[Federal Register Volume 61, Number 202 (Thursday, October 17, 1996)]
[Rules and Regulations]
[Pages 54270-54282]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-26072]



[[Page 54269]]


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Part II





Department of Agriculture





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Food and Consumer Service



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7 CFR Parts 271, et al.



Food Stamp Program: Leland Childhood Hunger Relief Act Certification 
Provisions; Child Support Deduction; Educational and Training 
Assistance Treatment; 1994 Improvements Act Reservations Provision 
Monthly Reporting; and Program Rules Simplification; Final Rules

  Federal Register / Vol. 61, No. 202 / Thursday, October 17, 1996 / 
Rules and Regulations  

[[Page 54270]]



DEPARTMENT OF AGRICULTURE

Food and Consumer Service

7 CFR Parts 271, 272 and 273

[Amendment No. 375]
RIN 0584-AB76


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

AGENCY: Food and Consumer Service, USDA.

ACTION: Final rule.

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SUMMARY: This rule amends Food Stamp Program regulations to implement 
nine provisions of the Mickey Leland Childhood Hunger Relief Act, 
finalizing a proposed rule published in the Federal Register on August 
30, 1994. This rule will: (1) simplify the household definition; (2) 
establish eligibility for children who live with their food stamp 
eligible parents in a drug or alcohol rehabilitation center; (3) 
exclude from resources the value of vehicles used to transport fuel or 
water; (4) increase the fair market value exclusion of vehicles for 
determining a household's resource limit; (5) exclude certain General 
Assistance (GA) vendor payments; (6) exclude the earnings of elementary 
and secondary students under age 22 who live with their parents; (7) 
increase the maximum amount of the dependent care deduction; (8) 
eliminate the current federally-imposed limit and (9) require State 
agencies to establish a Statewide limit on the dependent care 
reimbursement paid to participants in the Food Stamp Employment and 
Training Program (E&T); and require proration of food stamp benefits 
only after a break of more than one month in certification.

DATES: This rule is effective December 16, 1996.

FOR FURTHER INFORMATION CONTACT: Margaret Werts Batko, Assistant Chief, 
Certification Policy Branch, Program Development Division, Food and 
Consumer Service, 3101 Park Center Drive, Alexandria, VA 22302 or by 
telephone at (703) 305-2520.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This final rule has been determined to be economically significant 
and was reviewed by the Office of Management and Budget (OMB) under 
Executive Order 12866.

Executive Order 12372

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

Executive Order 12778

    This 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 final rule is not intended to have retroactive 
effect unless so specified in the Effective 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. In the Food Stamp Program, 
the administrative procedures are as follows: (1) for Program benefit 
recipients--State administrative procedures issued to 7 U.S.C. 
2020(e)(10) and 7 CFR 273.15; (2) for State agencies--administrative 
procedures issued pursuant to 7 U.S.C. 2023 set out at 7 CFR 276.7 (for 
rules related to non-quality control (QC) liabilities) or part 283 (for 
rules related to QC liabilities); (3) for Program retailers and 
wholesalers--administrative procedures issued pursuant to 7 U.S.C. 2023 
set out at 7 CFR 278.8.

Regulatory Flexibility Act

    The Department has also reviewed this final rule in relation to the 
requirements of the Regulatory Flexibility Act of 1980 (Pub. L. 96-354, 
94 Stat. 1164, September 19, 1980). Ellen Haas, Under Secretary for 
Food, Nutrition, and Consumer Services, has certified that this rule 
does not have a significant economic impact on a substantial number of 
small entities. The rule will affect food stamp applicants and 
recipients and the State and local agencies that administer the 
Program. Eligibility criteria will be simplified and some currently 
participating households will realize an increase in Program benefits.

Paperwork Reduction Act

    This final rule does not contain reporting or recordkeeping 
requirements subject to approval by the Office of Management and Budget 
under the Paperwork Reduction Act of 1995 (Pub. L. 104-13). The 
information collection requirements associated with application, 
certification and ongoing eligiblity of food stamp households is 
approved under OMB No. 0584-0064. This rule affects the determination 
of eligibility and benefit levels only; it does not affect the current 
information collection requirements for making such determination.

Regulatory Impact Analysis

Need for Action

    This action is required as a result of Title XIII, Chapter 3, 
Omnibus Budget Reconciliation Act of 1993, Pub. L. 103-66, the Mickey 
Leland Childhood Hunger Relief Act (Leland Act), amendments to the Food 
Stamp Act of 1977, as amended, 7 U.S.C. 2011-2032. The Leland Act 
amendments: (1) simplify the household definition; (2) establish 
eligibility for children who live with their food stamp eligible 
parents in a drug or alcohol rehabilitation center; (3) exclude from 
resources the value of vehicles used to transport fuel or water; (4) 
increase the fair market value exclusion of vehicles for determining a 
household's resource limit; (5) exclude certain General Assistance 
vendor payments; (6) exclude the earnings of elementary and secondary 
school students under age 22 who live with their parents; (7) increase 
the maximum amount of the dependent care deduction; (8) eliminate the 
current federally-imposed limit and require State agencies to establish 
a Statewide limit on the dependent care reimbursement paid to 
participants in the Food Stamp Employment and Training Program; and (9) 
require proration of benefits only in the initial month of 
certification.

Benefits

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

Costs

    It is estimated that this action will increase the cost of the Food 
Stamp Program by approximately $7 million in Fiscal Year 1994; $107 
million in Fiscal Year 1995; $132 million in Fiscal Year 1996; $187 
million in Fiscal Year 1997; and $207 million in Fiscal Year 1998.

Background

    On August 30, 1994, the Department published a proposed rule at 59 
FR 44866 to implement amendments to the Food Stamp Act of 1977, as 
amended, 7 U.S.C. 2011-2032, (Food Stamp Act) made by the Mickey Leland 
Childhood Hunger Relief Act. Title XIII, Chapter 3,

[[Page 54271]]

Omnibus Budget Reconciliation Act of 1993, Pub. L. 103-66, (Leland 
Act).
    Comments were solicited on the provisions of the proposed 
rulemaking through October 31, 1994. The Department received 26 comment 
letters from State and local welfare agencies and public interest 
groups. All comments received were reviewed and considered, and those 
which raised relevant issues or questions are addressed below by 
subject. Comments which were unclear or not pertinent to this 
rulemaking are not addressed in this preamble. For a full understanding 
of the provisions of this final rule, the reader should refer to the 
preamble of the proposed rule.
    By the time this rule is published, subsequent legislation will 
have modified some of its provisions. The Department will be amending 
these regulations to reflect those legislative changes.

