirement to verify child support 
information to remove unnecessary language concerning the household's 
responsibility to provide verification and the types of acceptable 
documentation. Verification requirements, including the State agency's 
obligation to assist the household, the sources of verification and 
responsibility for providing verification are already included in the 
regulations at 7 CFR 273.2(f) (4) and (5). If no verification is 
available because a household member has recently become responsible 
for paying child support, the State agency shall anticipate the amount 
to be budgeted initially based on verification of the amount of the 
obligation and the amount the household member expects to pay monthly. 
(Requirements for budgeting and reporting changes are discussed later 
in this preamble.)
    We agree with the commenter that the existence of a CSE case makes 
it easier to verify that child support is or is not being paid, and we 
would support State agency measures to encourage households to use CSE 
child support services. However, we have no authority to require that 
they do so. Services are available to any individual who is not 
otherwise eligible as a recipient of Aid to Families with Dependent 
Children (AFDC) and/or Medicaid. We believe the resolution of 
differences regarding claims of child support paid or received is best 
left to State agencies to address. If State agencies encourage payor 
households to use canceled checks, money order receipts, or receipts 
signed by the custodial parent as verification of payment, there should 
be few occasions when the verification is questionable. Also, although 
the household is the primary source for verification, the State agency 
may also obtain verification from CSE records, courts, or other 
sources.
    State agencies may, but are not required to compare the payee and 
payor records when both are food stamp households. We are not imposing 
a requirement on State agencies to compare payor and payee files each 
month because the payment and income amounts reflected legitimately may 
not match. This could occur, for example, if the cases are on different 
reporting and budgeting systems, vendor payments are involved, or 
averaging is used.
    The proposal to add a mandatory verification requirement for the 
child support deduction to 7 CFR 273.2(f)(1)(xii) is adopted as final 
with clarification and removal of unnecessary language. Because of 
changes in the final rule regarding the reporting requirements for 
child support, we are revising the requirement at 7 CFR 
273.2(f)(8)(i)(A) for verifying the amount of legally obligated child 
support at recertification to require verification of changes in the 
legal obligation, including the amount of the obligation, and the 
amount of child support the household pays. We are also adding a 
sentence to provide that reportedly unchanged information shall be 
verified only if the information is incomplete, inaccurate, 
inconsistent or outdated.
    B. Matching requirements. Also included in Sec. 273.2(f)(1)(xii) of 
the proposed rule was a requirement that the State agency enter into 
agreements with CSE agencies to obtain data regarding the child support 
obligation and the household's payment record from CSE automated data 
files before recertification or, for households certified for 3 months 
or fewer, prior to alternate recertifications. The match with the 
records of food stamp recipients receiving a child support deduction 
was intended to provide a record of child support paid or to identify 
cases in which no payments were recorded. The State agency would then 
have this information available for use at recertification. The 
proposed rule at 7 CFR 273.2(b)(2) also would have required State 
agencies to notify households on the application that child support 
information may be verified with CSE agencies or courts.

Comments

    The proposed matching requirement generated more comments than any 
other, and only two commenters found the proposal reasonable. Fourteen 
commenters expressed concern about this requirement. State and county 
welfare offices and CSE agencies objected to the requirement on the 
grounds that (1) a match, particularly an interstate match, would not 
be cost-effective, (2) CSE systems do not contain all the required 
information on all cases, (3) resolving discrepancies between 
information provided by the household and that obtained from CSE 
records would be burdensome, (4) the match is unnecessary because 
adequate verification is available from households and other sources, 
and (5) CSE automated data systems are being implemented now and 
modifications cannot be made at this time. Commenters suggested that 
on-line access to CSE records for advance verification would be 
preferable to a post-certification match. They requested that the match 
requirement be eliminated, be made optional, or be delayed until 
implementation of CSE automated data systems is completed.
    In addition to concerns expressed about the matching requirement, 
some State agencies had specific questions about its application. Two 
commenters questioned the necessity of notification to applicants that 
child support information would be checked through computer matching 
with CSE. One commenter asked what action the State agency would be 
required to take if a CSE match showed a change greater than $50 in 
child support paid. Another asked what action the State agency should 
take if the household verified a payment but CSE had no record.

