[Federal Register Volume 65, Number 40 (Tuesday, February 29, 2000)]
[Proposed Rules]
[Pages 10856-10912]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-4369]



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Part II





Department of Agriculture





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Food and Nutrition Service



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7 CFR Parts 272, 273, 274, and 277



Food Stamp Program: Noncitizen Eligibility, and Certification 
Provisions of Pub. L. 104-193, as Amended by Public Laws 104-208, 105-
33 and 105-185; Proposed Rule

  Federal Register / Vol. 65, No. 40 / Tuesday, February 29, 2000 / 
Proposed Rules  

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DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Parts 272, 273, 274, and 277

[Amendment Number ]
RIN 0584-AC40


Food Stamp Program: Noncitizen Eligibility, and Certification 
Provisions of Pub. L. 104-193, as Amended by Public Laws 104-208, 105-
33 and 105-185

AGENCY: Food and Nutrition Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This rule proposes to amend Food Stamp Program (Program) 
regulations to implement several provisions of the Personal 
Responsibility and Work Opportunity Reconciliation Act of 1996, and 
subsequent amendments to these provisions made by the Omnibus 
Consolidated Appropriations Act of 1996, the Balanced Budget Act of 
1997, and the Agricultural Research Extension and Education Reform Act 
of 1998. This action proposes options related to matching activities, 
fair hearing and recipient services. This action proposes provisions 
which would increase State agency flexibility in processing 
applications for the Program and allow greater use of standard amounts 
for determining deductions and self-employment expenses. This action 
also proposes revisions to the requirements for determining alien 
eligibility and the eligibility and benefits of sponsored aliens, and 
to require certain transitional housing payments and most State and 
local energy assistance to be counted as income, exclude the earnings 
of students under 18 from income, and require proration of benefits 
following any break in certification.
    Other provisions of this proposed action would establish ground 
rules for implementing the Simplified Food Stamp Program, allow State 
agencies options to issue partial allotments for households in 
treatment centers, count all, part or, in some cases, none of the 
income of an ineligible alien in determining the benefits of the rest 
of the household, issue combined allotments to certain expedited 
service households, and certify elderly or disabled households up to 24 
months and other households up to 12 months. The action also proposes 
several changes to existing regulations in response to the President's 
reform initiative to remove overly prescriptive, outdated, and 
unnecessary regulatory provisions.
    We are also taking this opportunity to add vehicles to the assets 
which may be covered under the inaccessible resources provisions of the 
Food Stamp Act of 1977, to clarify what constitutes an adequate notice 
of adverse action period, and to make a change to exclude from income 
on-the-job training payments received under the Summer Youth Employment 
and Training Program as required by Section 702 of the Job Training 
Reform Amendments of 1992.

DATES: Comments must be received on or before May 1, 2000 to be assured 
of consideration.

ADDRESSES: Comments should be submitted to Patrick Waldron, Program 
Analyst, Certification Policy Branch, Program Development Division, 
Food and Nutrition Service, USDA, 3101 Park Center Drive, Alexandria, 
Virginia 22302, (703) 305-2805. Comments may also be faxed to the 
attention of Mr. Waldron at (703) 305-2486. The internet address is: 
[email protected]. All written comments will be open for 
public inspection at the office of the Food and Nutrition Service 
during regular business hours (8:30 a.m. to 5 p.m., Monday through 
Friday) at 3101 Park Center Drive, Alexandria, Virginia, Room 720.

FOR FURTHER INFORMATION CONTACT: Questions regarding the proposed 
rulemaking should be addressed to Mr. Waldron at the above address or 
by telephone at (703) 305-2805.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

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

Executive Order 12372

    The Food Stamp Program (Program) is listed in the Catalog of 
Federal Domestic Assistance under Number 10.551. For the reasons set 
forth in the final rule in 7 CFR 3015, Subpart V and related Notice (48 
FR 29115), this Program is excluded from the scope of Executive Order 
12372 which requires intergovernmental consultation with State and 
local officials.

Regulatory Flexibility Act

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

Executive Order 12988

    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. This rule is intended to have preemptive effect with 
respect to any State or local laws, regulations or policies which 
conflict with its provisions or which would otherwise impede its full 
implementation. This rule is not intended to have retroactive effect 
unless so specified in the ``Effective Date'' paragraph of this 
preamble. Prior to any judicial challenge to the provisions of this 
rule or the application of its provisions, all applicable 
administrative procedures must be exhausted.

Unfunded Mandate Analysis

    Title II of the Unfunded Mandate Reform Act of 1995 (UMRA), Pub. L. 
104-4, establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and the private sector. Under section 202 of the UMRA, the 
Department generally must prepare a written statement, including a 
cost-benefit analysis, for proposed and final rules with ``Federal 
mandates'' that may result in expenditures to State, local, or tribal 
governments, in the aggregate, or to the private sector, of $100 
million or more in any one year. When such a statement is needed for a 
rule, section 205 of the UMRA generally requires the Department to 
identify and consider a reasonable number of regulatory alternatives 
and adopt the least costly, more cost-effective or least burdensome 
alternative that achieves the objectives of the rule.
    This rule contains no Federal mandates (under the regulatory 
provisions of Title II of the UMRA) which impose costs on State, local, 
or tribal governments or to the private sector of $100 million or more 
in any one year. Thus, this rule is not subject to the requirements of 
sections 202 and 205 of the UMRA.

Civil Rights Impact Analysis

    FNS has reviewed this proposed rule in accordance with the 
Department Regulation 4300-4, ``Civil Rights Impact Analysis'' to 
identify and address any major civil rights impacts the proposed rule 
might have on minorities, women, and persons with disabilities. After a 
careful review of the rule's intent and provisions, and the 
characteristics of

[[Page 10857]]

food stamp households and individuals participants, FNS has determined 
that there is no way to soften their effect on any of the protected 
classes. FNS has no discretion in implementing many of these changes. 
The changes required to be implemented by law, have been implemented.
    All data available to FNS indicate that protected individuals have 
the same opportunity to participate in the Food Stamp Program as non-
protected individuals. FNS specifically prohibits the State and local 
government agencies that administer the program from engaging in 
actions that discriminate based on race, color, national origin, 
gender, age, disability, marital or family status. Regulations at 7 CFR 
272.6 specifically state that ``State agencies shall not discriminate 
against any applicant or participant in any aspect of program 
administration, including, but not limited to, the certification of 
households, the issuance of coupons, the conduct of fair hearings, or 
the conduct of any other program service for reasons of age, race, 
color, sex, handicap, religious creed, national origin, or political 
beliefs.'' Discrimination in any aspect of program administration is 
prohibited by these regulations, the Food Stamp Act, the Age 
Discrimination Act of 1975 (Pub. L. 94-135), the Rehabilitation Act of 
1973 (Pub. L. 93-112, section 504), and title VI of the Civil Rights 
Act of 1964 (42 U.S.C. 2000d). Enforcement action may be brought under 
any applicable Federal law. Title VI complaints shall be processed in 
accordance with 7 CFR part 15. Where State agencies have options, and 
they choose to implement a certain provision, they must implement it in 
such a way that it complies with the regulations at 7 CFR 272.6.

Regulatory Impact Analysis

Need for Action

    This action is needed to implement provisions of Pub. L. 104-193 
(PRWORA) which would: (1) Remove specific requirements for State agency 
processing of food stamp applications; (2) revise requirements for 
determining the eligibility of aliens; (3) count as income certain 
State and local energy assistance; (4) allow State agencies to count 
all or part of an alien's income in determining the benefits of the 
rest of the household; (5) require that the full amount of a sponsor's 
income and resources be counted in determining the eligibility of a 
sponsored alien; (6) allow State agencies to certify households 
consisting entirely of elderly or disabled members up to 24 months; (7) 
exclude the earnings of students under age 18; (8) make use of a 
homeless shelter deduction optional; (9) allow State agencies to 
mandate use of a standard utility allowance if they have at least one 
standard that includes heating and cooling costs and one that does not; 
(10) eliminate the exclusion for vendored transitional housing payments 
for homeless households; (11) allow use of standard amounts in 
determining self-employment expenses; (12) make optional the issuance 
of combined allotments to expedited service households that apply after 
the 15th of the month; (13) allow State agencies to issue partial 
allotments to households in treatment centers; (14) require proration 
of benefits following any break in certification; (15) allow State 
agencies to accept an oral withdrawal from the household for a fair 
hearing; (16) revise requirements for producing or displaying 
nutritional education materials; (17) eliminate mandated training 
standards; (18) eliminate requirement for reviewing and reporting on 
office hours; (19) revise mail issuance requirements in rural areas; 
(20) prohibit Federal reimbursement for recruitment activities and 
recruitment activities from being approved as part of a State agency's 
optional Outreach plan; (21) make optional rather than mandatory the 
use of the Income Eligibility and Verification System and the 
Systematic Alien Verification for Entitlements match programs; and (22) 
establish ground rules for implementing the Simplified Food Stamp 
Program (SFSP) . In addition, this action is needed to implement a 
Departmental initiative to revise the current policy on determining the 
resource value of licensed vehicles.

PRWORA Provisions

Benefits

    State agencies will benefit from this rule to the extent that it 
increases State agency flexibility and simplifies Program requirements.

Costs

    The food stamp changes made in this rule would reduce Program costs 
for the 5-year period Fiscal Year (FY) 2000 through FY 2004 by 
approximately $2.75 billion, primarily as a result of the provisions 
that make many aliens ineligible to participate (section 402) and the 
provision that requires that most State and local energy assistance be 
counted as income for food stamp purposes (section 808). The Program 
realizes smaller savings from the following provisions: Section 807, 
earnings of children; section 809, standard utility allowances; section 
811, transitional housing payments; and section 827, proration of 
benefits at recertification. The SFSP authorized under section 854 may 
result in savings or increased Program costs with respect to individual 
households; however, the net impact of SFSP implementation must be cost 
neutral. The Departmental initiative to revise the treatment of 
inaccessible resources produces a cost which slightly lowers the total 
savings from this rule. The savings from the remaining provisions in 
the rule are negligible; therefore, we will not discuss them in this 
analysis.