Simplifying the Household Definition for Households With Children and 
Others

    Section 13931 of the Leland Act amended section 3(i) of the Food 
Stamp Act to simplify the household definition provisions and to 
support families that live together to share housing expenses but 
maintain individual households. With certain enumerated exceptions, the 
simplified household definition allows persons who live together and 
purchase food and prepare meals separately to participate in the 
Program as separate food stamp households. Those presumed to be groups 
of individuals who customarily purchase and prepare meals together even 
if they do not do so are: (1) spouses who live together; (2) parents 
and their children 21 years of age or younger (who are not themselves 
parents living with their children or married and living with their 
spouses); and (3) children (excluding foster children) under 18 years 
of age who live with and are under the parental control of a person 
other than their parent together with the person exercising parental 
control. The Leland Act left intact the separate household status of 
individuals (and their spouses) who live with others, are 60 years of 
age or older, and are unable to purchase food and prepare meals due to 
a disability or disabling infirmity, as long as the other household 
members' income (excluding that of the spouse) does not exceed 165% of 
the poverty line.
    The Department proposed to amend 7 CFR 273.1(a) to mirror section 
13931 of the Leland Act with one addition. The Leland provision did not 
address whether a child under 18 who is living with a non-parent adult 
can be a separate household from that adult when the child is married 
and living with his or her spouse or living with his or her own child. 
To provide the same treatment for a child living with a non-parent 
adult that is provided for a child living with a natural, adoptive, or 
stepparent, the Department proposed changing the definition of parental 
control to specify that children who live with their own children or 
who are married and live with their spouses are not considered to be 
under parental control for purposes of the section. Several commenters, 
including State welfare agencies and public interest groups, strongly 
supported the proposal because it simplifies the household 
determination by making the purchase and preparation of food the basis 
for membership in a household with only a few simple exceptions.
    The Department also proposed two conforming amendments to implement 
section 13931 of the Leland Act. As described in greater detail above, 
the Leland Act preserved the separate household status permitted for 
elderly individuals who are so disabled that they cannot purchase and 
prepare food for themselves. The Department proposed amending the 
provision that implements this exception, 7 CFR 273.1(a)(2)(ii), to 
update its references to the new portions of 7 CFR 273.1(a)(2)(i) 
regarding spouses and children. The Department proposed a second 
conforming amendment to remove the requirement of 7 CFR 273.10(f)(2) 
that mandates certification periods of up to six months for households 
meeting the parent/child or sibling provisions of 7 CFR 273.1(a)(2)(i) 
(C) and (D) because the Leland Act amended the parent/child provisions 
and removed the sibling provisions.
    No adverse comments were received on the amendment removing the 
six-month certification requirement for households consisting of an 
individual and his/her minor children living with the individual's 
parent or sibling, and so it will not be changed in this final 
rulemaking. The other proposed conforming amendment is discussed below.
    Two State welfare agencies requested clarification on how section 
13931 of the Leland Act and the Department's proposed rule changed 7 
CFR 273.1(a)(2)(ii), which allows individuals who are elderly and so 
disabled that they cannot purchase and prepare food for themselves to 
be separate households (in certain circumstances) from the others with 
whom they live. In the proposed rule, the Department updated the 
references in the elderly and disabled provision to correspond to the 
proposed rule's household definition. Under that proposal, an elderly 
and disabled person would be combined into one household with his or 
her spouse, his or her natural, adopted or stepchildren under age 22, 
and those children under 18 over whom the elderly and disabled 
individual exercised parental control. This makes the provision 
needlessly complex. This special rule for elderly and disabled people 
was created to discourage these individuals from being 
institutionalized, and to encourage people to take care of them by 
allowing them to be separate food stamp households. To continue to 
subject this exception to the other household provisions regarding 
children is also a departure from the legislation, which only requires 
that the elderly and disabled individual be included in the same food 
stamp household as his or her spouse. For these reasons, the Department 
is amending 7 CFR 273.1(a)(2)(ii) to follow the statutory language more 
directly.
    One commenter asked whether there was a minimum age for children 
who can, by default, have their own household under this elderly and 
disabled exception. Section 5(i) of the Food Stamp Act, as amended by 
the Leland Act, provides that ``[n]otwithstanding the preceding 
sentences, [the household definition provision] an individual who lives 
with others, who is sixty years of age or older, and who is unable to 
purchase food and prepare meals because such individual suffers * * * 
from a disability * * * shall be considered, together with any of the 
others who is the spouse of such individual, an individual household, 
without regard to the purchase of food and preparation of meals if the 
income * * * of the others, excluding the spouse, does not exceed the 
poverty line * * * by more than 65 per centum.'' This statutory 
language requires that the elderly and disabled individual be combined 
with his or her spouse, but does not address children that may also be 
in the household. It would be rare for an elderly person who is so 
disabled that he or she cannot purchase and prepare food to be living 
alone in a household with a minor child. Because this circumstance is 
not very likely to occur and the Food Stamp Act does not address 
children, the Department has decided not to set an arbitrary minimum 
age, and instead will follow the language of the Food Stamp Act.
    With respect to the proposal as a whole, one commenter thought it 
was confusing that the household definition establishes different ages 
(18 and 21) depending on the child's relationship

[[Page 54272]]

with the people with whom the child lives. Because these ages were 
statutorily mandated, the Department does not have the authority to 
change them. Several commenters requested that the Department continue 
to grant separate household status to minor children who live with an 
elderly or disabled parent or sibling. However, section 13931 of the 
Leland Act amended the household definition, eliminating the sibling 
provision in favor of a more simplified definition. The Department 
cannot override the Leland Act by restoring this provision. One 
commenter asked whether an individual can have a separate food stamp 
household the month he or she turns 22 (or 18 if the individual lives 
under the parental control of a non-parent), or the month after. The 
household composition analysis is not analogous to other age-driven 
provisions because it is also based on whether the individual purchases 
and prepares food separately from the others in the household. Separate 
household status is not granted automatically; an individual must meet 
the requirements that apply to all applicants, including the 
requirement to purchase and prepare food separately.
    Two commenters asked whether the provisions of 7 CFR 273.1(c)(1) 
regarding boarders should be changed in light of the Leland Act changes 
and the legislative intent behind those changes. Current regulations at 
7 CFR 273.1(c)(1) preclude children, even adult children, from being 
granted boarder status in their parents' home. According to 7 CFR 
273.1(c)(5), a boarder's income and resources are excluded from the 
income and resources of the household providing boarder services. 
Allowing adult children to be boarders in their parents' homes might 
encourage parents to allow children to remain at home until they are 
self-sufficient. The commenters thought a rule change would be 
necessary to remove the prohibition against children being boarders in 
their parents' homes. However, the current boarder provision, 7 CFR 
273.1(c)(1), incorporates the new household definition by reference and 
denies boarder status only to those ``* * * individuals or groups of 
individuals described in paragraph (a)(2) [of 7 CFR 273.1] * * *.'' 
Paragraph 273.1(a)(2) is being amended by this rule to describe 
children under age 22 living with their natural, adoptive, or 
stepparents, and children under 18 living under the parental control of 
a non-parent adult. Therefore, children age 22 and over are no longer 
prohibited by 7 CFR 273.1(c)(1) from being considered boarders in their 
parents' homes, and children 18 and over living with non-parent adults 
are not prohibited from being considered boarders in the adult's home.
    The Department received many comments on its proposal to amend the 
definition of parental control. The current definition is contained in 
Food Stamp Program Policy Memo 3-93-6, dated March 26, 1993, which 
states that children under parental control for food stamp eligibility 
purposes are ``minors who are dependents--financial or otherwise--of 
the household as opposed to independent units.'' The proposed rule 
retained the ``dependents or otherwise'' clause of the old definition, 
and added that ``[c]hildren who are living with their children or who 
are married and living with their spouse are considered to be 
independent units and not under parental control.'' The Department 
proposed to change the definition so that children living with non-
parent adults would be treated the same as children living with their 
natural, adoptive, or stepparents.
    Four State welfare agencies objected to the proposal that children 
with children of their own should be separate households from the 
parents or adults with whom they live only if the children purchase and 
prepare food separately. One commenter also objected to this granting 
of separate status to children who are married and living with their 
spouse when they purchase and prepare food separately from the adults 
with whom they live. This treatment is statutorily mandated with 
respect to children under age 22 who live with their natural, adoptive, 
or stepparents. The Department's only discretion in implementing this 
particular provision was to extend this treatment to those children 
under 18 who are living with non-parent adults. Several public interest 
groups commended the Department's decision to extend the parent/child 
and spousal exceptions mandated for natural, adopted, or stepchildren 
under age 22 who live with their parents to children under 18 who live 
with non-parent adults. No comments were received that objected to 
treating these two groups of children (those who live with their 
natural, adoptive, or stepparents and those under 18 who live with a 
non- parent adult) the same. Therefore, the Department's proposal to 
amend 7 CFR 273.1(a) to define as independent those children who are 
either married and living with their spouses, or living with their own 
children, is retained in this final rulemaking.
    One State welfare agency requested more time to implement the 
extension of the parent/child and spousal exceptions to children under 
18 living with non-parent adults because it was not statutorily 
mandated, and so not included in the implementing instructions provided 
by the Department. The Department recognizes that implementing new 
provisions places an administrative burden on State welfare agencies, 
especially those with separate rulemaking procedures. Therefore, the 
Department is making one exception to the September 1, 1994, 
implementation date for the provisions of this rule. State agencies 
must implement the provision allowing separate household status to 
children under 18 who are living with their spouse or children in the 
home of a non-parent adult no later than 90 days after publication of 
this rule.
    Several commenters requested guidance on what constitutes parental 
control with respect to a minor who is ``financially or otherwise'' 
dependent on other household members. Some commenters argued that the 
definition is vague and can result in inconsistent treatment. Although 
the Department recognizes that this definition may be subject to 
interpretation, the Department drafted this definition (in Food Stamp 
Program Policy Memo 3-93-6) to provide a consistent measure that would 
be broad enough to be compatible with State laws, which vary widely on 
issues of parental control. The Department is also reluctant to provide 
finite lists of dependencies which would be indicative of parental 
control. The Department feels that this determination should be left to 
the eligibility worker, who is in the best position to evaluate a 
particular child's relationship with the adults in his or her 
household. The Department believes that a more specific definition of 
parental control would limit the eligibility worker's flexibility to 
make these determinations. For these reasons, the Department has 
decided to adopt the proposed revision to 7 CFR 273.1(a)(2)(i)(B) 
(designated 273.1(a)(2)(i)(C) in this rule) with one minor language 
clarification suggested by a commenter that makes the provision easier 
to understand.
    One commenter was concerned that the Department's definition of 
parental control can hurt children who leave their parents' homes 
because of abuse or neglect and who move in with neighbors, relatives, 
or parents of schoolmates. The commenter noted that defining parental 
control to include financial dependence often prevents these children 
from having their own food stamp households, and therefore makes it 
more difficult for families to afford to take in these children. The