Response

    The purpose in requiring State agencies to enter into an agreement 
with CSE to match State agency records with CSE records was to ensure 
that households would not continue to be given a deduction when they 
were not actually making monthly payments. Under the proposed rule, 
there was no requirement for reporting changes in child support paid 
during the certification period unless the State agency required the 
household to report quarterly or monthly. We believed matching would 
enable the State agency to verify the degree to which the household had 
met its obligation and determine whether it should continue to receive 
a deduction.
    We continue to believe that matching the household's food stamp 
record of child support payments with CSE records is beneficial. 
However, we have considered all comments and have decided not to 
mandate a match. Where reasonable, State agencies should verify child 
support information by all means available. Many States may not yet be 
equipped to match child support information via automated CSE agency 
records. However, the goal is to ensure that States take every 
opportunity to

[[Page 54287]]

verify data provided by a recipient regarding another State or 
Federally administered program. Verification could take place by match, 
by checking available data on an on-line system or by other means. Our 
expectation is that State agencies will seek every opportunity to 
institute an appropriate verification system between programs.
    We are leaving it up to State agencies to determine the extent to 
which automated data systems can be used at this time. Some State 
agencies already have the capability of conducting on-line matches with 
CSE records and routinely consult these records before authorizing a 
deduction. We strongly encourage all State agencies to develop and use 
this capability as soon as possible. In the meantime, we believe the 
reporting and certification period requirements described below will 
provide protection against abuse of the deduction.
    We also agree with the commenters that the proposed amendment to 7 
CFR 273.2(b)(2) requiring State agencies to notify applicants on the 
application form that information provided may be checked with CSE 
records is unnecessary. Regulations at 7 CFR 273.2(b)(3) require all 
State agencies to use an application form designed by FCS unless a 
deviation is approved. The Food Stamp Program model application form 
(FCS-385) already contains language notifying households that 
information provided by the applicant will be compared with other 
Federal, State and local records using computer matching systems. 
Therefore, it is unnecessary to amend 7 CFR 273.2(b)(2) to include the 
proposed specific notice requirement, and we are not adopting the 
proposed amendment.

3. Budgeting and Reporting Requirements

    The proposed rule provided State agencies three options for 
handling budgeting and reporting requirements for child support. Under 
Option 1, change reporting, the anticipated child support payment would 
be budgeted either prospectively or retrospectively. For change 
reporting households with a record of 3 or more months of paid child 
support, the State agency would average at least 3 months of legally 
obligated child support and use the average as the household's child 
support deduction for the certification period, taking into account any 
anticipated changes in the legal obligation or other changes that would 
affect the payment. Households with an established payment history of 3 
or more months would have to report only changes in the legal 
obligation that occurred during the certification period.
    For change reporting households without a record of at least 3 
months of paid, legally obligated child support, the State agency would 
base the child support deduction on anticipated payments, exclusive of 
payments toward arrearages. These households would have to report 
changes of more than $50 from the amount used in the most recent 
certification action, excluding payments toward arrearages, until a 
payment history was established. They would also have to report changes 
in the legal obligation.
    Under Option 2, quarterly reporting, State agencies could require 
households claiming the child support deduction to report their actual 
payments quarterly. These households would have the payments budgeted 
either prospectively or retrospectively. They would be required to 
report actual amounts paid and changes in the legal obligation.
    Under Option 3, monthly reporting, a State agency could require 
households claiming the child support deduction to report monthly. 
After the beginning month or months, the household would have to be 
budgeted retrospectively and would report changes in the amount paid 
and the legal obligation.
    The proposed rule also provided that for retrospectively budgeted 
households in the beginning month or months of certification, the State 
agency would either average past payments if the household had a 
payment history or use an estimate of child support the household 
expected to pay, excluding arrearages, if the household had no payment 
history.

Comments

    Three of the eight commenters on budgeting and reporting agreed 
with the proposal. We received no specific comments on the proposal to 
allow quarterly reporting of child support payments.
    Several State agencies opposed the reporting provisions as 
unnecessarily limiting and burdensome and indicated that child support 
should be treated the same as any other type of income deduction. 
Others objected to the proposed requirement that change reporting 
households without a payment history report a change of more than $50 
in child support paid and suggested alternative reporting requirements. 
Several commenters objected to the averaging requirements for 
prospective and retrospectively budgeted households in proposed 
Sec. 273.10(d)(8). We are not describing these comments individually 
because, as indicated below, we are not adopting the proposed $50 
reporting requirement and the averaging requirements. One commenter 
opposed the requirement to report changes in the legal obligation 
between recertifications on the grounds that these changes rarely 
happen. Another State agency indicated that the child support order 
will include the age at which the legal obligation stops. The State 
agency can track that date and remove the deduction when the child 
reaches that age.