Section 402--Alien Eligibility

    Section 402 of the PRWORA significantly reduces the number of legal 
aliens who are eligible for food stamps. Effective August 22, 1996, for 
applicants and August 22, 1997, for current recipients, many aliens 
legally admitted for permanent residence who were previously eligible 
became ineligible. The exceptions are those admitted as refugees, 
asylees, Cubans, Haitians, Amerasians, and those who have had removal 
withheld who retain eligibility for the first 5 years (later changed to 
7 years by the Agricultural Research Extension and Education Reform Act 
of 1998 (AREERA) after admission; lawful permanent residents who have 
earned at least 40 quarters of coverage as defined by the Social 
Security Administration; and those who are serving or have served in 
the U.S. armed forces and their spouses and children. Effective 
November 1, 1998, AREERA made certain Hmong, Highland Laotians, and 
American Indians born in Canada eligible for food stamps. It also made 
aliens who were lawfully living in the U.S. on August 22, 1996, 
eligible for food stamps if they are under 18 or are disabled, or were 
65 or older on August 22, 1996.
    Those aliens who lost eligibility will contribute to smaller State 
agency caseloads. However, determining the eligibility of individuals 
will be more complicated. For certain categories of aliens, State 
agencies will have to determine when the individuals were admitted. For 
other categories, State agencies will have to obtain information 
regarding the applicant's work history. Thus, there may be no 
significant savings in caseworker time.
    In FY 2000, without taking into account the cost of restoring 
benefits to selected aliens through AREERA, we estimate that the 
savings would have been $500 million. We estimate that in 1998, 
approximately 790,000 participants lost eligibility with an average 
benefit loss of $75 a month and

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another 285,000 people remained eligible but lost an average of $15 a 
month. About 685,000 people living in households with ineligible aliens 
received a slightly larger per person benefit for those still eligible 
and participating in the Program, on average $15 per month. This is 
because of economies of scale in the allotment tables which are by 
household size, e.g., a two-person household based on no income would 
receive a larger per person allotment than a three-person household 
based on no income. It is important to realize that all of these 
``gainers'' lived in households where the total food stamp benefit 
available to the household declined.
    Based on information from a simulation model using 1996 Food Stamp 
Quality Control data, together with information from the Immigration 
and Naturalization Service on immigration and naturalization patterns 
and the Survey of Income and Program Participation (SIPP) on the work 
histories of aliens, we estimate that 20 percent of permanent residents 
meet the 40-quarters work exemption. Using information from the Current 
Population Survey on the veteran status of aliens, we estimate that 
less than 1 percent meet the veteran's exemption. Moreover, because 
applications for naturalization have increased dramatically over the 
last two years, it is anticipated that naturalizations will increase 
through FY 2001, reducing somewhat the number of persons losing 
eligibility and benefits through that time period compared to FY 1998.
    The enactment of AREERA on November 1, 1998 restored benefits to an 
estimated 210,000 legal aliens, costing an additional $185 million in 
2000 and $775 million for the 5-year period FY 2000-FY 2004.
    PRWORA does not address how or whether to count the income or 
resources of the aliens made ineligible by PRWORA for purposes of 
determining eligibility or allotment amounts for the rest of the 
household. Alternatives were considered including counting ineligible 
aliens' resources and all income; counting resources and a pro-rated 
share of income; not counting the ineligible aliens' income, but 
capping the resulting allotment for the eligible members at the 
allotment a similarly situated all citizen household would receive; or 
counting neither income nor resources. The alternative chosen under the 
proposed rule would be to allow the State agency to pick one State-wide 
option for determining the eligibility and benefit level of households 
with members who are aliens made ineligible under PRWORA. State 
agencies may either: (1) Count the resources and a pro-rated share of 
the ineligible aliens' income; or (2) count the resources, not count 
the ineligible aliens' income, but cap the resulting allotment for the 
eligible members at the allotment amount the household would receive 
were it not for the PRWORA eligibility restrictions.
    Using a simulation based on the 2000 baseline version of the 1996 
QC Minimodel, we estimate that the option of excluding the income of 
PRWORA-ineligible aliens increases costs by an estimated $0 million for 
FY 2000 and $20 million for FY 2000-FY 2004. These estimates take into 
account current State practices and an expected shift of some States 
from the first option.
    As a result, the combined effect of these changes will cause 
savings to fall through FY 2002, and then rise after that with the 
expected increases in the average benefit. After accounting for 
increased naturalization, AREERA, and changes in the counting of 
PRWORA-ineligible aliens' income being implemented starting in FY 2001, 
savings are estimated at $315 million in FY 2000, $320 million in FY 
2001, $360 million in FY 2002, $380 million in FY 2003, and $410 
million in FY 2004. Savings related to the alien provisions for the 5-
year period FY 2000-FY 2004 are estimated to be $1.785 billion.

Section 807--Earnings of Children

    This provision revises the current exclusion from income of the 
earnings of elementary or secondary school students under age 22 to 
exclude the earnings of these students if they are under 18. Based on 
the 1996 Quality Control data, it is estimated that the benefits of 
approximately 2,700 students will be reduced an average of $89 per 
month. FY 2000 savings are estimated at $5 million and a 5-year savings 
of $25 million.

Section 808--Energy Assistance

    This provision eliminates the exclusion from income of most State 
and local energy assistance payments. Federal, State, or local one-time 
payments for weatherization and replacement or repair of heating or 
cooling devices are excluded. All federal energy assistance payments 
are excluded, except those provided under Title IV-A of the Social 
Security Act. State agencies are required to count as income the 
portion of the public assistance grant previously excluded as energy 
assistance. Using 1996 food stamp QC data on the number of AFDC/FSP 
households in each State and 1996 Green Book data on the average AFDC 
disregard for state-provided energy assistance, we estimated that 
benefits for approximately 3.959 million participants will be reduced, 
with each person losing an average of $4.42 a month. This results in a 
savings of $210 million for FY 2000 and a 5-year savings of $1.05 
billion.

Section 811--Transitional Housing Payments

    This provision removes the statutory exclusion from consideration 
as household income any State PA or GA payments made to a third party 
on behalf of a household residing in transitional housing for the 
homeless. State agencies may continue to exclude PA housing payments 
from income if they are emergency or special payments over and above 
the regular grant or are provided for migrant or seasonal farmworker 
households while they are in the job stream. GA housing payments may be 
excluded if they are provided by a State or local housing authority, 
are emergency or special payments, or the assistance is provided under 
a program in a State in which no GA payments may be made directly to 
the household in the form of cash. State agencies will have to notify 
affected households that their benefits will be reduced. Based on 
estimates derived from data on AFDC and shelter payments made to the 
number of food stamp households estimated to be living in welfare 
hotels, approximately 76,000 recipients will lose benefits, for a 
savings of $10 million in FY 2000 and a 5-year savings of $50 million. 
The average benefit loss per person is about $11 a month.

Section 809--Standard Utility Allowances

    This provision allows State agencies to mandate use of a standard 
utility allowance that includes heating or cooling costs, provided the 
State agency has another standard allowance that does not include 
heating or cooling costs and the mandatory standards will not increase 
Program costs. The PRWORA also provides that in a State that does not 
choose to make standards mandatory, households are allowed to switch 
between actual expenses and a standard only at recertification.
    The proposed rule provides requirements for a nonheating/cooling 
standard and would require State agencies to provide FNS with 
sufficient data to determine whether or not the State agency's proposed 
standards are cost-neutral. The proposed rule also provides that 
elderly or disabled households certified for 24 months may switch at 
the 12-month point when the State agency is required to contact the 
household. The State agency would be

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required to allow households a choice between using actual expenses or 
a standard when they move and incur shelter expenses. The proposed rule 
also would allow households in private rental housing to use a standard 
allowance that includes heating or cooling costs if they incur an 
expense for heating or cooling separately from their rent. Many of 
these households are currently entitled to the standard because they 
receive Low-Income Home Energy Assistance (LIHEAP) payments. Households 
in public rental housing that incur only the cost of excess usage are 
prohibited by the Food Stamp Act from receiving a heating or cooling 
standard. Providing direct entitlement to a heating or cooling standard 
to households in private rental housing would eliminate the need for 
the State agency to verify receipt of LIHEAP, which has been 
problematic for State agencies and households.
    The provision of the PRWORA allowing mandatory utility standards 
would increase State agency flexibility and reduce the time needed to 
calculate the shelter expenses of households which previously claimed 
actual costs. Savings result from two factors: (1) If a State mandates 
a standard, households with shelter costs higher than the SUA would no 
longer be allowed to claim actual costs and (2) households will no 
longer be allowed to switch between the SUA and actual costs one 
additional time during each 12-month period.
    Using a simulation model based on 1994 data from the Survey of 
Income and Program Participation (SIPP), and adjusting for the fact 
that only five States (Delaware, Louisiana, Michigan, North Dakota, and 
Wyoming) with only seven percent of the caseload initially implemented 
this option, we estimate that the benefits of approximately 60,000 
people were reduced in 1998 for an average loss of $12 a month, and 783 
people lost eligibility for an average monthly loss of $31. The total 
savings were estimated to be $10 million.
    We assume that more States will implement this provision, once they 
turn their attention from implementing TANF. We estimate that in five 
years, States that account for 28 percent of total benefit issuance 
will have opted for required use of the SUA. Under these assumptions, 
total savings are $20 million in FY 2000 and $175 million over 5 years. 
By FY 2004, slightly over 3,000 people may lose eligibility.

Section 818--Treatment of the Income of Ineligible Aliens

    This rule would implement the provision which allows State agencies 
to elect to count either all or part of an ineligible alien's income if 
the alien is in a category that was ineligible prior to PRWORA when 
calculating the eligibility and benefits of the other individuals in 
the household. These aliens are primarily aliens admitted under color 
of law, those without documentation to establish eligible status, and 
those temporarily residing in the country legally, such as diplomats 
and students. (Treatment of the income and resources of the classes of 
aliens made ineligible by PRWORA is different, and it is discussed 
above.)
    In order not to give preferential treatment to households with 
ineligible aliens in classes that were ineligible prior to PRWORA over 
citizen households, the rule would allow State agencies a further 
option to count all of the income for purposes of applying the gross 
income test, but use a prorated share to determine eligibility and 
level of benefits. For example, a household consisting of an 
undocumented alien and a citizen may have an income which would place 
the household over the maximum income limit if all of it is counted. 
However, if the undocumented alien is excluded from the household and 
only a prorated share of his or her income is counted, the remaining 
citizen member could be eligible. This option would allow the State 
agency to count all of the undocumented alien's income for purposes of 
determining if the household's gross income is below the gross income 
limit but only counting a prorated share for determining the 
household's allotment level. The State agency will need to consider if 
the number of cases affected will warrant two different income 
computations. Whatever option the States selects will have to be 
applied to all ineligible aliens in the same class.
    Prior to the enactment of PRWORA, States were required to prorate 
only a share of the ineligible alien's income to the household. For 
example if a household consisted of one ineligible alien and two 
eligible participants, under prorating, two-thirds of the income of the 
ineligible alien would be counted as income available to the food stamp 
household. Under the 100 percent option, all of that ineligible alien's 
income would be counted.
    Of the two States electing to count 100 percent of the income of 
ineligible aliens, only one State has continued this policy. The budget 
assumes only that one State will continue to opt for the 100 percent 
option. Deeming 100 percent of the income of an ineligible household 
member increases the countable income of food stamp households. Some 
households lose eligibility if deeming 100 percent of the ineligible 
aliens' income causes their countable income to exceed the thresholds. 
Other households remain eligible but, with a higher net income, qualify 
for smaller benefits.
    Using a simulation based on 1996 Food Stamp Quality Control data 
adjusted to reflect rules in place in FY 1999, we estimate that under 
the provision allowing States to count 100 percent of the income of 
aliens ineligible prior to enactment of PRWORA, approximately 1,000 
people remained eligible but lost an average of $95 a month in benefits 
and 1,000 recipients became ineligible losing $190 a month in benefits. 
Savings are estimated at $5 million for FY 2000 and $25 million for FY 
2000-FY 2004.