[[Page 54273]]

commenter requested that a household's affidavit stating that a child 
is not under parental control be accepted to conclusively establish 
that child's independence. If in fact a child is under parental control 
according to Program rules, those facts are not changed merely because 
the household provides a statement otherwise. The facts of a given 
situation, as determined by the eligibility worker, would govern the 
certification of a child or children as a separate household.
    The commenter's other suggestion was to expand the definition of 
foster children to include children who live with others outside of the 
formal foster care system. However, even if these children were 
included as foster children, they would not be entitled to separate 
household status because foster children are considered boarders under 
7 CFR 273.1(c)(6). As boarders, these children could not have their own 
household, but could be included in the food stamp household of the 
household providing boarder services at its request. This option 
results in an outcome identical to the situation first presented by the 
commenter, in which the child cannot have his or her own household, but 
can be included in the household of others. Although the Department 
understands the difficulties these children and the families that take 
them in face, the Department has elected not to change the definition 
of parental control for the reasons discussed above.
    In summary, the Department is adopting the changes to 7 CFR 
273.1(a)(2)(i) as proposed, with a minor change in language. The 
proposed change to 7 CFR 273.1(a)(2)(ii) was revised to clarify that 
only the spouse of an elderly and disabled household member must be 
included in the household of the elderly and disabled person. The 
proposed change to 7 CFR 273.10(f) is adopted without change.

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

    Section 13932 of the Leland Act amended the Food Stamp Act to 
authorize Program eligibility for children living with their otherwise 
eligible parent(s) in a drug or alcohol treatment center. Under this 
provision, the children would be included in the parent's household. To 
implement this provision, the Department proposed to amend 7 CFR 
273.1(e)(1)(ii) to extend food stamp eligibility to children of 
narcotic addicts or alcoholics who are residents of drug or alcohol 
treatment centers. Conforming language was also proposed to 7 CFR 
273.1(f)(2), and to the definition of ``eligible foods'' in 7 CFR 
271.2.
    Two public interest groups commented on this provision, and both 
raised the same issue. Although the commenters generally supported the 
provision, both requested that State welfare agencies be given the 
option to allow narcotic addict or alcoholic parents and their children 
who live with them in the treatment center to be separate households. 
This issue was addressed in the preamble to the proposed rule. The 
Department has considered this issue again, but continues to believe 
that the household definition in the Food Stamp Act, as amended by the 
Leland Act, prohibits allowing separate household status to children 
under 22 living with their parents in a treatment center. Therefore, 
the Department is adopting with minor technical change the amendments 
to 7 CFR 273.1(e)(1)(ii) and 7 CFR 273.1(f)(2) contained in the 
proposed rule.

Vehicles Necessary To Carry Fuel or Water

    Section 13924 of the Leland Act amended section 5(g)(2) of the Food 
Stamp Act to exclude from household resources the value of a vehicle 
that a household depends upon to carry fuel for heating or water for 
home use when such transported fuel or water is the household's primary 
source for fuel or water. The Department proposed to amend 7 CFR 
273.8(h)(1) to add the new vehicle exclusion as paragraph (vi). The 
language of the Department's proposed rule mirrors the statutory 
language, and the Department is adopting as final the language of the 
provision in the proposed rulemaking. However, in response to several 
issues raised by commenters, the Department would like to clarify its 
rationale for adopting this provision.
    One commenter objected to adding another vehicle exclusion to an 
already complicated provision, but because this provision is 
statutorily mandated, the Department does not have the discretion to 
omit this exclusion.
    In this final rulemaking, the Department is continuing its 
commitment to providing State agencies with enough flexibility so that 
they can implement this rule to address their specific situations. For 
example, the Alaska State agency has the flexibility to determine 
whether a boat or other vehicle would meet the requirements of this 
provision because the Department has not defined the term ``vehicle.'' 
Several commenters commended the Department for this position, and it 
has not been changed in this rulemaking.
    The Department wishes to clarify its position on one policy 
expressed in the preamble to the proposed rule in light of comments 
received. The Department indicated in the preamble to the proposed rule 
at 59 FR 44869, that access to public utilities would not preclude a 
household from using this exclusion as long as the household actually 
used the vehicle as provided in section 13924 of the Leland Act. This 
statement was based on the Department's view that a household may not 
be able to afford the fuel that is piped into the home, or may choose 
not to use the fuel for other reasons. The Department believed that 
these households should be entitled to the exclusion.
    Although the Department stated in the preamble to the proposed rule 
that the provision could apply where the household was unable to use 
its utilities ``for whatever reason, such as non- payment of utility 
bill[s],'' the Department did not intend to indicate that this resource 
exclusion could be extended to cover temporary conditions. This policy 
was intended to address those situations in which a household was using 
its vehicle to transport fuel or water for sustained periods of time. 
This interpretation is supported by both the legislative history and 
the language of the statute. The Conference Report indicates that 
Congress intended this exclusion to apply only when households did not 
have fuel or water ``piped into their homes.'' (House Conference Report 
No. 213, 103rd Cong., 1st Session 927 (1993)). Further, the language of 
the statute allows a resource exclusion for ``a vehicle that a 
household depends on * * * when such transported fuel or water is the 
primary source * * * for the household * * *'' (emphasis added). This 
language implies something more permanent than a temporary condition 
like a utility being off because of non-payment of the bill. The two 
State welfare agencies that commented on this aspect of the vehicle 
exclusion did not support the provision. One agency wondered how its 
eligibility workers could know how long to apply the exclusion if a 
household told the worker it was using the vehicle because the 
electricity had been turned off for non- payment. Such cases would be 
labor intensive for the caseworker in order to ensure that the 
exclusion ended when utilities were restored. Both State agency 
commenters suggested that allowing it to apply in this situation would 
be error-prone and administratively difficult to implement.
    This vehicle exclusion extends eligibility to households that would 
not otherwise be eligible because of the

