[Federal Register Volume 61, Number 250 (Friday, December 27, 1996)]
[Rules and Regulations]
[Pages 68119-68122]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-32998]


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DEPARTMENT OF AGRICULTURE

Food and Consumer Service

7 CFR Part 278

RIN 0584-AC00


Food Stamp Program: Revisions in Use and Disclosure Rules 
Involving the Sharing of Information Provided by Retail and Wholesale 
Food Concerns with Other Federal and State Agencies

AGENCY: Food and Consumer Service, USDA

ACTION: Final rule.

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SUMMARY: This rulemaking implements certain provisions in two different 
laws which expand the authority of the United States Department of 
Agriculture's Food and Consumer Service (FCS) to share information 
provided by applicants and firms participating as authorized retail 
food stores or wholesale food concerns in the Food Stamp Program (FSP) 
with other Federal and State government agencies.
    The intent of this final rule is to enable better administration 
and enforcement of the Food Stamp Act of 1977, as amended (the Act), or 
any other Federal or State law and regulations issued under the Act or 
any other Federal or State law. This rule provides new criteria to 
govern the sharing of such information and new criminal penalties for 
unauthorized use. It also implements the Secretary of Agriculture's new 
authority to share employer identification numbers (EINs) and Social 
Security numbers (SSNs) of applicants and firms participating in the 
FSP with other Federal agencies.
    Finally, this rule makes technical changes to correct an error in 
regulatory reference and also to reflect changes made by the Department 
of the Treasury

[[Page 68120]]

in a parallel rule that does not change the substance of the affected 
provisions.

EFFECTIVE DATE: Provisions in this rule are effective and will be 
implemented beginning February 25, 1997.

FOR FURTHER INFORMATION CONTACT: Questions regarding this final rule 
should be addressed to Suzanne Fecteau, Food and Consumer Service, 
Chief, Redemption Management Branch, 3101 Park Center Drive, 
Alexandria, Virginia 22302-1594, or by telephone at (703) 305-2418.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

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

Executive Order 12372

    The Food Stamp Program is listed in the Catalog of Federal Domestic 
Assistance under No. 10.551. For the reasons set forth in the final 
rule and related Notice to 7 CFR part 3015 subpart V (48 FR 29115, June 
24, 1983), this Program is excluded from the scope of Executive Order 
12372, which requires inter-governmental consultation with State and 
local officials.

Regulatory Flexibility Act

    This final rule has been reviewed with regard to the requirements 
of the Regulatory Flexibility Act of 1980 (5 U.S.C. Sec. 601-612). 
William E. Ludwig, the Administrator of the Food and Consumer Service, 
has certified that this rule will not have a significant economic 
impact on a substantial number of small entities; however, it may have 
a significant effect on a limited number of small entities that violate 
State or Federal laws.

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 1980 (44 U.S.C. 3507).

Executive Order 12778

    This final rule has been reviewed under Executive Order 12778, 
Civil Justice Reform. This rule has 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 also has retroactive effect. Prior to any judicial challenge 
to the provisions of this rule or the application of its provisions, 
all applicable administrative procedures must be exhausted. In the Food 
Stamp Program the administrative procedures are as follows: (1) For 
Program benefit recipients--State administrative procedures issued 
pursuant to 7 U.S.C. 2020(e)(10) and 7 CFR 273.15; (2) for State 
agencies--administrative procedures issued pursuant to 7 U.S.C. 2023 
set out at 7 CFR 276.7 (for rules related to non-quality control (QC) 
liabilities) or Part 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.