Response

    We are retaining the three reporting and budgeting options 
contained in the proposed rule: change reporting with prospective or 
retrospective budgeting, quarterly reporting with prospective or 
retrospective budgeting, and monthly reporting with retrospective 
budgeting. However, in response to comments, we are simplifying the 
requirements and providing increased State agency flexibility.
    As indicated by the legislative history, Congress intended that 
regulations implementing the child support deduction minimize burdens 
on State agencies and households. The Conference Report (House 
Conference Report No. 213, 103rd Congress, 1st Session, 1993, pages 
925-26) states: ``For example, States could be permitted to base a 
household's deduction for a certification period on the average amount 
it paid in the prior certification period (with appropriate adjustments 
for any changes in the order) rather than having to keep track 
throughout a certification period of how much the absent parent 
actually pays each month. The managers do not intend for this procedure 
to deny a household a deduction for any child support actually paid, 
but rather the intention is to give States the option to use consistent 
budgeting procedures that would minimize the number of changes they 
would be required to make. State agencies correctly following such 
procedures would not be charged with quality control errors if the 
amount of child support that a household paid increased or decreased as 
long as the State agency adjusted the household's allotment 
prospectively at its next recertification.''
    To more fully meet the intent of Congress and address the concerns 
of commenters, we are modifying the reporting and budgeting 
requirements of the three options. This final rule allows State 
agencies the option of certifying households receiving a child support 
deduction more frequently or requiring periodic reporting of child 
support information. We believe this coincides with procedures State 
agencies currently use for identifying changes in

[[Page 54288]]