Section 827--Proration of Benefits at Recertification

    This provision requires that provisions for prorating benefits at 
recertification revert to those in place before enactment of the Mickey 
Leland Childhood Hunger Relief Act of 1993. Except for migrant and 
seasonal farmworker households, benefits would be prorated if there is 
any break in certification. State agencies are affected to the extent 
that they have to reprogram computers and revise guidance to staff. 
Based on a 1989 GAO study on recertification, entitled Participants 
Temporarily Terminated for Procedural Noncompliance, we estimate that 
the benefits of approximately 1.23 million people will be reduced, for 
a savings of $20 million in FY 2000 and $100 million over 5 years. 
Those losing benefits lose an estimated average of less than $1.50 a 
month.

Departmental Initiative--Inaccessible Resources and Vehicles

Benefits

    This proposed rule would allow some households with licensed 
vehicles of moderate value to participate in the program, if they are 
otherwise eligible and have little equity in the vehicle. State 
agencies could benefit from simplification of procedures as vehicles in 
which the household has little equity are excluded from consideration 
as resources.

Costs

    This provision will revise current procedures to include some 
vehicles under the inaccessible resources provision. Equity in a 
vehicle of less than one-half of the applicable resource standard for 
the household will exempt the vehicle from consideration as a resource. 
This provision has negligible costs in FY 2000. In FY 2001, the

[[Page 10860]]

estimated cost is $55 million and the five year cost is $430 million.

Paperwork Reduction Act

    The information collection requirements described in Sec. 273.2, 
Sec. 273.14(b),and Sec. 273.21 of this proposed rule governing the 
application, certification, and ongoing eligibility of food stamp 
households have been approved under OMB No. 0584-0064. The information 
collection requirements described in Sec. 273.9(d) and Sec. 273.11(b) 
of this proposed rule governing administration of the homeless shelter 
deduction, establishing and reviewing standard utility allowances, and 
establishing methodologies for offsetting the cost of producing self-
employment income have been approved under OMB No. 0584-0096. See Vol. 
64 FR 472, dated January 5, 1999, for a description of the information 
collection requirements and request for comment.
    The information collection requirements governing State agency 
administration and management described in this proposed rule at Part 
272 have been eliminated, made optional or significantly modified as a 
result of implementation of certain provisions of the PRWORA amending 
the Food Stamp Program. Therefore, current reporting and record keeping 
burden, previously approved by OMB and assigned control numbers 0584-
0064, 0584-0083, and 0584-0350, either remains the same or there is no 
longer an information collection burden associated with the provisions 
discussed in the preamble to this rule. Comments regarding this burden 
estimate or any other aspect of this collection of information, 
including suggestions to reduce this burden may be sent to: U.S. 
Department of Agriculture, Clearance Officer, OCIO, room 404-W, 
Washington, DC 20250 and to Wendy A. Taylor, OIRM, Office of Management 
and Budget, Washington, DC 20503.

Background and Discussion of Proposed Regulatory Changes

    On August 26, 1996, Pub. L. 104-193, the Personal Responsibility 
and Work Opportunity Reconciliation Act of 1996 (hereinafter referred 
to as ``PRWORA'') was enacted. PRWORA contained numerous provisions 
amending the Food Stamp Act of 1977 (hereinafter referred to as ``the 
Food Stamp Act'' or ``the Act''). The PRWORA contained several 
provisions designed to increase State agency flexibility in 
administering the Food Stamp Program--especially in the area of 
household application and certification for Program benefits and to 
encourage individuals to take personal responsibility for their own 
welfare. These provisions are addressed in this proposal. In addition, 
this rule addresses provisions of PRWORA relating to the eligibility of 
aliens which did not amend the Act. State agencies were notified in an 
agency memorandum that they were required to implement the mandatory 
provisions upon enactment for applicant households and at 
recertification for participant households without waiting for formal 
regulations.
    For those sections of the regulations we are proposing to amend as 
a result of PRWORA, we are also taking this opportunity to propose 
regulatory changes in response to the President's regulatory reform 
initiative to remove overly prescriptive, outdated and unnecessary 
provisions of the regulations.
    The requirements of each provision of PRWORA addressed by this 
proposal and the proposed regulatory changes are discussed in the 
remaining pages of this preamble. Those changes being made in response 
to the President's regulatory reform initiative are also identified and 
discussed.

Part 272--Requirements for Participating State Agencies

Operating Guidelines and Forms--7 CFR 272.3
    The PRWORA contains several provisions offering State agencies 
optional courses of action in their administration of the Food Stamp 
Program. These options will be included in Program regulations at the 
appropriate location and are discussed later in this preamble. We 
propose that the options chosen by the State agencies be included in 
the State's Plan of Operation. However, we do not intend to make a 
conforming amendment at 7 CFR 272.3 as the current regulation 
sufficiently addresses this requirement. Under current rules at 7 CFR 
272.3, when a State agency implements rule changes, including any 
optional provisions, the State agency is required to provide written 
procedures or guidelines to State staff. These written procedures or 
guidelines are also required to be submitted to FNS for review and 
comment at the same time they are issued to State staff.
    The optional provisions referred to in the previous paragraph 
include State agency options to: (1) Issue separate or combined 
allotments to expedited service households that apply for benefits 
after the 15th of the month as is currently allowed for non-expedited 
service households; (2) have a homeless shelter deduction; (3) require 
mandatory utility allowances; (4) certify households in which all 
members are elderly or disabled for 24 months; (5) determine the 
benefits of a household containing an ineligible alien in accordance 
with 7 CFR 273.11(c)(1) or (c)(2); (5) make exceptions to using direct 
mail issuance in rural areas; and (6) accept an oral withdrawal from 
the household for a fair hearing request. The proposed provisions for 
including these options in the regulations are discussed in detail 
below in order of the regulatory citation.
State Employee Training--7 CFR 272.4(d)
    Section 836 of PRWORA deleted all Federal requirements for State 
employee training. Prior to the enactment of PROWRA, Section 11(e)(6) 
of the Food Stamp Act (7 U.S.C. 2020(e)(6)) required State agencies to 
provide continuing training for all personnel involved with 
certification actions. The Food Stamp Act further provided State 
agencies with the option of contracting for training for persons who 
work with volunteers or nonprofit organizations that provide outreach 
or eligibility screening to persons who may be potentially eligible for 
food stamp benefits. The current rules at 7 CFR 272.4(d) include these 
provisions and require State agencies to provide training for all 
hearing officials and performance reporting system reviewers. Under 
current rules, FNS is also required to review the effectiveness of 
State agency training based on information obtained from Agency reviews 
and other sources.
    To implement Section 836 of PRWORA, we are proposing to delete all 
the mandatory training requirements at 7 CFR 272.4(d). On the basis of 
their own experience, States will determine the training needs 
necessary to develop staff skills that assure efficient and effective 
program administration. FNS fully supports State training efforts and 
believes State agencies will maintain quality training programs as an 
essential element of effective Program administration. Deleting 7 CFR 
272.4(d) reflects the change in the law.
Hours of Operation--7 CFR 272.4(g)
    Section 848 of PRWORA deleted previously designated Section 16(b) 
of the Food Stamp Act. That section required the Secretary of 
Agriculture to establish standards for the periodic review of food 
stamp office hours to ensure that employed individuals were adequately 
served by the FSP. It also required State agencies to submit regular 
reports specifying the administrative actions that the State

[[Page 10861]]

planned to take to meet the standards prescribed in that section. The 
corresponding rules at 7 CFR 272.4(g) specify that State agencies are 
responsible for determining the hours that food stamp offices are open 
and that, at least once annually, State agencies must review the hours 
of operation and maintain the results of the reviews for review by FNS.
    To implement Section 848 of PRWORA, we are proposing to make clear 
that State agencies are responsible for setting the hours of operation 
for their food stamp offices. However, we propose that in setting 
office hours State agencies are expected to take into account the 
special needs of the people they expect to serve. We ask them to be 
especially sensitive to the needs of households who contain working 
persons because these individuals may not be able to leave work to go 
to the food stamp office unless the food stamp office is open during 
non-traditional times such as evenings or weekends. In deciding what 
office hours will be offered, State agencies need to consider section 
11(e)(2)(A) of the Food Stamp Act, as amended by section 835 of PRWORA, 
which requires them to accommodate special needs. In singling out the 
working poor, we recognize that the Program serves a vital role in 
helping families move to self-sufficiency and that even people working 
full-time at minimum wages and taking advantage of the Earned Income 
Tax Credit may continue to fall below the poverty level without food 
stamp assistance. In commenting on this provision, we would appreciate 
any recommendations on how eligible or potentially eligible working 
individuals can best be assured adequate access to the Program.
    The proposed revisions at newly redesignated Sec. 272.4(f) no 
longer require State agencies to assess or report on office hours. It 
is expected that they will do such assessment on their own without the 
need for a regulatory requirement.
Nutrition Education Materials--7 CFR 272.5(b)
    Prior to the enactment of PRWORA, Section 11(e)(14) of the Food 
Stamp Act (7 U.S.C. 2020(e)(14)) and corresponding regulations at 7 CFR 
272.5(b) required FNS to supply State agencies with posters and 
pamphlets containing information about nutrition and the relationship 
between diet and health. State agencies were required to display these 
posters and to make these pamphlets available at all food stamp and 
public assistance offices.
    Section 835 of PRWORA deleted Section 11(e)(14) of the Food Stamp 
Act. The removal of this language requiring FNS to supply nutrition 
education materials to States in no way implies a lesser commitment to 
nutrition education in the FSP by FNS. In fact, it is our intention to 
strengthen and improve nutrition among low-income households through 
the vigorous promotion of nutrition education in the Program. Our 
commitment to the importance of nutrition education for food stamp 
recipients reflects the mandate of the Program which is, as specified 
by Section 2 of the Food Stamp Act, to ``* * * safeguard the health and 
well-being of the nation's population by raising levels of nutrition.'' 
(7 U.S.C. 2012) We will continue to expect States to help recipients 
use food stamp benefits to maximum nutritional advantage. States' 
growing levels of commitment to nutrition education and its importance 
are supported by the increasing number of States that have approved 
State plans for optional nutrition education over the past several 
years. As of Fiscal Year 1999, 46 State agencies have nutrition 
education plans and have committed over $70 million in non-Federal 
resources to FSP nutrition education. It is expected in future years 
that additional States will become actively involved in nutrition 
education delivery. FNS will continue to encourage active State agency 
commitment to the delivery of nutrition education to FSP clients.
    In response to changes in PRWORA, we are proposing to replace 
paragraphs 7 CFR 272.5(b)(1)(i), 7 CFR 272.5(b)(1)(ii), and 7 CFR 
272.5(b)(1)(iii) with a new paragraph (b)(1). The proposed paragraph 
would specify FNS' commitment to encourage State agencies to develop 
Food Stamp Nutrition Education Plans as allowed under current rules at 
7 CFR 272.2(d)(2). While most State agencies have a Nutrition Education 
Plan, FNS encourages all State agencies to seriously consider 
developing such plans so that FSP clients have access not only to food 
stamps, but also to nutrition education that promotes the effective and 
economical use of food stamps for healthier diets and healthier lives.
    Paragraph 7 CFR 272.5(b)(1)(iv), which discusses the Expanded Food 
and Nutrition Education Program (EFNEP), would be redesignated as 7 CFR 
272.5(b)(2). By law, State agencies must continue to encourage food 
stamp participants to participate in EFNEP and allow EFNEP personnel to 
distribute nutrition education materials or talk to participants in 
local food stamp offices. Paragraphs (b)(2) and (b)(3), which reiterate 
certain State agencies' responsibilities, would be redesignated as 
paragraphs (b)(3) and (b)(4).
Optional Use of the Income and Eligibility Verification System (IEVS) 
and the Systematic Alien Verification for Entitlements (SAVE) Program--
7 CFR 272.8, 272.11 and 273.2
    Currently, 7 CFR 272.8 and 7 CFR 273.2 require State agencies to 
maintain and use an income and eligibility verification system (IEVS) 
to request and to exchange wage and benefit information on Food Stamp 
applicants and recipients from specified data sources. The provisions 
of 7 CFR 272.8 also require that, prior to requesting or exchanging 
data, State agencies enter into data exchange agreements with the data 
source agencies and that these agreements be included in the State Plan 
of Operation. The State Plan attachment details the State agency's IEVS 
targeting methods, number of information items acted upon, and a cost-
benefit analysis justification. The regulations at 7 CFR 272.11 require 
State agencies to participate in the Immigration and Naturalization 
Service's Systematic Alien Verification for Entitlement (SAVE) Program.
    Section 840 of PRWORA amended Section 11(e)(18) of the Food Stamp 
Act (7 U.S.C. 2020(e)(18)) to make IEVS and SAVE State options. 
Consequently, we are proposing in this rule to remove the requirement 
that State agencies operate either an IEVS or a SAVE system. We believe 
that many States will decide to continue to avail themselves of these 
opportunities to match their Food Stamp case files against other 
Federal data sources. Furthermore, it is in a State's best interest to 
utilize wage, income, and immigration status information as there is a 
Food Stamp error reduction and cost avoidance potential in the use of 
these matches. Therefore, since in all likelihood many States will wish 
to continue to take advantage of these matching opportunities, these 
proposed regulations would provide a maximum amount of latitude to 
States to use IEVS and SAVE to the best advantage of the State and with 
minimum Federal oversight and record keeping requirements. These 
proposed regulations would require only that State agencies which opt 
to use IEVS and SAVE observe the requirements of the data exchange 
agreements with agencies from which data will be obtained or exchanged. 
Current requirements to report targeting methods and provide cost-
benefit justification would be rescinded in this