Background

    On May 12, 1995, the Department published a proposed rule at 60 FR 
25625, to implement section 203 of the Food Stamp Program Improvements 
Act of 1994, Public Law 103-225. Section 203 revises section 9(c) of 
the Food Stamp Act of 1977, as amended, to expand FCS' authority to 
share information provided by applicants and participating retail food 
concerns--including information about food stamp redemptions, retail 
food sales, and store ownership--with other Federal and State law 
enforcement and investigative agencies. It covers certain information 
provided on authorization applications, as well as additional 
supporting information submitted to document store eligibility to 
participate in the FSP. This information can be shared for the purpose 
of administering and enforcing the Food Stamp Act, as well as the 
enforcement of any other Federal or State laws, and the regulations 
issued under this Act or such other laws.
    The sharing of EINs and SSNs is not covered by Public Law 103-225 
or by Section 9(c) of the Food Stamp Act of 1977, as amended. The 
sharing of EINs and SSNs is covered in section 316 of the Social 
Security Independence and Program Improvements Act of 1994, Public Law 
103-296, and is also implemented by this rule. Section 316 revises 
section 6109(f) of the Internal Revenue Code of 1986, and section 
205(c)(2)(C) of the Social Security Act, to expand FCS' authority to 
verify and match SSNs and EINs with other Federal agencies or 
instrumentalities of the United States to more effectively administer 
and enforce the FSP, as well as other Federal laws and regulations.
    For currently authorized firms, the provisions of this rule are 
effective February 25, 1997 and will be implemented beginning February 
25, 1997. Because of the legal notice requirements related to the use 
of EINs and SSNs, currently authorized firms will receive notices of 
the expanded information sharing provisions of this rule, and will be 
given the opportunity to withdraw from FSP participation if they do not 
want to be subject to these new provisions. Firms that remain 
authorized 60-days after the date of the notice, will be subject to the 
information sharing provisions. However, firms that withdraw or were 
disqualified from FSP participation prior to the implementation date on 
the notice will not be subject to the expanded information sharing 
provisions of this rule, unless such firms participate in the FSP at a 
future date subsequent to implementation of this rule.
    Comments were solicited on the provisions of the proposed 
rulemaking through June 12, 1995. This final action addresses the 
commentors' concerns. Readers should refer to the proposed rule for a 
more complete understanding of this final action.
    The Department received three comment letters on the proposed rule, 
two representing Federal agencies and one representing a State agency. 
All three commentors were supportive of the proposed provisions, and 
two offered constructive suggestions to clarify certain provisions of 
the proposed rule.
    A State agency commented that the proposed rule will assist law 
enforcement and investigative agencies in their efforts to investigate 
food stamp trafficking, as well as other crimes associated with 
trafficking.
    A Federal agency commented on the need to clarify certain 
requirements in the proposed rule regarding how information is 
requested. The proposed rule required that requests be submitted in 
writing and include the specific provisions of laws and regulations 
being enforced. The recommendation was that written requests include 
electronic communications. This commentor also recommended that the 
final rule allow standing agreements between FCS and other agencies to 
document that such information is being accessed for bona fide law 
enforcement purposes, without citing specific provisions of law.
    It is the view of the Department that written requests include 
electronic communications. The Department also believes that formal 
agreements between government agencies may be a better way to document 
the bona fide need for the information. In such situations, individual 
written requests for access to FCS information may not be necessary. 
The Department has made this clear in the final rule by adding the 
appropriate language.

[[Page 68121]]