the circumstances of households with earnings.
    As proposed, a new Sec. 273.12(a)(1)(vi) adds the requirement that 
households report changes in the legal obligation to pay child support. 
In accordance with 7 CFR 273.12(a)(2), the household would be required 
to report these changes within 10 days. Although changes in the legal 
obligation may be infrequent, the requirement to report such a change 
may prevent overissuance of benefits to households no longer obligated 
to pay child support.
    Some State agencies may track the age of the child for whom the 
support is provided and the date when the obligation stops; others may 
rely on households to report the change. Therefore, we are retaining 
the requirement.
    Under the change reporting option as modified by this rule, 
households with less than a 3-month record of child support payments 
are not required to report a change of more than $50 in child support 
payments, as was proposed. Under this final rule, a limit on 
certification period length for these households would replace the 
reporting requirement. The final rule provides at Sec. 273.10(f)(9) 
that State agencies are required to certify change reporting households 
without a record of regular child support payments for no more than 3 
months, as described under ``Certification Periods'' below. State 
agencies are required to certify change reporting households with a 
payment history for no more than 6 months.
    Therefore, we are adopting as final the addition of paragraph (vi) 
to 7 CFR 273.12(a) to provide that change reporting households are 
required to report changes in the legal obligation to pay child 
support.
    We are also modifying the requirements for option 2, quarterly 
reporting, to increase State agency flexibility. We are not adopting 
the provision of proposed Sec. 273.12(a)(1)(vi) that would have 
required quarterly reporting households to report actual monthly 
amounts paid in addition to changes in the legal obligation or the 
provision in proposed Sec. 273.12(a)(4)(i) that the State agency would 
have to provide the household with the quarterly report no later than 
the end of the second month in the quarter.
    We are also not adopting the provisions of proposed 
Sec. 273.12(a)(4)(ii) and Sec. 273.12(b)(2) (i) through (x) regarding 
the content of the quarterly report form. State agencies may determine 
and specify on the quarterly report the child support information the 
household is required to report and the date by which it must be 
reported. State agencies may, but are not required to remind the 
household about other changes that have to be reported. They may also 
advise the household that the State agency will act on changes in child 
support the household reports before submitting the quarterly report.
    The requirements in proposed paragraphs 273.12(b)(2) (iii), (iv), 
(v), (vi), and (x) for the quarterly report form are already provided 
in 7 CFR 273.21(h)(2) (iii), (iv), (v), (vi) and (vii) for the monthly 
reporting form. Therefore, we are adding a reference in 
Sec. 273.12(b)(2) to 7 CFR 273.21(h)(2) (iii) through (vii). With these 
changes, the proposed requirements for child support quarterly 
reporting are adopted as final.
    Under Option 3, the State agency may require categories of 
households to report child support information on a monthly report. The 
proposed rule would have amended 7 CFR 273.21(h)(2) to add a paragraph 
specifying that if a State agency elects to require reporting of child 
support payments on the monthly report form, the State agency shall 
require the household to report changes in the actual monthly amount of 
child support paid and any changes in the legal obligation to pay child 
support. We are not adopting this proposed amendment. State agencies 
may determine what information households are required to report on the 
monthly report.
    We are adopting with modification the proposed amendment to add new 
paragraph (E) to 7 CFR 273.21(j)(3)(iii). We received no comments on 
this provision that the State agency shall not allow a child support 
deduction if the household does not report or verify child support 
information the State agency requires to be reported or verified.
    As provided in the proposed rule and required by section 6(c)(1)(A) 
of the Act, households excluded from monthly reporting and 
retrospective budgeting in accordance with 7 CFR 273.21(b) cannot be 
required to report periodically, and the State agency cannot use 
retrospective budgeting for the excluded households. Under all options, 
State agencies are required to act on any changes in child support 
payments reported by the household that affect benefits or eligibility.
    The proposed sections 273.10(d)(8)(i), (ii), (iii), and (iv) 
prescribing requirements for averaging and budgeting the child support 
deduction are not being adopted because they are unnecessary in light 
of the changes made in this rule. Under this final rule, 
Sec. 273.10(d)(8) provides that State agencies may budget child support 
payments prospectively, in accordance with 7 CFR 273.10(d) (2) through 
(5), or retrospectively, in accordance with 7 CFR 273.21(b) and (f)(2). 
The payments may be budgeted prospectively or retrospectively 
regardless of the budgeting system used for the household's other 
circumstances. Section 273.21(f)(2)(iv) currently provides that the 
State agency shall budget deductible expenses prorated over two or more 
months (except medical expenses) either prospectively or 
retrospectively. We are adding a conforming amendment to 7 CFR 
273.21(f)(2)(iv) to provide that the child support expense may be 
averaged and budgeted prospectively or retrospectively.
    We received no comments on the proposed amendment to 7 CFR 271.2 
allowing use of an adequate notice in connection with quarterly 
reporting, and the amendment is adopted as proposed.
    With these changes, the final rule provides that State agencies 
shall either require households receiving a child support deduction to 
report a change in the legal obligation to pay child support within 10 
days of the date the household becomes aware of a change or provide 
specified information periodically (monthly or quarterly). The proposed 
provision at Sec. 273.12(a)(4)(ii) which prohibits State agencies from 
requiring households that report child support information periodically 
to report the same changes within 10 days is adopted as final. An 
option to use frequent recertifications in place of reporting 
requirements is discussed below.
    We received one comment supporting the proposal regarding treatment 
of the deduction in households with a member who is ineligible because 
of alien status or failure to provide a social security number. We 
proposed to handle the child support deduction the same way as the 
shelter and dependent care expenses of these households under 7 CFR 
273.11(c)(2)(iii). That is, that portion of the household's allowable 
child support expense which is paid by the ineligible member is divided 
among the household members, including the ineligible member. All but 
the ineligible member's share is counted as a deductible child support 
expense for the remaining members. Therefore, the proposed amendment to 
7 CFR 273.11 is adopted as final without change.

4. Certification Periods

    The proposed rule contained no requirements regarding certification 
periods for households eligible for the child support deduction. 
However, in the preamble at 59 FR 63270 we

[[Page 54289]]

indicated that we were not proposing certification period requirements 
because current rules at 7 CFR 273.10(f)(4) already address the 
certification period length for households that experience frequent and 
significant changes and those that have more predictable circumstances. 
The preamble reflects the expectation that households with a regular 
payment record and households that report their child support payments 
quarterly or monthly would be certified for longer periods (6 to 12 
months) while households with no payment record or which have extreme 
monthly variations in payments would be certified for a shorter period 
of time.

Comments

    We received three comments on certification periods. One State 
agency indicated that the problem of fluctuations in child support 
payments could be addressed by using limited certification periods for 
households receiving the deduction. Another State agency agreed with 
the statement in the preamble of the proposed rule that establishing 
special certification period requirements was not necessary. Another 
commenter asked that ``short period'' as used in the preamble be 
defined and asked whether a minimum certification period would be 
required.