[[Page 10862]]

rule. This proposed rule also eliminates requirements for meeting 
follow-up time frames. States should be aware, however, that quality 
control reviews will continue to use data obtained from IEVS and SAVE 
systems as a case analysis tool.
    The proposed amendments to the current regulations are incorporated 
under 7 CFR 272.8, 7 CFR 272.11 and 7 CFR 273.2.

Part 273--Certification of Eligible Households

Application Processing--7 CFR 273.2 (a) Through (j)
    Section 835 of PRWORA amended sections 11(e)(2) and (e)(3) of the 
Act, 7 U.S.C. 2020(e)(2) and (e)(3) which govern the food stamp 
application and certification process. Section 11(e) provides more 
flexibility for State agencies to tailor day-to-day operations of the 
Program to the needs of individual States while ensuring that 
households continue to receive timely, accurate and fair service. More 
specifically, Section 835 removed the requirement that the Secretary 
design a uniform national food stamp application form and eliminated 
dictates concerning what information had to be included on the 
application form and in what particular location on the form. Section 
11(e) of the Act now provides that State agencies must develop their 
own food stamp application form and establish their own operating 
procedures for local food stamp offices. States may now use electronic 
storage of applications and other information, including the use of 
electronic signatures. States must provide a method of certifying and 
issuing coupons to eligible homeless individuals.
    While the language of amended Section 11(e) encourages personal 
responsibility and provides more State agency flexibility, it retains a 
few specific provisions to protect a client's right to timely, 
accurate, and fair service. The Act continues to: (1) Require that 
applications be processed within 30 days; (2) permit households to 
apply for participation on the same day they first contact the food 
stamp office during office hours; (3) consider an application as 
``filed'' on the date the applicant submits the application with the 
applicant's name, address, and signature (benefits are calculated based 
on the filing date of an application); (4) require that an adult 
representative certify the truth of the information on the application, 
including citizenship or alien status of each member, and that such 
signature is sufficient to comply with any provision of Federal law 
requiring applicant signatures; and (5) require that the State agency 
provide each household, at the time of application, a clear written 
statement explaining what acts the household must perform to cooperate 
in obtaining verification and otherwise complete the application 
process.
    Pursuant to Section 11(e) of the Act, as amended by Section 835 of 
PRWORA and the Department's response to the President's reform 
initiative to remove overly prescriptive, outdated, and unnecessary 
provisions of regulations, we are proposing to amend 7 CFR 273. 2, 
``Application Processing.'' The changes that would be made are 
discussed in detail in the following paragraphs of this preamble. Some 
minor editing changes would also be made but are not discussed in 
detail.
Title of Part 273.2
    The rulemaking would change the title of 7 CFR 273.2 from 
``Application processing'' to ``Office operations and application 
processing.''
General Purpose--7 CFR 273.2(a)
    A new paragraph (a) would be added and titled ``Office 
operations.'' Current paragraphs (a), (b), and (c) of 7 CFR 273.2 would 
be revised and combined into a single new paragraph (b).
    New paragraph (a) would incorporate the language contained in 
amended Section 11(e)(2)(A) requiring State agencies to establish their 
own procedures governing office operations that the State agency 
determines best serve households in the State, including households 
with special needs, such as, but not limited to, households with 
elderly or disabled members, households in rural areas with low-income 
members, homeless individuals, households residing on reservations, and 
households in areas in which a substantial number of members of low-
income households speak a language other than English. It would also 
incorporate the requirements that the State agency provide timely, 
accurate, and fair service as required by Section 835 of PRWORA. This 
revised paragraph would also clarify that a State agency may not impose 
a processing requirement for another assistance program as a condition 
of food stamp eligibility. This is in accordance with Section 11(e)(5) 
of the Act (7 U.S.C. 2020(e)(5)) which provides that the State agency 
may not impose any additional eligibility requirements. Eligibility for 
food stamps must be based solely on the Act and food stamp regulations 
and not on another program's requirements. Pursuant to the requirement 
for fair service, we have added a sentence that the State agency must 
have a procedure for informing persons who wish to apply for food 
stamps about the application process and their rights and 
responsibilities.
    State agencies are reminded that pursuant to current regulations at 
7 CFR 272.3(b), operating procedures or guidelines established by the 
State agency are required to be submitted to FNS as part of the State's 
Food Stamp Plan of Operation.
Food Stamp Application--7 CFR 273.2(b) and (c)
    New paragraph (b) would be titled ``Application processing.'' The 
introductory text for this paragraph would include language from the 
first sentence of current paragraph (a) which defines the application 
process to include filing of an application, being interviewed, and 
providing verification. The second, third, and fourth sentences of 
current paragraph (a) would be removed. The second sentence now 
requires State agencies to act promptly on applications and provide 
food stamp benefits retroactive to the month of application for those 
households determined eligible. The third sentence provides that 
expedited service must be available. These requirements are addressed 
in separate paragraphs under this section; therefore, there is no need 
to repeat them here. The fourth sentence simply introduces the rest of 
the provisions under 7 CFR 273.2(a) and is unnecessary.
    New paragraph 7 CFR 273.2(b)(1) would be titled ``Application 
design'' and would include the requirement of amended Section 
11(e)(2)(B)(ii) that State agencies design their own application forms. 
Pursuant to Section 11(e)(2)(C), the application form may include the 
electronic storage of information and the use of electronic signatures. 
The requirement in current paragraph (b)(3) regarding the need for 
prior FNS approval of State-designed applications which deviate from 
the Federally designed application would be removed because Section 835 
eliminated the requirement that State agencies use a Federally-designed 
application.
    Proposed paragraph (b)(1) would provide that the food stamp 
application may be designed separately or included in a State-designed 
multi-program application. As discussed later in this preamble under 
the section entitled ``PA, SSI, and GA categorical eligibility--7 CFR 
273.2(j),'' PRWORA eliminated mandatory joint application processing 
for certain households. However, under Section 11(e), State agencies 
are not prohibited from

[[Page 10863]]