[[Page 54274]]

excluded vehicle. Allowing the exclusion when a household has 
temporarily had its utilities turned off for non-payment of its utility 
bills also presents the incongruous situation of addressing a 
household's inability to pay a utility bill with temporary eligibility 
for food stamps.
    The Department recognizes that there may be times when a 
household's utilities will be off for an extended period of time, or 
that there may be rural areas or other areas with sporadic or 
unreliable access to water or fuel. There may also be occasions where a 
household's access to drinking water is interrupted for an extended 
period of time such that the exclusion would be appropriate. To balance 
the need for administrative ease in determining entitlement to the 
exclusion with an appropriate response to a household's circumstances, 
the Department is modifying the language of the final rule to allow the 
vehicle exclusion if it is anticipated that the transported fuel or 
water will be the household's primary source of fuel or water during 
the certification period. This gives eligibility workers the 
flexibility to evaluate each situation and apply the provision with 
common sense and good judgment.
    The legislative history of the provision indicates that Congress 
intended to apply the exclusion without requiring the household to meet 
any ``additional tests concerning the nature, capabilities, or other 
uses of the vehicle.'' (House Conference Report No. 213, 103rd Cong., 
1st Session 927 (1993); House Report No. 111, 103rd Cong., 1st Session 
33 (1993)). The Department drafted its proposed rule to reflect this 
statutory intent, and no adverse comments were received on this 
provision. However, some commenters mistakenly thought this was a 
verification provision. This language is intended merely to prevent a 
household that meets the fuel/water vehicle exclusion from having to 
further justify excluding the vehicle. It is very possible that a 
vehicle excluded under this provision would have value far in excess of 
the fair market value vehicle exclusion (discussed below), and this 
language would preclude the household from having to meet the fuel/
water vehicle exclusion test first, and then having to meet a fair 
market value test.
    In the preamble to the proposed rule, the Department requested 
comments on how this exclusion could be verified. By asking for these 
comments, the Department did not mean to indicate that it was departing 
in any way from its normal verification requirements and procedures. 
Several public interest groups urged that an applicant household's 
assertion that it depends on a vehicle to transport its fuel or water 
should conclusively establish its entitlement to the exclusion. The 
Department sees no reason to exempt this vehicle exclusion from the 
normal verification requirements by allowing self-declaration. Several 
commenters supported including a question in the food stamp 
application, or checking with someone outside the household who is 
familiar with the household's circumstances. With the exception of the 
documentation requirement contained in the proposed rule, the 
Department is not adopting any specific verification requirements for 
this exclusion. No adverse comments were received regarding the 
Department's requirement that no documentation be required unless the 
exclusion was questionable, so it is adopted as final.
    No comments were received on the proposed technical amendment to 
the summary of the vehicle provisions at 7 CFR 273.8(h)(6). Therefore, 
the proposed revisions to 7 CFR 273.8(h)(1) and 7 CFR 273.8(h)(6) are 
adopted as final.

Vehicles Needed To Seek and Continue Employment and for Household 
Transportation

    Current regulations at 7 CFR 273.8(h)(3), in accordance with 
section 5(g) of the Food Stamp Act, require that all licensed vehicles 
be evaluated to determine their fair market value for purposes of 
determining a household's resource eligibility for the Program. Section 
13923 of the Leland Act amended section 5(g)(2) of the Food Stamp Act 
to increase the fair market value resource exclusion of vehicles by $50 
on September 1, 1994, and by an additional $50 on October 1, 1995. 
Beginning on October 1, 1996, the fair market value resource exclusion 
will be adjusted annually, using a base of $5,000, to reflect changes 
in the Consumer Price Index (CPI).
    In order to implement section 13923 of the Leland Act, the 
Department proposed to amend 7 CFR 273.8(h)(3) to conform to the 
timetable and values mandated by section 13923. The Department received 
three comments on this provision, each one requesting a departure from 
the values or timetable provided by the Leland Act. Two of the 
commenters suggested that the participant's equity value should be 
evaluated, which would provide a more realistic measure of the 
vehicle's value to the household. One commenter suggested increasing 
the exclusion directly to $4,600 without the intermediate steps. The 
Department has no discretion in this area. Section 13923 of the Leland 
Act is itself a compromise position. As indicated in the House 
Conference Report, the exclusion was originally going to be raised to 
$5,500 in 1994, and adjusted annually to the CPI thereafter. (House 
Conference Report No. 213, 103rd Cong., 1st Session, 927 (1993)). Given 
this clear legislative mandate, the Department cannot unilaterally 
raise the fair market value exclusion or change the Leland Act's 
timetable. The Department is therefore adopting the provision as 
proposed.
    After the proposed rule was published, the Department realized that 
a conforming amendment was needed at 7 CFR 273.8(i)(4), involving the 
transfer of resources. That provision contains an example which 
includes the old dollar figure of $4,500 for the vehicle exclusion. 
Because the exclusion has changed and will become variable starting in 
1996, the example in 7 CFR 273.8(i)(4) has been deleted.

General Assistance (GA) Vendor Payments

    Section 13915 of the Leland Act amended section 5(k)(1)(B) of the 
Food Stamp Act to change the treatment of third-party payments made to 
recipients from GA programs. To implement this provision, the 
Department proposed to amend and reorganize 7 CFR 273.9(c)(1). Three 
commenters supported the proposed language as a significant improvement 
over the previous, more complex provision. One commenter supported the 
provision, but requested that GA vendor payments for utilities 
assistance also be excluded from income under the provision. Under the 
proposed language, 7 CFR 273.9(c)(1)(ii)(A) does exclude ``assistance 
provided for utility costs'' from income. Because no adverse comments 
were received, the Department is adopting the complete revision of 7 
CFR 273.9(c)(1) contained in the proposed rulemaking.

Student Earned Income Exclusion

    Section 13911 of the Leland Act amended section 5(d)(7) of the Food 
Stamp Act to exclude ``income earned by a child who is a member of the 
household, who is an elementary or secondary school student, and who is 
21 years of age or younger * * *.'' Current regulations at 7 CFR 
273.9(c)(7) exclude the earned income of children who are under age 18, 
members of the household, under the parental control of another 
household member, and students at least half-time. Under the current 
regulations, the exclusion does not apply if the student has formed a 
separate household. The legislative

[[Page 54275]]

history of section 13911 indicates that the provision was intended to 
assist students that are still in high school and living with their 
parents beyond age 18, but not to change the law regarding students who 
live away from home and have separate food stamp households (House 
Report No. 111, 103rd Cong., 1st Session 28 (1993)).
    To implement this provision and address issues that had arisen 
under the current student earned income exclusion, the Department 
proposed to amend 7 CFR 273.9(c)(7) to exclude the earned income of ``a 
student under age 22 who attends elementary or secondary school or 
classes to obtain a General Equivalency Diploma at least half-time and 
lives with a natural, adoptive or stepparent, is under the control of a 
household member other than a parent, or is certified in a separate 
food stamp household but lives with a natural, adoptive or 
stepparent.'' The proposed rule included some provisions not directly 
mandated by the statutory language, but that were either carried over 
from the current provision or included in the proposed rule to 
implement the legislative intent of the provision. Issues raised in the 
comments to the proposed rulemaking are addressed below.