Response

    As indicated above in the discussion about reporting and budgeting 
requirements, we have reconsidered our position on the need for 
certification period limits in connection with the child support 
deduction. We agree with the commenter that assigning limited 
certification periods to households claiming the deduction is one way 
to control for fluctuations in payments. Requiring households to report 
changes periodically is another way.
    Under this rule State agencies can choose to use frequent 
recertifications instead of reporting requirements to obtain 
information about changes in child support payments. To protect Program 
integrity, we believe it is necessary to set a limit on the number of 
months a household may participate without some examination of the 
amount of child support actually being paid. Therefore, this rule 
provides that if the State agency does not require households to report 
changes in child support payments periodically during the certification 
period, the State agency shall assign certification periods that 
correspond to the extent to which the household has made regular 
payments. Households with no history of regular child support payments 
who are not required to report periodically shall be assigned a 
certification period of no more than 3 months. Households with an 
established record of regular payments that are expected to continue 
payments of the same amount and frequency shall be certified for no 
more than 6 months if they are not required to report periodically. 
State agencies may establish their own procedures for determining what 
constitutes a ``record of regular child support payments.''
    Households required to report periodically shall be assigned 
certification periods of not less than 6 months and not more than 12 
months, unless a waiver has been approved.
    Current regulations at 7 CFR 273.10(f)(3), (6), and (7) governing 
certification periods for jointly processed PA or GA cases and elderly 
or self-employed households are based on requirements of section 3(c) 
of the Food Stamp Act and shall continue to apply. We realize that 
under current regulations, frequent recertifications can be a burden 
for both households and State agencies. However, a proposed rule titled 
``Simplification of Program Rules'' published January 11, 1995, would, 
when final, simplify the recertification process to greatly reduce the 
burden on households and State agencies. Households that establish a 
regular child support payment history will benefit by having less 
frequent recertifications.
    Therefore, this rule amends 7 CFR 273.10(f) to add a new paragraph 
(9). It requires State agencies to certify households eligible for a 
child support deduction for no more than 3 months if they have no 
record of regular child support payments and are not required to submit 
periodic reports. Households with a record of regular payments shall be 
certified for no more than 6 months unless they are required to submit 
periodic reports.

5. Claims and Disqualification

Comments

    One commenter asked whether a household would be charged with an 
intentional Program violation (IPV) if it claimed a deduction and then 
failed to report that the household member did not make the payment. 
The commenter also asked whether a claim against the household would be 
established when a deduction is granted but the household does not make 
the anticipated payment, and what action would be taken if it was 
discovered that the household had provided false verification.

Response

    Current regulations at 7 CFR 273.18 provide requirements for 
establishing inadvertent household error or IPV claims. If a household 
is required to report a change in child support and does not report the 
change, a claim will be established in accordance with 7 CFR 273.18(c) 
(1) or (2). If the household is not required to report a change during 
the certification period, a claim is not established because of failure 
to report a change during that period. If the household provided false 
information or verification, the household could be charged with an 
IPV, in accordance with 7 CFR 273.16, or the State agency could pursue 
court action against the household member. If the individual is found 
to have intentionally violated Program rules, an IPV claim would be 
established in accordance with 7 CFR 273.18(c)(2).

6. Quality Control

    In accordance with the legislative history of the child support 
deduction provision (House Conference Report No. 213, 103rd Congress, 
lst Session (1993) p. 925), the proposed rule would have added a new 
paragraph (ix) to 7 CFR 275.12(d)(2) to provide that any variance in a 
child support deduction which was the result of an unreported change 
subsequent to the most recent certification action shall be excluded 
from the error determination. As indicated in the preamble to the 
proposed rule at 59 FR 63270, the QC system would review the accuracy 
of the deduction at the most recent certification action prior to the 
sample month. Any unreported change in actual child support payments or 
obligation subsequent to the certification action would not be the 
basis for citing a household reporting error or a State agency error. A 
variance would exist if the QC reviewer determined that the State 
agency did not apply the proper deduction at the most recent 
certification action or that the household reported a change after the 
most recent certification action and the State agency failed to act or 
acted improperly on the reported change.

Comments

    The five State agencies that commented on quality control supported 
the proposed provision.

Response

    The proposed addition of paragraph (ix) to 7 CFR 275.12(d)(2) 
regarding QC variances in child support cases is adopted as final 
without change.

[[Page 54290]]

7. Implementation

    The preamble to the proposed rule at 59 FR 63270 indicated that the 
child support provision of the Leland Act was effective September 1, 
1994 and was required to be implemented by October 1, 1995.