continuing to use joint processing. If they do, the food stamp 
eligibility of jointly processed cases would continue to be based 
solely on food stamp eligibility criteria contained in the Act. The 
benefit levels of all households would also continue to be based solely 
on food stamp criteria.
    New paragraph 7 CFR 273.2(b)(2) would be entitled ``Application 
contents.'' Section 835 of PRWORA amended section 11(e) of the Act to 
remove the list of mandatory application content requirements. This 
mandatory list currently appears at 7 CFR 273.2(b). New paragraph 
(b)(2) would replace this list with a general requirement that the 
application must contain all necessary information to comply with the 
Act and regulations. Notices that are required to be given to 
households by the Act may be included on the application itself or a 
document to accompany the application.
    Departmental regulation 4300-3, dated February 25, 1998, requires 
that the following nondiscrimination statement appear on the 
application itself even if a joint program application is being used:
    ``The U.S. Department of Agriculture (USDA) prohibits 
discrimination in all its programs and activities on the basis of race, 
color, sex, religion, national origin, or political beliefs. Persons 
with disabilities who require alternative means for communication of 
program information (Braille, large print, audiotape, etc.) should 
contact USDA's TARGET Center at (202) 720-2600 (voice and TDD).
    ``To file a complaint of discrimination, write to USDA, Director, 
Office of Civil Rights, Room 326-W, Whiten Building, 14th and 
Independence Avenue, SW, Washington, D.C. 20250-9410 or call (202) 720-
5964 (voice and TDD). USDA is an equal opportunity provider and 
employer.''
    State agencies are reminded that Section 835 only affected 
application content requirements mandated by the Act. Some of the other 
notices appearing on the former model food stamp application form were 
included to ensure compliance with other laws or to ensure a stronger 
case against Program violators. The notices that are still required by 
other Federal laws include: (1) Collection of racial and ethnic data 
and notification to applicants that disclosure of such information is 
voluntary; (2) notification to applicants that the Act requires 
collection of the social security numbers of household members and that 
the Privacy Act requires notification of the intended use of the 
numbers; and (3) notification to applicants of the use of IEVS, 
participation in the SAVE program, and other computer matching systems 
as governed by the Deficit Reduction Act and the Computer Matching and 
Privacy Protection Acts. These requirements are discussed at greater 
length in 7 CFR 273.2(f). Use of the IEVS and SAVE systems were made 
optional by Section 840 PRWORA; but if a State uses these systems, they 
must notify applicants pursuant to the Computer Matching and Privacy 
Protection Acts. As stated earlier, prior to PRWORA, State-designed 
applications were required to be modeled after the Federally-designed 
application; therefore, all State-designed applications were in 
compliance with these other requirements. We would include in new 
paragraph (b)(2) language necessary to ensure that State agencies 
continue to include this information on State-designed applications 
even though the applications are no longer subject to FNS approval.
    We are proposing that a new statement be included on State-designed 
applications to ensure specific compliance with the Privacy Act as it 
relates to administrative offset programs as described in sections 3716 
and 3720A of title 31 U.S.C. and section 5514 of title 5 U.S.C.
    New paragraph 7 CFR 273.2(b)(3) would be entitled ``Jointly 
processed cases'' and would provide that if a State agency has a 
procedure that allows applicants to apply for the food stamp program 
and another program at the same time, the State agency shall notify 
applicants that they may file a joint application for more than one 
program or they may file a separate application for food stamps 
independent of their application for benefits from any other program. 
The proposed paragraph would continue to require joint applications to 
be processed for food stamp purposes in accordance with food stamp 
procedural, timeliness, notice, and fair hearing requirements. The 
proposed rule would continue to provide that no household shall have 
its food stamp benefits denied solely on the basis that its application 
to participate in another program has been denied or its benefits under 
another program have been terminated without a separate determination 
by the State agency that the household failed to satisfy a food stamp 
eligibility requirement. Section 835 of PRWORA added an exception to 
this prohibition for disqualifications as a penalty for failure to 
comply with a public assistance program rule or regulation. We have 
published a separate proposed rule (64 FR 70920) to address 
disqualifications as a penalty for failure to comply with a public 
assistance program rule or regulation. The proposed regulation provides 
that households that file a joint application for food stamps and 
another program and are denied benefits for the other program shall not 
be required to resubmit the joint application or to file another 
application for food stamps but shall have their food stamp eligibility 
determined based on the joint application in accordance with the food 
stamp processing time frames for expedited service and normal 
processing time frames from the date the joint application was 
initially accepted by the State.
    Pursuant to this rulemaking, new paragraph (c) would be entitled 
``Filing an application'' and new paragraph (c)(1) would be entitled 
``Filing process.'' This paragraph contains the requirement appearing 
in the first sentence of current paragraph (c)(1) regarding the manner 
in which applications can be submitted. The new language clarifies that 
the application may be submitted by facsimile transmission as well as 
in person, through an authorized representative, or by mail. The new 
language also recognizes that some State agencies are using on-line or 
other types of automated applications that may require the applicant to 
come into the local office to complete the application. New paragraph 
(c)(1) would also contain the requirement appearing in the fifth 
sentence of current paragraph (c)(1) that allows an applicant to file 
an incomplete application provided it contains at the least the 
applicant's name, address, and signature. The proposed language of new 
paragraph (c)(1) would also include PRWORA requirement which allows the 
use of electronic signatures. The new paragraph specifically provides 
that applications signed through the use of electronic signature 
techniques and applications containing handwritten signatures which are 
then transmitted to the appropriate office via fax or other electronic 
transmission technique are acceptable.
    New paragraph 7 CFR 273.2(c)(2) would be entitled ``Household's 
right to file.'' It would provide that the State agency must make food 
stamp applications readily accessible to all potentially eligible 
households or to anyone who requests one which is currently required by 
7 CFR 273.2(c)(3). The proposed paragraph would contain the requirement 
in current 7 CFR 273.2(c)(2)(i) that the State agency shall provide an 
application in person or by mail to anyone who requests one. The 
requirement in current paragraph

[[Page 10864]]

(c)(2)(i) for mailing an application on the same day as initial contact 
by the household is modified to require mailing by the next business 
day. The proposed paragraph would contain the requirement in the fourth 
sentence of 7 CFR 273.2(c)(1) that a household be allowed to file an 
application on the same day it contacts the food stamp office during 
office hours.
    The first sentence of 7 CFR 273.2(c)(4) provides that the State 
agency shall post signs in the certification offices which explain the 
application processing standards and the right to file an application 
on the day of initial contact. New paragraph (c)(2) would require State 
agencies to post signs or make available other advisory materials 
explaining a person's right to file an application on the day of their 
first contact with the food stamp office and the application processing 
procedures. State agencies would be required to notify all persons who 
contact a food stamp office and either request food assistance or 
express financial and other circumstances which indicate a probable 
need for food assistance, of their right to file an application and 
``encourage'' them to do so. For purposes of this provision 
``encourage'' does not mean recruitment or persuasion. It means that 
State agencies have a responsibility to inform individuals who express 
an interest in food assistance, or express concerns which indicate food 
insecurity, about the Food Stamp Program and their right to apply. We 
believe these requirements are necessary under Section 835 of PROWRA 
which requires fair, accurate, and timely service, and that applicant 
households be permitted to apply the same day they first contact the 
food stamp office in person. It is very important to notify households 
through some means of these rights because benefits are provided to 
eligible households retroactive to the date of application.
    The second sentence of current 7 CFR 273.2(c)(4) requires State 
agencies to include information on the application form that explains 
the processing standards and the right to file an application on the 
day of initial contact. As explained above, State agencies are no 
longer required to have this information on the food stamp application 
form.
    The language appearing in the fifth sentence of current paragraph 
(c)(1) requiring the State agency to advise households that they do not 
need to be interviewed before filing an application as long as it is 
signed by the applicant or an authorized representative would be 
removed. We do not believe this provision is necessary if the State 
agency informs households of the right to file an application on the 
first day they contact the food stamp office.
    New paragraph (c)(2) would address the handling of applications 
filed at the wrong certification office. The proposed rule would 
continue to allow the State agency to require households to file an 
application at a specific certification office or allow them to file an 
application at any certification office within the State or project 
area. The proposed rule would contain the requirement in the second 
sentence of 7 CFR 273.2(c)(2)(ii) that if an application is received at 
an incorrect office, the State agency shall advise the household of the 
address and telephone number of the correct office. However, this 
proposal would modify the requirement in the third sentence that the 
State agency offer to forward the application to the correct office 
that same day. We would require the State agency to forward the 
application to the correct office not later than the next business day. 
The third sentence in 7 CFR 273.2(c)(2)(ii) that requires the State 
agency to inform the household that its application will not be 
considered filed and the processing standards shall not begin until the 
application is received by the appropriate office would be removed, 
because this information should be included on the sign or other 
advisory information required above. The fourth sentence in 7 CFR 
273.2(c)(2)(ii) that requires State agencies to forward applications 
mailed to the wrong office to the appropriate office the same day would 
be revised to require mailing by the next business day. As noted above, 
if an application is received at the incorrect office, the State agency 
would be required to inform the household of the address and telephone 
number of the correct office.
    Section 7 CFR 273.2(c)(iii) provides that in States that have 
elected to have Statewide residency, the application processing time 
frames begin when the application is filed in any food stamp office in 
the State. This provision would be removed as unnecessary, because any 
office in the State would be considered the correct food stamp office.
    The language appearing in the sixth sentence of current paragraph 
(c)(1) which requires State agencies to document the date the 
application was filed by recording on the application the date it was 
received by the food stamp office would be removed. State agencies have 
developed many ways of maintaining applications, through paper records 
and through automated systems. Depending on the system used by a State 
agency, an alternate method of identifying the date an application was 
received may be more appropriate than the method specified in the 
regulations. We believe that State agencies are in the best position to 
decide the method for establishing the date of application. Removing 
the requirement to annotate the application does not eliminate a State 
agency's responsibility to process an application within 30 days of its 
receipt.
    We would retain in new paragraph (c)(4) the requirement in current 
paragraph (c)(5), ``Notice of required verification,'' that State 
agencies provide households, at the time of application for 
certification and recertification, with a clear written statement of 
what acts the household must perform in cooperating with the 
application process, and identify potential sources of required 
verification. The requirement in current paragraph (c)(5) that State 
agencies assist in the verification processing would be retained, but 
modified, in the new provision. While PRWORA eliminated the specific 
requirement to assist in obtaining verification, it substituted a 
general requirement that State agencies address the requirements of 
``special needs'' households in their administration of the Program. 
Such households include, but are not limited to, households with 
elderly or disabled members, households in rural areas with low-income 
members, homeless individuals, households residing on reservations, and 
households in areas in which a substantial number of members of low-
income households speak a language other than English. We do not 
believe that PRWORA amendment should have the result of leaving 
households with limited mobility, transportation difficulties, or 
limited English language capabilities to complete verification 
requirements totally without State agency assistance. Accordingly, the 
State agency must continue to inform such households of the State 
agency's responsibility to assist the household in obtaining required 
verification, providing the household is cooperating with the State 
agency. The specific requirement in current paragraph (c)(5) that the 
State agency comply with bilingual requirements would not be included 
in the new provision, because a general requirement to comply with 
bilingual standards is set forth elsewhere in current regulations (7 
CFR 272.4(b)), and it is not necessary to repeat the requirement here. 
With these changes, current paragraph (c)(5) would be removed.
    Current 7 CFR 273.2(c)(6), ``Withdrawing an application,'' would