Living Arrangement

    Thirteen commenters strongly opposed limiting the student earnings 
exclusion to students living with their parents or under the parental 
control of another household member. There were no comments that 
supported the limitation. Commenters argued that a student's living 
arrangements should have no bearing on the student's entitlement to the 
exclusion. Several commenters argued that the First Circuit's decision 
in Dion v. Commissioner, Maine Department of Human Services, 933 F.2d 
13 (1st Cir. 1991), discussed in the preamble to the proposed rule 
would specifically prohibit this limitation. Several commenters argued 
that even if the legislative history supported the limitation, 
statutory construction rules would prohibit looking to it because of 
the clear language of the statute. Several commenters thought the 
limitation was inconsistent with the Department's and Congress' intent 
to encourage students to stay in school. Some State welfare agencies 
also commented that the requirement would be burdensome and error-
prone.
    The Department maintains its position that the language of the 
statute and its legislative history support limiting the exclusion to 
students living with their parents. It is appropriate and necessary for 
the Department to look to the legislative history of this provision in 
order to develop implementing regulations. This exclusion was passed 
after the First Circuit's decision in Dion and so the Department 
considered the provision's legislative history to determine whether, 
and to what extent, Congress intended the provision to address issues 
raised in that litigation. The Department disagrees with one 
commenter's assertion that the Supreme Court's decision in Chevron USA 
v. Natural Resources Defense Council, 467 U.S. 837 (1984), would 
preclude looking to the legislative history to interpret this 
provision. Even the Dion court looked to the legislative history to 
interpret the statutory language of the pre-Leland provision. That 
court concluded, based on the language of the statute and its 
legislative history, that Congress had not intended to limit the 
exclusion to students living with their parents. Dion, 933 F.2d at 19. 
It is also the Department's position that its proposal does not violate 
the holding in Dion. The decision in that case was based in part on the 
lack of ``evidence that Congress considered the policy implications of 
either extending the exclusion to all student-earners or limiting it to 
those within their parents' household.'' (emphasis added) Dion, 933 
F.2d at 17. Now Congress has clearly indicated its intent to limit this 
exclusion only to students living with their parents. (House Report No. 
111, 103rd Cong., 1st Session 28 (1993)).
    Contrary to some commenters' assertions, the Department believes 
the limitation best addresses Congressional intent. The House Report 
states that the provision was intended ``to encourage those students 
who are living with their parents to pursue their education * * *.'' 
(emphasis added) (House Report No. 111, 103rd Cong., 1st Session 28 
(1993)). Congress clearly did not intend the exclusion to apply to all 
students, but created the exclusion to address situations where 
students' earnings could have a negative impact on the students' 
families. There is also no reason that this limitation will be 
administratively burdensome or error-prone because the information will 
already have been collected and analyzed for the household 
determination.
    In order to reflect the realities of today's diverse household 
situations and be consistent with the amended household definition 
provisions of 7 CFR 273.1(a)(2)(i)(B), the Department will include 
students who are living under the parental control of an adult 
household member other than a parent. The Department continues to 
believe that this is a reasonable interpretation of the statutory 
language and intent that otherwise eligible students living with 
parents (or with others acting in that role) should have their earned 
income excluded.
    The Department has therefore decided to retain the requirement in 
the proposed rule that students must live with a natural, adoptive, or 
stepparent, or be living under the parental control of a household 
member other than a parent, to be eligible for this exclusion.
    One commenter requested more time to implement the student income 
exclusion because of the limitations regarding a student's living 
arrangements. The Department may not extend the implementation beyond 
the statutorily mandated date of September 1, 1994.

Status as Head of Household

    The Department also received several comments arguing that the 
exclusion should apply regardless of the student's status as head of 
household. In its proposal, the Department extended the exclusion to 
students who are certified in separate food stamp households, but who 
live with their parents. Under the proposal, any (otherwise eligible) 
student who lives with his or her natural, adoptive or stepparent is 
entitled to the exclusion, regardless of that student's status in the 
food stamp household.
    The plaintiff in Dion, a 17 year-old girl who was the head of her 
own food stamp household and who also lived with her parents, would be 
eligible for the exclusion under the proposal. A student who lives with 
someone other than his or her natural, adoptive, or stepparents, and 
who forms a separate food stamp household would not be eligible for the 
exclusion. The Department does not agree with the commenter who argued 
that whether a student like Ms. Dion is living with her parents or 
living on her own would not be relevant in this inquiry. Congress 
specifically stated that the new student provision was not intended to 
change ``current law regarding those students who live away from home 
and have formed a separate household.'' (emphasis added) (House Report 
No. 111, 103rd Cong., 1st Session 28 (1993)). Such students are 
currently ineligible for the income exclusion, and so Congress 
specifically intended for those students to remain ineligible for the 
exclusion.
    The Department is therefore retaining the proposal's extension of 
the exclusion to students who have been certified in a separate food 
stamp household, as long as that student is

[[Page 54276]]

living with a natural, adoptive or step-parent.

Half-Time Attendance

    Another issue raised by several commenters was whether the 
Department could require that students attend school at least half-time 
to be eligible for the exclusion. The legislative history of section 
13911 of the Leland Act did not address this issue. Because of concerns 
that the increased scope of the exclusion (increasing the eligible age 
from 18 to 21) would dramatically increase its cost, the Department 
believed that the exclusion should be limited to students seriously 
pursuing a high school diploma or General Equivalency Diploma (GED).
    Seven commenters strongly objected to the proposal's half-time 
requirement. One commenter, although recognizing the Department's 
desire to limit costs with a fair and simple rule, agreed with other 
commenters that the half-time requirement was arbitrary. Another 
commenter suggested that students with learning disabilities, health 
problems, difficult family situations, or other circumstances might not 
be able to attend classes half-time. Commenters also argued that 
restricting the exclusion to students who attended school for a 
specified period of time each day was contrary to Congressional intent 
to help students who need more time to finish school. (House Report No. 
111, 103rd Cong., 1st Session 28 (1993)). Several State agencies 
remarked that verification would be difficult and the requirement would 
be error-prone.
    The Department understands the concerns regarding the half-time 
requirement. However, the Department is reluctant to exclude the income 
of every student. To illustrate, although the Department is extending 
the exclusion to GED students, we do not believe that this exclusion 
should apply to a person working full-time and studying for the GED for 
a few hours a week on his or her own.
    One commenter made a suggestion that provides some limit, but is 
not arbitrary. The commenter suggested that as long as a person attends 
school for enough time for that person's state or local school district 
to consider the person a ``student,'' then the exclusion should apply, 
regardless of the time the person spends in class. The Department has 
chosen to adopt this practical and reasonable approach to the problem 
of school attendance. This approach also resolves a separate issue 
raised by two commenters, who requested that home-schooled students 
also be eligible for the exclusion. The Department has amended 7 CFR 
273.9(c)(7) to provide that as long as the otherwise eligible person is 
either (1) attending elementary or secondary school, or (2) attending 
GED or home-school classes recognized, operated, or supervised by the 
student's state or local school district, then the student's earned 
income will be excluded. The Department also believes that this 
approach will be less administratively burdensome and error-prone.

GED Classes

    One commenter objected to the Department's decision to include 
students attending classes to obtain a GED among those students who are 
eligible for this exclusion. The commenter believed that adding GED 
students would make the exclusion too difficult to implement because of 
the half-time attendance requirement. Two commenters supported the 
inclusion of GED students. The Department has eliminated the half-time 
requirement, and believes that the new provision will not be difficult 
to apply to GED students. Although the Leland Act did not directly 
address GED students, the legislative history reflects support for 
those who are working to obtain a high school diploma, (House Report 
No. 111, 103rd Session 28 (1993)), and the Department sees no reason 
not to include those pursuing a diploma in a GED program recognized, 
supervised, or operated by the student's state or local school 
district. The Department believes that earning a high school diploma is 
a significant step towards self- sufficiency, and that extending this 
exclusion to include students pursuing a GED in a reputable program 
will encourage them to continue. Therefore, the proposed provision to 
allow the earned income exclusion for students attending GED classes is 
retained in this final rule.