Comments

    Two State agencies commented on the proposed implementation 
requirements. One indicated that the State agency would have a problem 
getting changes in place by October 1995, that there was no extra money 
for programming, and an additional 6 months would be needed. The other 
State agency indicated that for States which implemented before the 
required date, there should be a paragraph explaining that only the 
overall policy intent, not the procedural steps such as CSE matching 
and reporting, had to be implemented at that time.

Response

    In accordance with section 13971 of the Leland Act, this final rule 
provides that State agencies were authorized to implement the child 
support deduction effective September 1, 1994, but were not required to 
implement the provision until October 1, 1995.
    In accordance with Pub. L. 104-221, the Contract with America 
Advancement Act of 1996, this final rule is effective December 16, 1996 
and must be implemented no later than May 1, 1997. The provisions must 
be implemented for all households that newly apply for Program benefits 
on or after either the required implementation date or the date the 
State agency implements the provision prior to the required 
implementation date. State agencies are required to adjust the cases of 
participating households at the next recertification, at household 
request, or when the case is next reviewed, whichever comes first. 
State agencies which fail to implement by the required implementation 
date or adjust benefits as required shall provide restored benefits as 
appropriate.
    Variances resulting from implementation of the provisions of the 
final rule are excluded from error analysis for 120 days from the 
required implementation date, in accordance with section 13951(c)(2) of 
the Leland Act. State agencies which implement prior to the required 
implementation date must notify the appropriate regional office prior 
to implementation that they wish the variance exclusion period to begin 
with actual implementation, as provided in 7 CFR 275.12(d)(2)(vii)(A). 
In the absence of such notification, the exclusionary period will begin 
with the required implementation date.

List of Subjects

7 CFR Part 271

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

7 CFR Part 272

    Alaska, Civil Rights, Food Stamps, Grant programs-social programs, 
Reporting and recordkeeping requirements.

7 CFR Part 273

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

7 CFR Part 275

    Administrative practice and procedures, Food stamps, Reporting and 
recordkeeping requirements.

    Accordingly, 7 CFR parts 271, 272, 273, and 275 are amended as 
follows:
    1. The authority citation of parts 271, 272, 273, and 275 continues 
to read as follows:

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

PART 271--GENERAL INFORMATION AND DEFINITIONS


Sec. 271.2   [Amended]

    2. In Sec. 271.2, the definition of ``Adequate notice'' is amended 
by removing the words ``in a Monthly Reporting and Retrospective 
Budgeting system'' and adding in their place the words ``in a periodic 
reporting system such as monthly reporting or quarterly reporting.''

PART 272--REQUIREMENTS FOR PARTICIPATING STATE AGENCIES

    3. In Sec. 272.1, a new paragraph (g)(148) is added to read as 
follows:


Sec. 272.1   General terms and conditions.

* * * * *
    (g) Implementation. * * *
    (148) Amendment No. 362. The provision of Section 13921 of Public 
Law 103-66 establishing a child support deduction was effective 
September 1, 1994, and was required to be implemented no later than 
October 1, 1995. The provisions of Amendment No. 362 are effective 
December 16, 1996 and must be implemented no later than May 1, 1997. 
State agencies shall implement the provisions no later than the 
required implementation date. The provisions must be implemented for 
all households that newly apply for Program benefits on or after either 
the required implementation date or the date the State agency 
implemented the provision prior to the required implementation date, 
whichever is earlier. State agencies are required to adjust the cases 
of participating households at the next recertification, at household 
request, or when the case is next reviewed, whichever comes first. 
State agencies which fail to implement or adjust cases by the required 
implementation date shall provide restored benefits as appropriate. For 
quality control purposes, any variances resulting from implementation 
of the provisions are excluded from error analysis for 120 days from 
the required implementation date, in accordance with 7 CFR 
275.12(d)(2)(vii) and 7 U.S.C. 2025(c)(3)(A). State agencies which 
implement prior to the required implementation date must notify the 
appropriate regional office prior to implementation that they wish the 
variance exclusion period to begin with actual implementation, as 
provided in 7 CFR 275.12(d)(2)(vii)(A). Absent such notification, the 
exclusionary period will begin with the required implementation date.

PART 273--CERTIFICATION OF ELIGIBLE HOUSEHOLDS

    4. In Sec. 273.2:
    a. a new paragraph (f)(1)(xiii) is added and
    b. two new sentences are added at the end of paragraph 
(f)(8)(i)(A).
    The additions read as follows:


Sec. 273.2   Application processing.