[[Page 10865]]

be redesignated as the new paragraph (c)(3).
Household Cooperation--7 CFR 273.2(d)
    Current 7 CFR 273.2(d) contains provisions relative to household 
cooperation in the application process and quality control reviews. We 
propose to retain most of the language of current paragraph (d)(1) and 
all of the contents of current paragraph (d)(2). The changes to 
paragraph (d)(1) we would make are discussed below. Paragraph (d)(1) 
would be titled ``Cooperation with application process.'' We would 
remove the example of ``refusal to cooperate'' appearing in current 
paragraph (d)(1) as unnecessary. There are numerous ways that a 
household could refuse to cooperate, and the example is not definitive. 
While we are removing the example, we nonetheless expect State agencies 
to continue to determine non-cooperation in accordance with the 
standard set forth in the regulation. If a household believes that it 
has been denied unjustly for refusal to cooperate, it retains the right 
to request a fair hearing.
    We would expand on the policy regarding household cooperation with 
subsequent reviews to provide that a subsequent review can be in the 
form of an in-office interview. It is not our intent that State 
agencies routinely require households to appear for an interview to 
resolve discrepancies found during a household's certification period. 
However, we do believe State agencies should have the flexibility to 
require an in-office interview when the State agency has new 
information which calls into question the household's current 
eligibility or level of benefits. For example, a State agency may 
discover information indicating that a household is not reporting 
earned or unearned income, which would affect the household's 
eligibility and benefit level and raise questions about whether the 
failure to report is an intentional Program violation. Refusal to 
appear for the interview would result in the household's case being 
closed. In all cases, where the State agency determines that benefits 
will be reduced or terminated, the household is entitled to receive a 
notice of adverse action, unless exempt from such notice, pursuant to 7 
CFR 273.13.
    We would remove the last two sentences of current paragraph (d)(1). 
The first of these sentences provides that the State agency may not 
determine a household to be ineligible when a person outside of the 
household fails to cooperate with a request for verification. Section 
835 of PRWORA amended section 11(e)(3) of the Act to remove this 
requirement. As a result of this change, the last sentence of current 
paragraph (d)(1) is unnecessary and would be removed. That sentence 
describes certain individuals who are not considered ``outside'' the 
household for the purpose of the existing provision. Removal of these 
provisions does not change current policy because refusal to cooperate 
continues to be defined as refusal by a household member.
Interviews--7 CFR 273.2(e)
    Current 7 CFR 273.2(e) requires households to participate in a 
face-to-face interview with a caseworker at the time of certification 
and each recertification. Prior to PRWORA, the Act did not contain an 
explicit provision requiring food stamp applicants to be interviewed. 
This has always been a regulatory requirement. Section 11(e)(2) did 
provide language which allowed elderly/disabled households to request a 
waiver of the in-office interview under certain conditions. Section 835 
of PRWORA amended section 11(e)(2) of the Act to remove this waiver 
language, thereby eliminating any reference in the Act to the fact that 
in-office interviews are conducted. The Department believes that 
Congress did not seek to eliminate the Program's requirement for 
conducting in-office interviews; rather, by removing the in-office 
interview waiver language in the Act, Congress provided State agencies, 
rather than households, the flexibility to determine when the in-office 
interview should be waived. In consideration of the removal of the 
waiver language and in the spirit of PRWORA, the Department believes it 
is appropriate to reevaluate current policy and determine whether or 
not to continue requiring face-to-face interviews. A face-to-face 
interview affords an eligibility worker the best opportunity to explore 
and resolve questionable or unclear information on the application or 
other documents presented by the household in support of its 
application for benefits in order to make an informed eligibility 
determination. The face-to-face interview also provides an opportunity 
for households to ask questions to help them better understand the many 
facets of the Program and to obtain clarification of questions on the 
application.
    At the same time, we want to allow some flexibility in this area. 
Therefore, after careful consideration, the Department is proposing 
that a face-to-face interview be required at the time of initial 
certification and at least once every 12 months thereafter unless the 
household is certified for longer than 12 months or the face-to-face 
interview is waived by the State agency. This would eliminate the 
requirement to conduct a face-to-face interview at the time a 
recertification if it occurs during the 12-month period since the last 
face-to-face interview. Conforming amendments would be made to the 
recertification provisions of existing rules at 7 CFR 273.14. Proposed 
provisions regarding State agency waiver of the face-to-face interview 
are discussed later in this section of the preamble.
    In response to the President's regulatory reform initiative to 
remove outdated, unnecessary and overly prescriptive rules, we are also 
proposing additional changes to current interview requirements, as 
discussed below. The proposed changes are also consistent with the 
spirit of PRWORA to provide more State agency flexibility in the area 
of household application and certification.
    Current 7 CFR 273.2(e)(1) requires that interviews be held in the 
food stamp office or other certification site. We propose to remove 
this requirement. State agencies could continue to conduct all 
interviews in a food stamp office or could choose to conduct interviews 
in other mutually convenient locations, including the household's home. 
If the interview is conducted in the household's residence, the 
proposal would continue to require that such interview be scheduled in 
advance with the household.
    We would also remove the sixth and eighth sentences of paragraph 
(e)(1). These sentences address the need for privacy and 
confidentiality of the household's circumstances. The seventh sentence 
also addresses the need for privacy; therefore, the sixth and eighth 
sentences are repetitive and unnecessary.
    The provision would continue to provide that the person interviewed 
may be the head of the household, spouse, or another responsible 
household member, or an authorized representative and that the 
applicant may bring any person to the interview he or she chooses, and 
that the applicant's right to privacy must be protected during the 
interview. The proposal also clarifies that the interview may be 
conducted separately or jointly with an interview for another 
assistance program.
    Current 7 CFR 273.2(e)(2) addresses waivers of the interview 
requirement. Prior to enactment of PRWORA, the interview could only be 
waived if requested by the household because the household was unable 
to appoint an authorized representative and had no

[[Page 10866]]

adult household members able to come to the office because the members 
were elderly, mentally or physically handicapped, lived in a location 
not served by a certification office, had transportation difficulties, 
or had similar hardships as determined by the State agency. Section 835 
of PRWORA struck this waiver provision from the Act and amended Section 
11(e)(2) to provide State agencies the authority to waive an interview 
without first being requested by a household. Under this proposal, the 
State agency must waive the in-office face-to-face interview in favor 
of a telephone interview or announced home visit for household hardship 
cases. The proposal would allow the State agency to determine what 
constitutes hardship cases. State agencies could also waive the in-
office interview in favor of a telephone interview or announced home 
visit for households with no earned income if all of its members are 
elderly or disabled. This change is consistent with existing waiver 
authority at 7 CFR 273.14 which allows the State agency to waive the 
in-person interview at recertification for such households. The State 
agency would continue to be required to grant a face-to-face interview 
to any household that requests one.
    We would remove 7 CFR 273.2(e)(2)(i) regarding State agency options 
to conduct telephone or announced home visit interviews as this policy 
is incorporated in the new introductory language of paragraph (e)(2) 
discussed above. We would also remove current paragraphs (e)(2)(ii) and 
(iii) as unnecessary and overly prescriptive. Paragraph (e)(2)(ii) 
provides that the waiver of the face-to-face interview does not exempt 
the household from the verification requirements. Paragraph (e)(2)(iii) 
provides that the waiver of the face-to-face interview must not affect 
the length of the household's certification period.
    We would remove current paragraph (e)(3). The first sentence 
requires the State agency to schedule all interviews as promptly as 
possible to insure that eligible households receive an opportunity to 
participate within 30 days after the application is filed. We would 
remove this sentence and add a sentence to remind State agencies that 
they should schedule interviews so as to allow the household at least 
10 days to provide required verification before the end of the 30 day 
processing period. The remainder of current paragraph (e)(3) requires 
State agencies to schedule a second interview if a household fails to 
attend the first scheduled interview. Under the waiver authority in 7 
CFR 272.3(c), we have granted waivers to the requirement that State 
agencies schedule a second interview if the applicant fails to attend 
the first scheduled interview. Some State agencies have found it 
burdensome to schedule multiple interviews and have found that a 
household that fails to attend the first scheduled interview frequently 
does not attend a second scheduled interview. We recognize that a 
household may not be able to attend a scheduled interview. However, in 
the spirit of PRWORA, which focuses on State agency flexibility in the 
certification process and household responsibility, we do not want to 
mandate that the State agency be responsible for rescheduling a missed 
interview. State agencies that want to may continue to do this. To be 
consistent with the waiver approvals noted above, we are adding a 
requirement to proposed paragraph (c)(1) that State agencies advise 
households that they may reschedule any missed appointment.
Verification--7 CFR 273.2(f)
    Current 7 CFR 273.2(f) sets forth the procedures, including the 
types of documents required, for providing verification to establish 
the accuracy of statements on the application. Some information must be 
verified in all cases and other information must be verified if 
questionable. The mandatory verification requirements are specified in 
paragraph (f)(1), and the verification requirements for questionable 
information are specified in paragraph (f)(2).
    In response to the President's regulatory reform initiative, we 
propose to simplify the current provisions of paragraphs (f)(1) and 
(f)(2) by removing repetitive information and overly prescriptive 
requirements for use of specific documents wherever possible. We also 
propose to change the order of the subparagraphs in paragraph (f)(1) so 
those that relate to financial criteria will be grouped together toward 
the end of the paragraph. Current paragraph (f)(1)(i) regarding gross 
nonexempt income would be renumbered (f)(1)(vi). Current paragraph 
(f)(1)(ii) regarding alien status would be revised and renumbered as 
(f)(1)(iv).
    Section 402 of PRWORA and Sections 503 through 509 AREERA made 
extensive changes in requirements for alien eligibility which affect 
the verification requirements. The changes affecting eligibility are 
described below under the discussion of Alien eligibility--7 CFR 273.4. 
Section 432 of PRWORA also affects the requirements for verification of 
alien eligibility. Section 432(a) of PRWORA required the Attorney 
General to publish regulations not later than 18 months after the date 
of enactment of PRWORA (August 22, 1996) providing requirements for 
verifying that a person applying for a Federal public benefit is a 
qualified alien and is eligible to receive the benefit. Section 504 of 
the Omnibus Consolidated Appropriations Act (OCAA), Pub. L. 104-208 
amended section 432(a) to provide that by the same date the Attorney 
General, in consultation with the Secretary of Health and Human 
Services (HHS), must also establish procedures for a person applying 
for a Federal public benefit to provide proof of citizenship. Section 
5572(a) of the Balanced Budget Act of 1997, Pub. L. 105-33 provides 
that not later than 90 days after enactment of the law, the Attorney 
General, in consultation with HHS, must issue interim guidance for 
verifying qualified alien status and eligibility for a Federal public 
benefit. The interim guidance developed by the Department of Justice 
(DOJ) was published in the Federal Register on November 17, 1997 (62 FR 
61344). State agencies should also be aware that DOJ will be publishing 
a final rule on Verification of Eligibility for Public Benefits. The 
proposed rule has been published in the Federal Register, 63 FR 41662, 
August 4, 1998. Our proposed rule references the forthcoming final 
rule. Relevant changes to alien verification procedures made by DOJ's 
final rule will be incorporated into the final version of this rule. 
The interim guidance provides currently acceptable procedures for the 
verification of citizenship, alien status, and military connections. 
Section 432(b) of PRWORA provided that not later than 24 months after 
the date the verification regulations are adopted, States that 
administer a program that provides a Federal public benefit must have 
in effect a verification system that complies with the new regulations. 
We would remove current paragraphs (f)(1)(ii)(B), (C), and (D), which 
mandate the types of documents that must be used for verification. 
State agencies may refer to the interim guidance developed by DOJ, 
Program policy interpretations, and procedures developed by the Social 
Security Administration (SSA) for obtaining work history information. 
These sources provide examples of verification, including verification 
provided by the household, which State agencies may use in developing 
their own verification requirements.
    Current 7 CFR 273.2(f)(1)(ii)(A) which requires the household to 
provide verification that each alien is eligible