    The Department of Agriculture's Office of Inspector General (OIG) 
expressed concern that the proposed rule restricted its authority to 
share information for enforcement of the Food Stamp Act, while other 
government entities could access information to enforce all laws and 
regulations under their respective jurisdictions. OIG also requested 
that the final rule include language to give it special authority to 
release information in certain circumstances.
    The Department agrees that OIG and other USDA agencies may be 
allowed access to information needed to enforce Departmental laws and 
regulations. Appropriate clarifying language is included in the final 
rule. Authority for OIG or other agencies to release FCS information 
will be addressed in written agreements with individual agencies.
    OIG was also concerned about the effective date of this rule. The 
proposed rule provides that stores authorized to participate in the FSP 
on August 15, 1994, and stores authorized after that date will be 
subject to the rule. OIG was concerned that a possible interpretation 
might be that stores initially authorized before August 15, 1994, that 
continue participating after implementation, would not be subject to 
this rule. This was not the Department's intent; thus, the final rule 
states that all stores participating in the FSP after implementation 
shall be subject to the provisions in this rule. This rule also affects 
unauthorized entities and individuals accepting and redeeming food 
stamps illegally, except that the sharing of EINs and SSNs for such 
firms will be limited to those firms which were previously sanctioned 
or convicted under section 12 or 15 of the Food Stamp Act of 1977, as 
amended (7 U.S.C. 2021 or 2024).
    The Department has made minor revisions to clarify the meaning of a 
few provisions in the proposed rule in order to avoid any confusion. A 
reference to ``applicant'' under paragraph (q) that was inappropriate 
has been replaced with the appropriate term, ``retail food store.'' The 
Department also clarified a reference in the proposed rule involving 
the Special Supplemental Food Program for Women, Infants and Children 
(WIC). Current regulations afford WIC special information sharing 
status. This rule's expanded information sharing negates the need to 
treat WIC as a special situation; therefore, the sentence involving the 
treatment of WIC in the proposed rule has been removed.
    The Department has also added clarifying language to clearly 
distinguish between the two different laws implemented by this rule. 
One law (amending the Food Stamp Act) addresses information, excluding 
SSNs and EINs, provided by applicants and participating firms that can 
be shared with both Federal and State law enforcement or investigative 
agencies. The other law (amending the Social Security Act and the 
Internal Revenue Code) addresses information involving SSNs and EINs 
that can only be shared with certain Federal agencies and 
instrumentalities of the United States. Clarifying language has also 
been added to the final rule to define ``a law enforcement or 
investigative agency'' and ``an FCS initiated match.'' Editorial 
changes in the final rule were also made to provide a more orderly 
presentation.
    Finally, because a regulation published on October 15, 1996 
redesignated paragraph (q) to (r) in Sec. 278.1, this rule makes the 
conforming changes.

List of Subjects in 7 CFR Part 278

    Administrative practice and procedure, Banks, Banking, Claims, Food 
stamps, Groceries--retail, Groceries, General line--wholesaler, 
Penalties.

    Accordingly, 7 CFR part 278 is amended as follows:

PART 278--[AMENDED]

    1. The authority citation for 7 CFR part 278 continues to read as 
follows:

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

PART 278--PARTICIPATION OF RETAIL FOOD STORES, WHOLESALE FOOD 
CONCERNS AND INSURED FINANCIAL INSTITUTIONS

    2. In Sec. 278.1:
    a. The heading and the introductory text of paragraph (r) is 
revised;
    b. Paragraphs (r)(1) and (r)(2) are redesignated as paragraphs 
(r)(2) and (r)(3), respectively, and a new paragraph (r)(1) is added;
    c. Newly redesignated paragraphs (r)(2)(i), (r)(2)(ii), (r)(3)(i), 
and (r)(3)(ii) are revised;
    d. Newly redesignated paragraph (r)(2)(iii) is amended by adding 
after the word ``Department'' in the first sentence the words ``or any 
agency or instrumentality of the United States'' and by removing the 
designation ``(c)(2)'' following the references to ``Sec. 301.6109-2'' 
and ``(26 CFR 301.6109-2)'' and adding in its place the designation 
(d)(2);
    e. Newly redesignated paragraph (r)(2)(iv) is amended by adding 
after the word ``Department'' the words ``or maintained by any agency 
or instrumentality of the United States'', by removing the references 
to ``Sec. 278.1(s)(1)(ii)'' and ``Sec. 278.1 (r)(1)(iv)'' and adding in 
their place references to ``paragraph (r)(2)(ii) of this section'' and 
``paragraph (r)(2)(iv) of this section'', and by removing the 
designation ``(d)'' following the references to ``Sec. 301.6109-2'' and 
``(26 CFR 301.6109)'' and adding in its place the designation (e);
    f. Newly redesignated paragraph (r)(2)(v) is amended by removing 
the designation ``(e)'' after the references to ``Sec. 301.6109-2'' and 
``(26 CFR 301.6109-2)'' and adding in its place the designation (f);
    g. Newly redesignated paragraph (r)(3)(iv) is amended by removing 
the reference ``Sec. 278.1(q)(2)(iv)'' and adding in its place the 
reference ``paragraph (r)(3)(iv) of this section''; and
    h. A new paragraph (r)(4) is added.
    The revisions and additions read as follows:


Sec. 278.1  Approval of retail food stores and wholesale food concerns.