* * * * *
    (f) Verification. * * *
    (1) Mandatory verification. * * *
    (xiii) Legal obligation and actual child support payments. The 
State agency shall obtain verification of the household's legal 
obligation to pay child support, the amount of the obligation, and the 
monthly amount of child support the household actually pays. Documents 
that are accepted as verification of the household's legal obligation 
to pay child support shall not be accepted as verification of the 
household's actual monthly child support payments. State agencies may 
and are strongly encouraged to obtain information regarding a household 
member's child support obligation and payments from Child Support 
Enforcement (CSE) automated data files. The State agency shall give the 
household an opportunity to resolve any discrepancy between household

[[Page 54291]]

verification and CSE records in accordance with paragraph (f)(9) of 
this section.
* * * * *
    (8) Verification subsequent to initial certification. (i) 
Recertification. (A) * * * The State agency shall require a household 
eligible for the child support deduction to verify any changes in the 
legal obligation to pay child support, the obligated amount, and the 
amount of legally obligated child support a household member pays to a 
nonhousehold member. The State agency shall verify reportedly unchanged 
child support information only if the information is incomplete, 
inaccurate, inconsistent or outdated.
* * * * *
    4(a). In Sec. 273.9, paragraphs (d)(7) and (d)(8) are redesignated 
as paragraphs (d)(8) through (d)(9) respectively and a new paragraph 
(d)(7) is added to read as follows:


Sec. 273.9   Income and deductions.

* * * * *
    (d) Income deductions. * * *
    (7) Child support deduction. Legally obligated child support 
payments paid by a household member to or for a nonhousehold member, 
including payments made to a third party on behalf of the nonhousehold 
member (vendor payments). The State agency shall allow a deduction for 
amounts paid toward arrearages. Alimony payments made to or for a 
nonhousehold member shall not be included in the child support 
deduction.
* * * * *
    5. In Sec. 273.10:
    a. The introductory text of paragraph (d) is amended by adding the 
words ``child support'' between the words ``shelter,'' and ``and 
medical''.
    b. A new paragraph (d)(8) is added.
    c. Paragraph (e)(1)(i)(E) is amended by removing the reference 
``(e)(1)(i)(F)'' and adding in its place a reference to 
``(e)(1)(i)(G)''.
    d. Paragraphs (e)(1)(i)(F) and (e)(1)(i)(G) are redesignated as 
paragraphs (e)(1)(i)(G) and (e)(1)(i)(H) respectively and a new 
paragraph (e)(1)(i)(F) is added.
    e. Newly redesignated paragraph (e)(1)(i)(G) is amended by removing 
the reference to ``(e)(1)(i)(G)'' and adding in its place a reference 
to ``(e)(1)(i)(H)''.
    f. A new paragraph (f)(9) is added.
    The additions and revisions read as follows:


Sec. 273.10   Determining household eligibility and benefit levels.

* * * * *
    (d) Determining deductions. * * *
    (8) Child support deduction. State agencies may budget child 
support payments prospectively, in accordance with paragraphs (d)(2) 
through (d)(5) of this section, or retrospectively, in accordance with 
Sec. 273.21(b) and Sec. 273.21(f)(2), regardless of the budgeting 
system used for the household's other circumstances.
    (e) Calculating net income and benefit levels.
    (1) Net monthly income.
    (i) * * *
    (F) Subtract allowable monthly child support payments in accordance 
with Sec. 273.9(d)(7).
* * * * *
    (f) Certification periods. * * *
    (9) Households eligible for a child support deduction that have no 
record of regular child support payments or of child support arrearages 
and are not required to report child support payment information 
required by the State agency periodically (monthly or quarterly) during 
the certification period shall be certified for no more than 3 months. 
Households with a record of regular child support and arrearage 
payments that are not required to report payment information 
periodically during the certification period shall be certified for no 
more than 6 months. These requirements do not apply to households whose 
certification periods are established in accordance with paragraphs 
(f)(3), (f)(6), or (f)(7) of this section. Households required to 
report monthly or quarterly shall be assigned certification periods in 
accordance with paragraph (f)(8) of this section.
* * * * *


Sec. 273.11   [Amended]

    6. In Sec. 273.11,
    a. Paragraph (c)(1)(i) is amended by adding the words ``child 
support,'' after the words ``dependent care,''.
    b. Paragraph (c)(2)(iii) is amended by adding the words ``child 
support payment,'' after the word ``allowable'' in the second sentence 
and after the word ``deductible'' in the third sentence.
    7. In Sec. 273.12:
    a. A new paragraph (a)(1)(vi) is added.
    b. Paragraph (a)(4) is redesignated as paragraph (a)(5) and a new 
paragraph (a)(4) is added.
    c. The heading of paragraph (b), the introductory text of paragraph 
(b)(1), and paragraph (b)(2) are revised.
    The revisions and additions read as follows:


Sec. 273.12   Reporting changes.