[[Page 10867]]

would be removed. In the introductory paragraph (f)(1)(iv), we would 
provide that the immigration status of all aliens and other factors 
relevant to the eligibility of individual aliens must be verified prior 
to certification. Other factors relevant to the eligibility of 
individual aliens could be the date of admission or date status was 
granted; military connection; 40 qualifying quarters of work coverage; 
battered status; Indian, Hmong or Highland Laotian status; place of 
residence on August 22, 1996; or age on August 22, 1996. We would also 
include in new paragraph (f)(1)(iv) the provision from the first 
sentence of current paragraph (f)(1)(ii)(G), which provides that an 
alien whose eligibility is questionable is ineligible until the alien 
provides acceptable documentation, with two exceptions which would be 
contained in new paragraphs (f)(1)(ii)(A) and (B). The last sentence of 
current paragraph (f)(1)(ii)(G) would be removed because the reference 
to 7 CFR 273.11(c) is unnecessary. With these changes, current 
paragraph (f)(1)(ii)(G) would be eliminated. In regard to expedited 
service, the eligible status of aliens would have to be determined 
prior to certification, but verification could be postponed in 
accordance with paragraph (i).
    Pursuant to the President's regulatory reform initiative, the first 
two sentences and the last sentence of current paragraph (f)(1)(ii)(E) 
would be removed because they do not provide any significant guidance 
to State agencies and are unnecessary. New paragraph (f)(1)(ii)(A) 
would include the provisions appearing in the third and fourth 
sentences of current paragraph (f)(1)(ii)(E), with some changes in 
wording for clarity. The third sentence of current paragraph 
(f)(1)(ii)(E) provides that when a State agency accepts a non-
Immigration and Naturalization Service (INS) document from the 
household as reasonable evidence of alien status, the State agency must 
send the document to INS for verification. The fourth sentence of 
current paragraph (f)(1)(ii)(E) provides that the agency must not 
delay, deny, reduce or terminate an individual's benefits while 
awaiting such verification. With these changes, current paragraph 
(f)(1)(ii)(E) would be eliminated.
    New paragraph (f)(1)(iv)(B) would be added to address verification 
of alien eligibility when work history is questionable. Section 
402(a)(2)(B) of PRWORA provides that aliens lawfully admitted for 
permanent residence may be eligible for food stamps if they can be 
credited with 40 qualifying quarters of work. The conforming amendment 
proposed here would provide that verification of eligibility based on 
40 qualifying quarters of work must be obtained before the alien can be 
certified unless the State agency or the applicant has submitted a 
request to SSA regarding the number of quarters of work that can be 
credited, SSA has responded that the individual has fewer than 40 
quarters, and the individual or the State agency has documentation from 
SSA that SSA is conducting an investigation to determine if more 
quarters can be credited. If it can be documented that SSA is 
conducting an investigation, the individual may participate for up to 6 
months from the date of the first determination that the number of 
quarters was insufficient for eligibility. This provision is based on 
an interpretation of the phrase ``has worked 40 qualifying quarters of 
coverage'' set forth in section 402(a)(2)(B)(ii) of PRWORA. An 
immigrant, under the express terms of section 402(a)(2)(B), would be 
eligible for food stamp benefits if the immigrant had actually worked 
40 qualifying quarters of coverage, notwithstanding SSA's inaccurate or 
incomplete recording of the immigrant's work history. Food stamp 
eligibility is premised on the immigrant's act of working the 40 
quarters rather than SSA's recording of the immigrant's work history. 
Thus, in keeping with past practice concerning the receipt of benefits 
pending the completion of Federal government verification, we propose 
to permit immigrants to receive food stamp benefits for a maximum 
period of 6 months. We emphasize that food stamp benefits pending the 
completion of an SSA investigation are only available to an alien who: 
(1) Is admitted as a lawful permanent resident under the INA (i.e., an 
immigrant); (2) SSA has determined has fewer than 40 quarters of 
coverage; and (3) provides the State agency with documentation produced 
by SSA indicating SSA is investigating the number of quarters 
creditable to the alien.
    Current 7 CFR 273.2(f)(1)(ii)(F) would be removed. That paragraph 
specifies that alien applicants must be provided sufficient time (at 
least 10 days) to provide verification and that benefits must be 
provided timely. The time period for providing verification would be 
included in the introductory text of paragraph (f).
    Current paragraph (f)(1)(iii) would be renumbered (f)(1)(x), and 
the first sentence would be revised to conform to Section 809 of PRWORA 
which amended Section 5(e) of the Act, 7 U.S.C. 2014(e), to allow State 
agencies to mandate use of standard utility allowances. The revised 
paragraph would require that actual utility costs be verified if they 
are used. Current paragraphs (f)(1)(iv) regarding the verification of 
medical costs would be renumbered (f)(1)(vii).
    Current paragraph (f)(1)(v) regarding verification of social 
security numbers (SSN) would be revised and renumbered (f)(1)(iii). The 
third sentence of current paragraph (f)(1)(v) requires that once an SSN 
is verified, the State agency must permanently annotate in the case 
file the verification provided by the household to prevent unnecessary 
reverification. Section 835 of PRWORA amended Section 11(e) of the Act 
to remove the prohibition against requiring a household to submit 
additional verification for information already currently verified. 
Therefore, we would remove this requirement currently found in 
paragraph 273.2(f). We would make the fourth sentence of current 
paragraph (f)(1)(v), which provides that the State agency must accept 
as verified an SSN which has been verified by another program 
participating in the Income Eligibility and Verification System (IEVS), 
optional except for households which are categorically eligible. We 
believe this provision is overly prescriptive, and State agencies 
should have the flexibility to determine if they want to continue such 
verification polices. We would remove the last two sentences of current 
paragraph (f)(1)(v) which instruct State agencies on what to do if an 
individual is unable to provide an SSN or does not have an SSN. These 
procedures are established in 7 CFR 273.6 and do not need to be 
repeated here. We would include a reference to 7 CFR 273.6 instead. We 
would add the requirement in 7 CFR 273.2(f)(8)(i)(B) to verify newly 
obtained SSNs at recertification.
    Current 7 CFR 273.2(f)(1)(vi) would be revised and renumbered 
(f)(1)(ii). This paragraph requires the verification of residency, 
specifies that to the extent possible residency must be verified in 
conjunction with the verification of other information, and includes 
examples of sources of verification. We would remove the requirement 
that residency be verified in conjunction with other information and 
remove the examples. The list is not inclusive, and the eligibility 
worker is in the best position to know whether the other documentation 
provided is sufficient to verify residency. We would also remove the 
last sentence in current paragraph (f)(1)(vi) which specifies that no 
durational requirement may be established. This requirement is already

[[Page 10868]]

established in 7 CFR 273.3 and does not need to be repeated here.
    Current paragraph (f)(1)(vii) specifies the requirements for 
verifying identity and includes a list of examples of acceptable 
documentary evidence. We would renumber it as (f)(1)(i) and remove the 
list of examples of acceptable documentary evidence. State agencies may 
establish their own documentation standards, provided those standards 
do not exceed the general standards provided in this paragraph.
    Current paragraph (f)(1)(viii) would be renumbered as (f)(1)(v). 
Current paragraph (f)(1)(viii)(A) specifies the types of documentation 
required to verify disability as defined in 7 CFR 271.2. We would 
remove the detailed listing of required documentation. Some of the 
documentation listed is self-evident and does not need to be regulated. 
Other documentation requirements that may be necessary are best left to 
the discretion of the eligibility worker. In current paragraph 
(f)(1)(viii)(B), we would make some minor editing changes for clarity.
    Current paragraph (f)(1)(ix) contains provisions regarding 
verification required when a household reapplies after being 
disqualified for refusal to cooperate with quality control (QC) 
reviewers. We would renumber this paragraph (f)(1)(xii) and add the 
title ``Refusal to cooperate with QC reviewer'' to the paragraph for 
consistency.
    We would remove current paragraph (f)(1)(x). The requirement in 
this paragraph to verify household composition if it is questionable is 
not necessary since paragraph (f)(2) requires verification of all 
questionable information. The remainder of the text of current 
paragraph (f)(1)(x) requires individuals who claim separate household 
status to provide documentation to the State agency that they are 
separate. We believe that this requirement is unnecessary and provides 
no meaningful guidance to the State agency. If the individual(s) meets 
the requirements in regulations at 7 CFR 273.1 to be a separate 
household, the State agencies can request proof; however, the primary 
evidence that would need to be provided is proof that the individual 
purchases food and prepares meals separately. Signed statements by the 
individuals involved would in most cases be the only documentation that 
could be provided.
    Current paragraph (f)(1)(ix) concerning shelter costs for homeless 
households would be renumbered (f)(1)(x) and the first sentence would 
be revised to conform with Section 5(e) of the Act, 7 U.S.C. 
2015(e)(5), as amended by Section 809 of PRWORA which establishes an 
optional homeless household shelter deduction. This PRWORA change is 
discussed later in this preamble. We would not include the language 
currently appearing in the second and third sentences of this newly 
designated paragraph which requires the eligibility worker to use 
prudent judgment in determining if the homeless household's 
verification of shelter expenses is adequate and provides an example. 
These sentences do not provide specific verification requirements and 
thus are not necessary.
    It should be noted that through a regulatory publishing error, the 
current regulations at 7 CFR 273.2(f) contain two paragraphs designated 
as (f)(1)(xii). The first paragraph (f)(1)(xii) regarding the 
verification of physical or mental fitness of a student claiming to be 
an eligible student because of a disability would be removed. Since the 
verification is not mandatory in every case and State agencies are 
allowed by current paragraph (f)(2) to verify questionable information, 
we believe the current provision is unnecessary.
    The second paragraph (f)(1)(xii) pertains to child support 
payments. This paragraph would be revised and renumbered (f)(1)(vii). 
We would retain the requirement for verification of the information. We 
would remove the third and fourth sentences because they are 
unnecessary. The third sentence encourages, but does not require, State 
agencies to use information from the State's Child Support Enforcement 
(CSE) automated data files in verifying child support payments. The 
fourth sentence provides that the State agency must give the household 
an opportunity to resolve discrepancies between household and CSE 
verification. Since this is the standard procedure for use of computer 
match data, it is not necessary to include the requirement here.
    We would add a new paragraph (xi), ``Unverified expenses.'' 
Currently 7 CFR 273.2(f)(3)(ii) contains procedures a State agency must 
follow if a household fails to provide required verification of a 
deductible expense within the required processing time. We believe this 
provision should be simplified and moved to paragraph (f)(1) because it 
applies to that paragraph as well.
    Current 7 CFR 273.2(f)(2)(i) provides that the State agency must 
verify, prior to certification of the household, all other factors of 
eligibility which are questionable and affect a household's eligibility 
and benefit level. This section also requires State agencies to 
establish guidelines to be used in determining what will be considered 
questionable and prohibits any requirement for verification based on 
race, religion, ethnic background, or national origin or targeting the 
guidelines to groups such as migrant workers or Native Americans for 
more intensive verification. These provisions would be retained.
    Paragraph (f)(2)(ii) currently provides requirements for 
verification of citizenship if a household's statement that a household 
member is a U.S. citizen is questionable. We would combine paragraphs 
(f)(2)(i) and (f)(2)(ii) into a new paragraph (f)(2) and revise the 
provisions regarding verification of citizenship. We are retaining the 
requirement that citizenship be verified only if it is questionable and 
the provision that participation in another program that requires 
verification of citizenship is acceptable if verification was obtained 
for the other program. As indicated above under the discussion of 
verification of alien eligibility, DOJ has provided guidelines for 
verification of citizenship as well as alien eligibility. Therefore, we 
propose to remove the verification guidance in current paragraph 
(f)(2)(ii) and provide in new paragraph (f)(2) that State agencies must 
verify citizenship in accordance with the DOJ guidance if a household 
member's citizenship status is questionable.
    Current paragraph (f)(3) allows the State agency to mandate 
verification of any other factor which affects household eligibility or 
benefit level, including household size where not questionable. We 
would remove the phrase ``including household size where not 
questionable.'' The provision already allows the State agency to 
mandate verification of any factor not already mandated by the 
regulations. Therefore, this phrase is unnecessary.
    Current paragraph (f)(3)(i) provides that the State agency may 
establish its own standards to provide that all questionable 
information is verified in accordance with 7 CFR 273.2(f)(2), that such 
standards do not allow for inadvertent discrimination, and that the 
standards cannot be applied to households certified by SSA in 
accordance with 7 CFR 273.2(k) without SSA concurrence. We would remove 
the references to verifying questionable information and 
nondiscrimination because these requirements are covered in the new 
paragraph (f)(2) and Sec. 272.6 respectively.
    We would remove 7 CFR 273.2(f)(3)(ii) which contains procedures for 
handling a case if a State agency opts to verify a deductible expense 
and obtaining the verification would delay a household's certification.