* * * * *
    (r) Use and disclosure of information provided by firms. With the 
exception of EINs and SSNs, the contents of an initial application, or 
other information required to be submitted by retail food stores and 
wholesale food concerns to determine continued eligibility, such as 
ownership information and sales and redemption data, may be disclosed 
to and used by Federal and State law enforcement and investigative 
agencies for the purpose of administering or enforcing the Food Stamp 
Act or any other Federal or State law, and the regulations issued under 
the Food Stamp Act or such other law. Such disclosure and use shall 
also include companies or individuals under contract for the operation 
by, or on behalf of FCS to accomplish an FCS function. Such purposes 
include the audit and examination of such information by the 
Comptroller General of the United States authorized by any other 
provision of law. Any person who publishes, divulges, discloses, or 
makes known in any manner or to any extent not authorized by Federal 
law or regulations any information obtained under this paragraph shall 
be fined not more than $1,000 or imprisoned not more than 1 year, or 
both. Safeguards with respect to employee identification numbers (EINs) 
are contained in paragraph (r)(2) of this section. Safeguards with 
respect to Social Security numbers (SSNs) are contained in paragraph 
(r)(3) of this section.
    (1) Criteria for requesting information. FCS shall determine what 
information can be disclosed and which government

[[Page 68122]]

agencies have access to that information based on the following 
criteria:
    (i) Federal and State law enforcement or investigative agencies or 
instrumentalities administering or enforcing specified Federal and 
State laws, or regulations issued under those laws, have access to 
certain information maintained by FCS. Such agencies or 
instrumentalities must have among their responsibilities the 
enforcement of law or the investigation of suspected violations of law. 
However, only certain Federal entities have access to information 
involving SSNs and EINs in accordance with paragraph (r)(1)(ii) of this 
section;
    (ii) Except for SSNs and EINs, information provided to FCS by 
applicants and authorized firms participating in the FSP may be 
disclosed and used by qualifying Federal and State entities in 
accordance with paragraph (r)(1)(i) of this section. The disclosure of 
SSNs and EINs is limited only to qualifying Federal agencies or 
instrumentalities which otherwise have access to SSNs and EINs based on 
law and routine use. Release of information under this paragraph shall 
be limited to information relevant to the administration or enforcement 
of the specified laws and regulations, as determined by FCS;
    (iii) Requests for information must be submitted in writing, 
including electronic communication, and must clearly indicate the 
specific provision of law or regulations which would be administered or 
enforced by access to requested information, and the relevance of the 
information to those purposes. If a formal agreement exists between FCS 
and another agency or instrumentality, individual written requests may 
be unnecessary. FCS may request additional information if needed to 
clarify a request;
    (iv) Disclosure by FCS is limited to: Information about applicant 
stores and concerns with applications on file; information about 
authorized stores participating in the FSP; and information about 
unauthorized entities or individuals illegally accepting or redeeming 
food stamps;
    (v) Requests for information disclosure by FCS may involve a 
specific store or concern, or some or all stores and concerns covered 
by paragraph (r)(1)(iv) of this section. In addition, FCS may sign 
agreements allowing certain government entities direct access to 
appropriate FCS data, with access to EINs and SSNs limited only to 
other Federal agencies and instrumentalities that otherwise have access 
to such numbers.
    (2) Employer identification numbers. (i) The Department may have 
access to the EINs obtained pursuant to paragraph (b)(5) of this 
section for the purpose of establishing and maintaining a list of the 
names and EINs of the stores and concerns for use in determining those 
applicants who previously have been sanctioned or convicted under 
sections 12 and 15 of the Food Stamp Act of 1977, as amended, (7 U.S.C. 