    (a) Household responsibility to report.
    (1) * * *
    (vi) Changes in the legal obligation to pay child support.
* * * * *
    (4) The State agency may require a household that is eligible to 
receive a child support deduction in accordance with Sec. 273.9(d)(7) 
to report information required by the State agency regarding child 
support on a change report, a monthly report, or quarterly report. The 
State agency shall process the reports in accordance with procedures 
for the systems used in budgeting the household's income and 
deductions. The following requirements apply to quarterly reports:
    (i) The State agency shall provide the household a reasonable 
period after the end of the last month covered by the report in which 
to return the report. If the household does not file the report by the 
due date or files an incomplete report, the State agency shall provide 
the household with a reminder notice advising the household that it has 
10 days from the date the State agency mails the notice to file a 
complete report. If the household does not file a complete report by 
the extended filing date as specified in the reminder notice, the State 
agency shall determine the household's eligibility and benefits without 
consideration of the child support deduction. The State agency shall 
not terminate the benefits of a household for failure to submit a 
quarterly report unless the household is otherwise ineligible. The 
State agency shall send the household an adequate notice as defined in 
Sec. 271.2 of this chapter if the household fails to submit a complete 
report or if the information contained on a complete report results in 
a reduction or termination of benefits. The quarterly report shall meet 
the requirements specified in paragraph (b) of this section. The State 
agency may combine the content of the reminder notice and the adequate 
notice as long as the notice meets the requirements of the individual 
notices.
    (ii) The quarterly report form, if required, shall be the sole 
reporting requirement for reporting child support payments during the 
certification period. Households excluded from monthly reporting as 
specified in Sec. 273.21(b) and households required to submit monthly 
reports shall not be required to submit quarterly reports.
* * * * *
    (b) Report forms. (1) The State agency shall provide the household 
with a form for reporting the changes required in paragraph (a)(1) of 
this section to be reported within 10 days and shall pay the postage 
for return of the form. The

[[Page 54292]]

change report form shall, at a minimum, include the following:
* * * * *
    (2) A quarterly report form for reporting changes in the child 
support obligation and payments shall be written in clear, simple 
language and meet the bilingual requirements described in Sec. 272.4(b) 
of this chapter. The report shall meet the requirements of 
Sec. 273.21(h)(2)(iii) through (h)(2)(vii).
* * * * *
    8. In Sec. 273.21:
    a. Paragraph (f)(2)(iv) is amended by adding a sentence at the end.
    b. Paragraph (j)(3)(iii) is amended by removing the semicolon at 
the end of paragraphs (j)(3)(iii)(A) and (j)(3)(iii)(B) and adding a 
period in its place and by adding a new paragraph (j)(3)(iii)(E).
    The additions read as follows:


Sec. 273.21   Monthly reporting and retrospective budgeting (MRRB).

* * * * *
    (f) Calculating allotments for households following the beginning 
months. * * *
    (2) Income and deductions. * * *
    (iv) * * * The State agency may average the child support expense 
and budget it prospectively or retrospectively.
* * * * *
    (j) State agency action on reports. * * *
    (3) Incomplete filing. * * *
    (iii) * * *
    (E) If the household does not report or verify changes in child 
support, the State agency shall not allow a child support deduction.
* * * * *

Part 275--PERFORMANCE REPORTING SYSTEM

    9. In Sec. 275.12, a new paragraph (d)(2)(ix) is added to read as 
follows:


Sec. 275.12   Review of active cases.

* * * * *
    (d) Variance identification. * * *
    (2) Variances excluded from error analysis. * * *
    (ix) Any variance in a child support deduction which was the result 
of an unreported change subsequent to the most recent certification 
action shall be excluded from the error determination.
* * * * *
    Dated: September 27, 1996.
Ellen Haas,
Under Secretary for Food, Nutrition, and Consumer Services.
[FR Doc. 96-26068 Filed 10-16-96; 8:45 am]
BILLING CODE 3410-30-U