Case Adjustment When Student Becomes 22

    Another issue addressed in the proposal is the point at which a 
student's earnings must be counted when the student turns 22 during the 
certification period. To make the requirements for applicant and 
ongoing households and prospective and retrospective budgeting 
procedures the same, the Department proposed to add a new paragraph (E) 
to 7 CFR 273.10(e)(2)(i) to provide that for prospective eligibility 
and benefit determination, the earned income of a high school or 
elementary school student shall be counted beginning with the month 
following the month in which the student turns 22. To address 
retrospectively budgeted households, the Department proposed to amend 7 
CFR 273.21(j)(1)(vii) to specify that the income of an elementary or 
secondary student shall be counted beginning with the budget month 
after the month in which the student turns 22. The Department's 
proposal did not change the current regulations regarding the 
continuation of the exclusion during temporary interruptions in school 
attendance and the proration of income when the child's share cannot be 
differentiated. Two commenters commended the Department's proposal as a 
simple and fair handling of the issue.
    One commenter suggested that the income be included beginning with 
the certification period after the student turns 22 or graduates. 
Similarly, one commenter suggested that certification periods be set to 
correspond with these events. Although the Department encourages State 
agencies to set certification dates as suggested by the commenter to 
ease the administrative burden of making the adjustment, the Department 
will not complicate the provision by requiring that certification 
periods be so set. In addition, because the effects of the income 
exclusion are so sweeping, the Department believes it would be too 
costly to extend a student's earned income exclusion until the next 
recertification. The Department is therefore adopting the language of 
these proposals with one clarification in the context of retrospective 
budgeting.
    The Department is clarifying 7 CFR 273.21(j)(1)(vii), which 
addresses retrospective eligibility and budgeting, because of a comment 
we received which demonstrated that our proposal was not clear. The new 
language specifies that the income of an elementary or secondary 
student shall be counted beginning with the budget month after the 
budget month in which the student turns 22. To illustrate: a student in 
a retrospective budgeting jurisdiction (which budgets from the 15th of 
the month to the 14th of the next month) turns 22 on September 14. 
Under the provision, the student's income would be included the budget 
month after the budget month in which the student turned 22. The 
student turned 22 in the budget month of August 15-September 14, so the 
student's income would be included beginning the budget month of 
September 15-October 14.
    With this change in wording for retrospectively budgeted cases, the 
revisions to 7 CFR 273.10(e)(2)(i) and 7 CFR 273.21(j)(1)(vii) are 
adopted as proposed.

[[Page 54277]]

JTPA Earnings

    One commenter asked for clarification on whether earnings received 
pursuant to the Job Training and Partnership Act (JTPA) could be 
excluded from income under this provision. Under the language in this 
final rulemaking, JTPA earnings can be excluded under the student 
income exclusion. Current regulations at 7 CFR 273.9(b)(1)(v) provide 
that JTPA earnings are earned income to the recipient. The student 
income exclusion of 7 CFR 273.9(c)(7) excludes earned income of 
students who meet its requirements. The two provisions do not conflict; 
one defines JTPA earnings as ``earned income,'' and the other excludes 
all ``earned income'' of those individuals who meet its requirements.

Summary

    In summary, the Department is amending 7 CFR 273.9(c)(7) to exclude 
the earned income of any household member who is an elementary or 
secondary school student 21 years of age or younger who lives with his 
or her natural, adoptive, or stepparents or who is living under the 
parental control of a household member other than a parent. An 
elementary or secondary school student is someone who attends 
elementary or secondary school, or who attends GED or home-school 
classes recognized, operated, or supervised by the student's state or 
local school district.

Improving Access to Employment and Training Activities

Dependent Care Deduction

    Section 13922 of the Leland Act amended section 5(e) of the Food 
Stamp Act by increasing the maximum dependent care deduction to $200 
for each dependent child under the age of two, and to $175 for all 
other dependents. In its discussion on implementing the two-tiered 
deduction, Congress urged that implementation be conducted in ways that 
would minimize administrative burdens on State agencies. (House 
Conference Report No. 213, 103rd Congress, 1st Session 926 (1993)).
    The Department proposed to amend 7 CFR 273.9(d)(4) and 7 CFR 
273.10(e) to replace the fixed maximum deduction with the Leland Act's 
two-tiered approach. To address Congressional intent, the Department 
proposed to require State welfare agencies to adjust the deduction from 
$200 to $175 no later than the next regular recertification after a 
dependent child's second birthday.
    Several commenters supported the two-tiered approach as both 
realistic and reasonable. Two commenters also supported the 
Department's proposal to allow State welfare agencies flexibility 
regarding when to adjust the amount of the deduction after a dependent 
child's second birthday. One State welfare agency thought that allowing 
the higher deduction amount to continue until the next recertification 
after the child's second birthday was confusing, and suggested that the 
Department require that the adjustment be made the month following the 
child's second birthday. Under the language in the proposed rulemaking, 
the State agency can adjust the deduction the month following the 
child's second birthday if that timeframe is easier or less confusing 
for the agency to implement. No other commenters objected to the 
Department's decision to allow a later adjustment, and so the 
Department is adopting the provision in the proposed rule requiring the 
adjustment no later than the next recertification after the child's 
second birthday.
    The Department also proposed a conforming change to 7 CFR 
273.10(d)(1)(i) to replace the term ``child care expense'' with the 
term ``dependent care expense.'' No adverse comments were received on 
this conforming change, and so the Department is adopting this 
amendment as provided in the proposed rulemaking.

Dependent Care Reimbursement for the Food Stamp Employment and Training 
Program

    Section 13922 of the Leland Act amended section 6(d) of the Food 
Stamp Act to replace the $160 cap on dependent care reimbursements to 
participants in the Employment and Training Program with a requirement 
that State agencies reimburse the actual costs of dependent care 
expenses up to a limit set by the State agency. Section 13922(b) of the 
Leland Act establishes a methodology for determining the relevant 
limits, including a local market rate for dependent care.
    One State welfare agency objected to the provision, stating that 
there is no established local market rate for dependent care for 
individuals over the age of 18. The Department does not see this as a 
significant problem. The proposed rule would require the State agency 
to establish a State limit for dependent care over the age of 18. The 
State limit cannot be more than the local market rate. The lack of a 
local market rate does not preclude the State welfare agency from 
establishing a State limit, it simply places a cap on the State limit. 
Without a local market rate, the State agency can establish a State 
limit by using a reasonable estimation of the cost of service in the 
area, and the amount of dependent care reimbursement payable to 
households would be the established State limit or the actual cost of 
dependent care, whichever is lower. Where there is a local market rate, 
State welfare agencies cannot establish State limits which exceed that 
rate, and the amount of the dependent care reimbursement is the lower 
of the local market rate, the State limit, or actual costs. Because the 
Department does not see this as a significant problem with the 
provision, the Department is adopting the provision as proposed.

Proration of Benefits

    Section 13916 of the Leland Act amended section 8(c)(2)(B) of the 
Food Stamp Act to eliminate proration of first month's benefits if a 
household is recertified for food stamps after a break in certification 
of less than one month. Current regulations at 7 CFR 273.10(a)(1)(ii) 
require that a household's benefit level for the initial month of 
certification be based on the day of the month it applies for benefits 
and that the household receive benefits from the date of application to 
the end of the month.
    The Department proposed to revise 7 CFR 273.10(a) (1)(ii) and 
(2)(i) to prohibit the proration of first month's benefits for all 
households that apply for benefits after a break in certification of 
less than one month.
    The Department's proposal raised several issues. Several public 
interest groups commented that the final rule should make clear that 
benefits should not be prorated even if a client's previous 
participation was in another county. Under the language of the Leland 
Act, the reason for the break in certification is not relevant when 
applying the provision. The Department does not believe the provision 
requires clarification on that point. Furthermore, the administrative 
problems that State welfare agencies face when transferring a 
household's case from one jurisdiction to another are not really 
impacted by this provision. Applying this provision just means that if 
the client's break in certification is one month or less, the client's 
benefits are calculated from the beginning of the month, not the day 
the client reapplied in the new jurisdiction.
    A State welfare agency requested clarification as to the 
provision's impact on the Department's reinstatement policy. This 
provision does not directly affect this policy. Under that policy, a 
State agency may reinstate a household without requiring a new 
application if the household has had a break in