2021 or 2024). The Department also may share EINs with other Federal 
agencies and instrumentalities that otherwise have access to EINs if 
the Department determines that such sharing would assist in verifying 
and matching such information against information maintained by such 
other agency or instrumentality. Any such information shared pursuant 
to this paragraph may be used by the Department or such other agency or 
instrumentality for the purpose of effective administration and 
enforcement of the Food Stamp Act of 1977, as amended, or for the 
purpose of investigating violations of other Federal laws or enforcing 
such laws. See Treas. Reg. Sec. 301.6109-2 (b) and (c) (26 CFR 
301.6109-2 (b) and (c)).
    (ii) The only persons permitted access to EINs obtained pursuant to 
paragraph (b) of this section are officers and employees of the United 
States, who otherwise have access and whose duties or responsibilities 
require access to the EINs for the administration or enforcement of the 
Food Stamp Act of 1977, as amended, or for the purpose of investigating 
violations of other Federal laws or enforcing such laws. See Treas. 
Reg. Sec. 301.6109-2(d)(1) (26 CFR 301.6109-2(d)(1)).
* * * * *
    (3) Social Security numbers. (i) The Department may have access to 
SSNs obtained pursuant to paragraph (b)(5) of this section for the 
purpose of establishing and maintaining a list of names and SSNs of 
stores and concerns for use in determining those applicants who 
previously have been sanctioned or convicted under section 12 or 15 of 
the Food Stamp Act of 1977, as amended, (7 U.S.C. 2021 or 2024). The 
Department may use this determination of sanctions and convictions in 
administering sections 12 and 15 of the Food Stamp Act of 1977, as 
amended, (7 U.S.C. 2018, 2021). The Department also may share SSNs with 
other Federal agencies and instrumentalities if the Department 
determines that such sharing would assist in verifying and matching 
such information against information maintained by the Department or 
such other agency or instrumentality. Any such information shared 
pursuant to this paragraph shall be used for the purpose of effective 
administration and enforcement of the Food Stamp Act of 1977, as 
amended, or for the purpose of investigating violations of other 
Federal laws or enforcing such laws.
    (ii) The only persons permitted access to SSNs obtained pursuant to 
paragraph (b) of this section are officers and employees of the United 
States, who otherwise have access, and whose duties or responsibilities 
require access to the SSNs for the administration or enforcement of the 
Food Stamp Act of 1977, as amended, or for the purpose of investigating 
violations of other Federal laws or enforcing such laws. Such access 
shall also include companies or individuals under contract for the 
operation by, or on behalf of FCS to accomplish an FCS function.
* * * * *
    (4) FCS initiated matches. Under the restrictions noted in 
paragraph (r) of this section, FCS will periodically initiate cross 
matches of retailer data with other Federal and State agencies' files 
for the purpose of verifying information provided by applicant and 
participating firms, and for the purposes of administering and 
enforcing other Federal or State laws. Such matches could involve all 
firms participating after implementation for the purpose of verifying 
information such as, but not limited to, SSNs and retail sales data.
* * * * *
    3. In Sec. 278.9, a new paragraph (l) is added to read as follows:


Sec. 278.9  Implementation of amendments relating to the participation 
of retail food stores, wholesale food concerns and insured financial 
institutions.

* * * * *
    (l) Amendment No. 335. Expanded authority to use and disclose 
information about firms participating in the FSP under CFR 278.1(r) for 
currently authorized firms is effective and will be implemented 
beginning February 25, 1997 but not before 60-days after the date of 
notices to such firms, notifying them of the changes. The only 
exception to the above is that such disclosure of information shall not 
apply to firms that are withdrawn or are disqualified from FSP 
participation prior to implementation, unless such firms participate in 
the FSP at a future date subsequent to the implementation date.

    Dated: December 18, 1996.
William E. Ludwig,
Administrator, Food and Consumer Service.
[FR Doc. 96-32998 Filed 12-26-96; 8:45 am]
BILLING CODE 3410-30-U