[[Page 54278]]

certification of less than one month because of a late monthly report. 
The Leland provision was not meant to eliminate policies helpful to 
households, but only to ensure that those households that reapply after 
a short break in certification do not receive reduced benefits.
    Another State welfare agency raised the issue of the interaction of 
the Leland Act proration provision and the Department's combined 
allotment policy contained in 7 CFR 274.2(b) (2), (3), and (4). Under 
that policy, a household that is eligible for expedited service and 
applies after the 15th of the month is entitled to a combined allotment 
representing the prorated portion of the first month's benefit, plus 
the next month's benefit. To accommodate the administrative realities 
of expedited service cases, the provision, like other provisions 
regarding verification for expedited service cases, allows for delayed 
verification. The commenter was concerned that dishonest applicants 
could continue to reapply for expedited service benefits after the 15th 
of a month, and under the combined provisions of the combined allotment 
rule and the new proration provision, continue to get six weeks' worth 
of benefits with little verification. Section 13916 of the Leland Act 
defines ``initial month'' to mean one that follows a period of more 
than one month in which the household was not certified to participate. 
A household that reapplies within one month of a break that is entitled 
to have its benefits not prorated under this section, is not, by 
definition, in its ``initial month,'' and so is not entitled to a 
combined allotment because a combined allotment is only available for 
``initial'' allotments.
    Although this question raises a serious issue, the Department does 
not believe that further analysis on this point is fruitful in the 
context of this rulemaking. The commenter's question is not really 
addressed to the proration or the combined allotment policies. The 
question really addresses the delayed verification requirements 
necessitated in expedited service cases. If the Department addresses 
the expedited service regulations in the future, we will reexamine this 
issue in that context.
    One State welfare agency requested that States that issue benefits 
prospectively on a rolling fiscal month be exempted from this 
provision. The language of the Leland Act does not allow exceptions to 
the proration provision; therefore, the Department has no authority to 
exempt such States.
    The most significant issue to arise under this provision is whether 
the proration of benefits provision applies only when an identical 
household reapplies after a break in certification of less than one 
month. Two State welfare agencies raised this issue in their comments.
    One commenter suggested that as long as at least one household 
member was certified in the previous month, the household should get 
the benefit of the provision and its benefits should not be prorated. 
This approach effectively extends the provision, which was intended to 
benefit households, to individuals. The Department does not believe 
this extension would be consistent with either the statutory language 
or intent of section 13916 of the Leland Act. The Department does 
recognize the need, however, to address changing household membership 
in the context of this provision.
    To address this issue, the Department has revised 7 CFR 
273.10(a)(1)(ii) to specify that a household that reapplies after a 
break in certification is not considered to be the ``same'' household 
if the membership of the original household has changed to the extent 
that the certification worker must establish a new case for a portion 
of the original household. Under this approach, when a household's 
membership changes so that a new case is created, the new case's 
benefits are prorated, but the original case's benefits are not 
prorated.
    The Department believes that this approach is consistent with the 
statutory language and intent, which was to eliminate the proration 
requirement for households which reapply after a break in certification 
of less than one month. (House Report No. 111, 103d Cong., 1st Session 
30 (1993).) It also provides a reasonable limit on the provision, 
protecting the interests of the original household over the interests 
of members that leave to form new households. Because State agencies 
will be able to apply this provision in conjunction with established 
policy for creating new cases when household membership changes, this 
approach would not be unduly burdensome. The Department believes that 
it is most appropriate to have this case-related decision made by the 
eligibility worker, who will be most familiar with the situation.
    The Department also proposed to delete 7 CFR 273.10(a)(2) (ii) and 
(iii). Both provisions, which prohibit proration in the first month of 
a household's new certification period, were made moot by section 13916 
of the 1993 Leland Act. No adverse comments were received on this 
proposal, and so those paragraphs are deleted in this final rulemaking.
    With the modification addressing the problem of changing household 
composition, the proposed amendments to 7 CFR 273.10(a) are adopted as 
final.

Implementation

    Pursuant to section 13971 of the Leland Act, the Leland Act was 
effective, and States were required to implement it, September 1, 1994. 
Pursuant to Public Law 104-121, the Contract with America Advancement 
Act of 1996, this final rule is effective December 16, 1996; State 
agencies must implement it no later than June 30, 1997. State agencies 
will be required to adjust the cases of ongoing households at the next 
recertification, at household request, or when the case is next 
reviewed, whichever comes first. If implementation of the Leland Act or 
this rule is delayed, benefits shall be restored, as appropriate, in 
accordance with the Food Stamp Act. Three State welfare agencies did 
not agree that restored benefits were mandated by the Leland Act. One 
of those agencies suggested that Congress' decision to apply new 
provisions no later than the next recertification indicated that the 
Leland Act was not intended to be retroactive. As explained below, the 
Department has determined that section 13951 of the Leland Act requires 
that clients receive the benefits of its provisions as of September 1, 
1994, and so benefits shall be restored, to the extent appropriate, in 
accordance with the Food Stamp Act.
    Legislative history indicates that the Leland Act provisions were 
to be implemented in the Department's ``normal manner.'' (House 
Conference Report No. 213, 103rd Congress, 1st Session 926 (1993)). The 
Department's ``normal'' procedure is to set an implementation date 
after which households are entitled to the benefits of the new 
provision. If there is a statutorily mandated implementation date, the 
implementation date would correspond to that date. If the State agency 
cannot adjust the ongoing cases by this date, then benefits are 
restored, within the restrictions provided by the Food Stamp Act, back 
to the required implementation date when the case is adjusted. To help 
ease the administrative burden of implementing statutory changes, the 
Department does not require immediate adjustment or require State 
agencies to conduct case reviews to determine which households would 
benefit from legislative changes. Several public interest groups 
requested that the Department require State welfare agencies to notify 
ongoing

[[Page 54279]]

households of the Leland Act provisions because it would help 
households realize the benefits of the legislation more quickly. 
Although the Department in general encourages giving notice to 
households, the Department has decided not to require that notice be 
given to households because of the administrative burden and costs to 
State agencies.
    If for any reason a State agency fails to implement on the required 
dates, restored benefits shall be provided, if appropriate under the 
provisions of the Food Stamp Act, back to the relevant implementation 
date or the date of application, whichever is later. In accordance with 
section 13951 of the Leland Act, variances resulting from 
implementation of the provisions of the final rule are excluded from 
error analysis for 120 days from June 30, 1997.

List of Subjects

7 CFR 271

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

7 CFR 272

    Alaska, Civil rights, Food stamps, Grant programs--social programs, 
Report and recordkeeping requirements.

7 CFR 273

    Administrative practice and procedures, Aliens, Claims, Food 
stamps, Grant programs--social programs, Penalties, Reporting and 
recordkeeping requirements, Social Security, Students.

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

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

PART 271--GENERAL INFORMATION AND DEFINITIONS


Sec. 271.2  [Amended]

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

PART 272--REQUIREMENTS FOR PARTICIPATING STATE AGENCIES

    3. In Sec. 272.1, a new paragraph (g)(151) is added in numerical 
order to read as follows:


Sec. 272.1  General terms and conditions.

* * * * *
    (g) Implementation. * * *
    (151) Amendment No. 375. Public Law 103-66, the Mickey Leland 
Childhood Hunger Relief Act, was effective and required to be 
implemented on September 1, 1994. The provisions of Amendment No. 375 
are effective December 16, 1996, and must be implemented by June 30, 
1997. The State agency shall implement the provisions of this amendment 
no later than the appropriate required implementation date for all 
households newly applying for Program benefits on or after such 
implementation date. The current caseload shall be converted to these 
provisions at household request, at the time of recertification, or 
when the case is next reviewed, whichever occurs first, and the State 
agency must provide restored benefits, as may be appropriate under the 
Food Stamp Act, back to the appropriate required implementation date. 
If for any reason a State agency fails to implement on the appropriate 
implementation date, restored benefits shall be provided, if 
appropriate, back to the appropriate required implementation date or 
the date of application, whichever is later. Any variances resulting 
from implementation of this amendment shall be excluded from quality 
control error analysis for 120 days from June 30, 1997.

PART 273--CERTIFICATION OF ELIGIBLE HOUSEHOLDS

    4. In Sec. 273.1:
    a. Paragraphs (a)(2)(i)(B) and (a)(2)(i)(C) are revised.
    b. Paragraph (a)(2)(i)(D) is removed.
    c. Paragraph (a)(2)(ii) is amended by removing the words ``may be a 
separate household from the others based on the provisions of 
paragraphs (a)(2)(i)(A) and (a)(2)(i)(B) of this section'' and adding 
in their place the words ``may be considered, together with any of the 
others who is the spouse of the elderly and disabled individual, an 
individual household''.
    d. Paragraph (e)(1)(ii) is amended by adding the words ``, and 
their children who live with them'' after the words ``facility or 
treatment center''.
    e. Paragraph (f)(2) introductory text is amended by adding the 
words ``and their children who live with them'' after the words ``on a 
resident basis''.
    The revisions read as follows:


Sec. 273.1  Household concept.

    (a) Household definition. * * *
    (2) Special definition:
    (i) * * *
    (B) A child under 22 years of age who is living with his or her 
natural, adoptive, or stepparents, unless the child is also living with 
his or her own child(ren) or spouse.
    (C) A child (other than a foster child) under 18 years of age who 
lives with and is under the parental control of a household member 
other than his or her parent. A child is considered to be under 
parental control for purposes of this provision if he or she is 
financially or otherwise dependent on a member of the household, except 
that a child who is living with his or her own child(ren) or spouse is 
not considered to be under parental control.
* * * * *
    5. In Sec. 273.7:
    a. A new paragraph (c)(4)(xiv) is added.
    b. A new paragraph (c)(4)(xv) is added.
    c. Paragraph (d)(1)(ii)(A) is amended by revising the first, 
seventh, and last sentences.
    The additions and revisions read as follows:


Sec. 273.7  Work requirements.

* * * * *
    (c) State agency responsibilities. * * *
    (4) * * *
    (xiv) The Statewide limit(s) for dependent care reimbursements as 
established by the State agency. The limit(s) shall not be less than 
the dependent care deduction amounts specified under Sec. 273.9(d)(4).
    (xv) The local market rates of dependent care providers in the 
State. State agencies shall adopt the local market rates already 
established by programs under section 402(g) of the Social Security 
Act. State agencies shall establish separate local market rates for 
categories of care relevant to food stamp E&T which are not addressed 
under section 402(g) of the Social Security Act and include such rates 
in the E&T State Plan.
* * * * *
    (d) Federal financial participation.
    (1) Employment and training grants. * * *
    (ii) Participant reimbursements. * * *
    (A) The costs of such dependent care expenses that are determined 
by the State agency to be necessary for the participation of a 
household member in the E&T program up to the actual cost of dependent 
care, the local market rate, or the Statewide limit, whichever is 
lowest. * * * If more than one household member is required to 
participate in the E&T program, the

[[Page 54280]]

State agency shall provide reimbursement for the actual cost of 
dependent care, the local market rate, or the Statewide limit, 
whichever is lowest, for each dependent in the household, regardless of 
the number of household members participating in the E&T program. * * * 
A State agency may claim 50 percent of costs for dependent care 
services provided or arranged by the State agency up to the actual cost 
of dependent care, the local market rate, or the Statewide limit, 
whichever is lowest.
* * * * *
    6. In Sec. 273.8:
    a. Paragraph (h)(1) is amended by removing the period at the end of 
paragraph (h)(1)(v) and adding in its place the word ``; or'' and 
adding a new paragraph (h)(1)(vi).
    b. Paragraph (h)(3) is revised.
    c. Paragraph (h)(6) is amended by revising the first sentence of 
the paragraph.
    d. Paragraph (i)(4) is amended by removing the second sentence.
    The additions and revisions read as follows:


Sec. 273.8  Resource eligibility standards.

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


Sec. 273.9  Income and deductions.

* * * * *
    (c) Income exclusions. * * *
    (1) Any gain or benefit which is not in the form of money payable 
directly to the household, including in-kind benefits and certain 
vendor payments. In-kind benefits are those for which no monetary 
payment is made on behalf of the household and include meals, clothing, 
housing, or produce from a garden. A vendor payment is a money payment 
made on behalf of a household by a person or organization outside of 
the household directly to either the household's creditors or to a 
person or organization providing a service to the household. Payments 
made to a third party on behalf of the household are included or 
excluded as income as follows:
    (i) Public assistance (PA) vendor payments. PA vendor payments are 
counted as income unless they are made for:
    (A) Medical assistance;
    (B) Child care assistance;
    (C) Energy assistance as defined in paragraph (c)(11) of this 
section;
    (D) Emergency assistance (including, but not limited to housing and 
transportation payments) for migrant or seasonal farmworker households 
while they are in the job stream;
    (E) Housing assistance payments for households living in 
transitional housing for the homeless;
    (F) Emergency and special assistance. PA provided to a third party 
on behalf of a household which is not specifically excluded from 
consideration as income under the provisions of paragraphs (c)(1)(i)(A) 
through (c)(1)(i)(E) of this section shall be considered for exclusion 
under this provision. To be considered emergency or special assistance 
and excluded under this provision, the assistance must be provided over 
and above the normal PA grant or payment, or cannot normally be 
provided as part of such grant or payment. If the PA program is 
composed of various standards or components, the assistance would be 
considered over and above the normal grant or not part of the grant if 
the assistance is not included as a regular component of the PA grant 
or benefit or the amount of assistance exceeds the maximum rate of 
payment for the relevant component. If the PA program is not composed 
of various standards or components but is designed to provide a basic 
monthly grant or payment for all eligible households and provides a 
larger basic grant amount for all households in a particular category, 
e.g., all households with infants, the larger amount is still part of 
the normal grant or benefit for such households and not an ``extra'' 
payment excluded under this

[[Page 54281]]

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

[[Page 54282]]

of $160 per dependent'' and adding in their place the words ``maximum 
amount as specified under Sec. 273.9(d)(4) for each dependent''.
    h. A new paragraph (e)(2)(i)(E) is added.
    i. Paragraph (f)(2) is removed and reserved.
    The additions read as follows:


Sec. 273.10   Determining household eligibility and benefit levels.

    (a) Month of application.
    (1) Determination of eligibility and benefit levels. * * *
    (ii) * * * For purposes of this provision, a household is not 
considered to be the same household as the previously participating 
household if the certification worker has established a new food stamp 
case for the household because of a significant change in the 
membership of the previously participating household. * * *
* * * * *
    (d) Determining deductions. * * *
    (4) Anticipating expenses. * * * If a child in the household 
reaches his or her second birthday during the certification period, the 
$200 maximum dependent care deduction defined in Sec. 273.9(d)(4) shall 
be adjusted in accordance with this section not later than the 
household's next regularly scheduled recertification.
* * * * *
    (e) Calculating net income and benefit levels. * * *
    (2) Eligibility and benefits.
    (i) * * *
    (E) If a household contains a student whose income is excluded in 
accordance with Sec. 273.9(c)(7) and the student becomes 22 during the 
month of application, the State agency shall exclude the student's 
earnings in the month of application and count the student's earnings 
in the following month. If the student becomes 22 during the 
certification period, the student's income shall be excluded until the 
month following the month in which the student turns 22.
* * * * *
    9. In Sec. 273.21, the first sentence of paragraph (j)(1)(vii)(A) 
is revised and a new sentence is added after the first sentence to read 
as follows:


Sec. 273.21   Monthly Reporting and Retrospective Budgeting (MRRB)

* * * * *
    (j) State agency action on reports.
    (1) Processing. * * *
    (vii) * * *
    (A) Earned and unearned income received in the corresponding budget 
month, including income that has been averaged in accordance with 
paragraph (f) of this section. The earned income of an elementary or 
secondary school student excluded in accordance with Sec. 273.9(c)(7) 
shall be excluded until the budget month following the budget month in 
which the student turns 22. * * *
* * * * *
    Dated: September 27, 1996.
Ellen Haas,
Under Secretary for Food, Nutrition, and Consumer Services.
[FR Doc. 96-26072 Filed 10-16-96; 8:45 am]
BILLING CODE 3410-30-U