[[Page 10869]]

The first sentence provides that if a State agency opts to verify a 
deductible expense and obtaining the verification may delay the 
certification, the State agency must advise the household that its 
eligibility and benefit level may be determined without providing a 
deduction for the claimed but unverified expense. As all expenses for 
which verification is mandatory are covered by this provision, we would 
include it under new paragraph (f)(1)(xi) of this section. The second 
and third sentences identify specific deductions covered by this 
provision, and they would be removed because they are unnecessary. The 
provision in the fourth sentence regarding use of the standard utility 
allowance would be included in new paragraph (f)(1)(xi) of this 
section. The remaining text concerning delayed processing would be 
removed because it is covered by new paragraph (h)(3) of this section 
regarding delays in application processing.
    We would combine the provisions of 7 CFR 273.2 (f)(4)(i), (ii), 
(iii) and (iv) regarding sources of verification into a single 
paragraph designated as (f)(4). Current paragraphs (f)(4)(i), (ii) and 
(iii) provide that documentary evidence must be the primary source of 
verification and that collateral contacts and home visits may be used 
only when documentary evidence is insufficient. We recognize that each 
State agency needs the flexibility to decide what sources of 
verification are appropriate in that State. Technological advances have 
made verification of many items achievable through computer checks. In 
many instances, the eligibility worker is best able to decide what 
verification is appropriate in a specific situation. However, State 
agencies should afford households some flexibility in providing 
necessary verifications. Therefore, in the new paragraph (f)(4), we 
would replace the specific requirements on sources of verification with 
a general statement requiring State agencies to establish their own 
standards for sources of verification. The standards would focus on 
determining the adequacy of the documentary evidence the household 
provides to support the statement on the application. State agencies 
may not limit households to one specific form of verification, if other 
documents can prove equally its statements. The new paragraph (f)(4) 
would continue to prohibit home visits unless scheduled in advance with 
the household. In some contexts such visits have been found to be 
violations of the Fourth Amendment to the Constitution (See, e.g., 
Reyes v. Edmunds 472 F. Supp 1218 (D. Minn. 1979). The new paragraph 
(f)(4) would also retain the requirement in current paragraph 
(f)(4)(iv) on the handling of verification discrepancies.
    We would condense the provisions of 7 CFR 273.2(f)(5)(i) and 
(f)(5)(ii) into a single new paragraph (f)(5). This paragraph would 
include the requirement in the first sentence of current paragraph 
(f)(5)(i) which provides that the household has primary responsibility 
for providing documentary evidence to support statements on the 
application and to resolve any questionable information. The remaining 
sentences of current paragraph (f)(5)(i) require State agencies to help 
applicants with verification, allow households to supply documentary 
evidence in person or through another means, prohibit State agencies 
from requiring households to present verification in person, and 
require the State agency to accept any reasonable documentary evidence 
provided by households. Section 835 of PRWORA revised section 11(e) of 
the Act to remove the requirement that State agencies assist households 
in obtaining verification and the prohibition against requiring 
households to present additional proof of a matter for which the State 
agency already possesses current verification. While PRWORA removed the 
requirement to assist all households in the verification process, there 
remains a mandate to offer assistance to special needs households. As 
previously stated in the discussion relating to the notice of required 
verification, the proposal would require State agencies to offer 
assistance in completing verification requirements for such households. 
We would retain the sentences allowing households to provide 
verification through whatever means they choose, prohibiting States 
from requiring the household to supply verification in person, except 
in the case of a suspected intentional Program violation, and requiring 
the State agency to accept any reasonable documentary evidence provided 
by households. We believe these long standing policies are a necessary 
adjunct of the PRWORA requirement that State agencies provide accurate, 
timely, and fair service.
    We would also remove current paragraph (f)(5)(ii) which provides 
that the State agency may use collateral contacts or announced home 
visits when documentary evidence is insufficient to make a 
determination of eligibility or benefit level and establishes specific 
requirements for obtaining a reliable collateral contact. Proposed 
paragraph (f)(4) would allow State agencies to set their own 
verification standards, establishes collateral contact requirements, 
and requires that home visits be scheduled in advance. Therefore, these 
statements are unnecessary.
    Current paragraph (f)(6) requires the State agency to document 
eligibility, ineligibility, and benefit level determinations. This 
documentation must be in sufficient detail to allow a reviewer to 
determine the reasonableness and accuracy of the determination. For 
obvious reasons, we do not intend to change the requirements of this 
paragraph.
    We would remove 7 CFR 273.2(f)(7) regarding use of the State Data 
Exchange (SDX) and Beneficiary Data Exchange (BENDEX) databases. The 
provisions in this section are also contained in 7 CFR 272.8 and are 
not necessary here. Consistent with the removal of paragraph (f)(7), we 
would renumber current paragraphs (f)(8), (9), and (10) as paragraphs 
(f)(7), (8), and (9), respectively.
    Newly redesignated paragraph (f)(7) provides procedures for 
verification of household circumstances reported subsequent to initial 
certification. Current paragraph (f)(7)(i) contains requirements for 
verifying changes reported at the time of recertification. Current 
paragraph (c)(7)(ii) contains requirements for verifying changes 
reported during the certification period. We would combine paragraphs 
(f)(7)(i) and (f)(7)(ii) into a single paragraph designated as (f)(7) 
and establish new verification requirements for changes that occur at 
any time subsequent to the initial certification.
    Section 11(e)(3)(C) of the Act prior to PROWRA prohibited a State 
agency from requiring additional proof of a matter on which the State 
agency already has current verification, unless the State agency has 
reason to believe that the information possessed by the agency is 
inaccurate, incomplete, or inconsistent. The current regulations 
require verification for a change in income or actual utility expenses 
if the source has changed or the amount has changed by more than $25 
and for previously unreported medical expenses and total recurring 
medical expenses which have changed by more than $25. Income may not be 
verified if the source has not changed or if the amount has not changed 
by more than $25, unless the information is incomplete, inaccurate, 
inconsistent or outdated.
    Section 835 of PROWRA removed the prohibition on requiring 
households to submit additional information. Therefore, we propose to 
replace the current regulatory requirements with a general requirement 
that the State

[[Page 10870]]

agency verify information as required by 7 CFR 273.2(f)(1), (2), and 
(3), as proposed to be amended by this action, when a household reports 
any changes during the certification period or at recertification which 
would affect eligibility or the benefit level, or if unchanged 
information becomes questionable. Although this may increase 
verification efforts in a few instances, e.g., when income changes by 
less than $25, we believe that this requirement is simpler to 
understand and administer, because the procedure is the same for all 
household circumstances. We believe that the proposed requirement that 
the change would have to affect eligibility or the benefit level will 
limit the increase in verification efforts significantly. The 
Department is particularly interested in receiving comments on this 
proposal.
    We would remove newly designated paragraph (f)(8)(ii) regarding 
disclosure safeguards and agreements because 7 CFR 272.8 contains these 
requirements. With the removal of newly designated paragraph 
(f)(8)(ii), newly designated paragraphs (f)(8)(iii), (iv), and (v) 
would be redesignated as paragraphs (f)(8)(ii), (iii), and (iv), 
respectively. Minor editing changes would be made to the newly 
designated paragraphs (f)(8)(ii) and (iii).
    Current paragraph (f)(9), newly designated as paragraph (f)(8), 
contains procedures for using the Income Eligibility Verification 
System (IEVS) information to verify eligibility and benefits. As 
previously discussed in this preamble, section 840 of PRWORA amended 
Section 11(i)(18) of the Act, 7 U.S.C. 2020(e)(18), to make use of IEVS 
a State agency option. This provision was effective upon enactment of 
the law, and States were allowed to implement this provision as of that 
date. If State agencies do access IEVS, most of the procedures 
contained in this paragraph are still appropriate. However, in newly 
redesignated paragraph (f)(8)(iv), we would remove the requirement that 
the State agency put in writing any information it has received from 
IEVS if it is requesting independent verification from the household. 
State agencies may be obtaining this information on-line while the 
household is present or may be able to request the independent 
verification more readily through a telephone call. Therefore, 
specifying that the request for verification be in writing restricts 
the State agency unnecessarily. Currently the section specifies the 
household's right to a fair hearing if it is terminated for failure to 
respond to a request for verification of IEVS data and again if it 
verifies information that results in a negative action. We would remove 
the repetitive language regarding a household's right to a fair 
hearing.
    Newly designated paragraph (f)(9) provides procedures for verifying 
alien status through the SAVE system. As previously discussed in this 
preamble, section 11(p) of the Act, as amended by section 840 of 
PRWORA, makes use of the SAVE system a State agency option. If the 
State agency uses the SAVE system, the procedures in this paragraph 
would apply. We would simplify the language of paragraph (f)(9) and 
eliminate repetitive statements contained in paragraph (f)(9)(i) 
regarding the procedures for obtaining verification from the household 
and the first sentence of (f)(9)(iii) regarding the procedures for 
accessing the SAVE system.
Normal Processing--7 CFR 273.2(g); Delays in Processing--7 CFR 273.2(h)
    Current 7 CFR 273.2(g) requires State agencies to process 
applications within 30 days. Current 7 CFR 273.2(h) provides 
requirements for handling applications when the process is delayed 
beyond the legislatively mandated 30 days. We would remove paragraph 
(h) entirely. We would revise paragraph (g) and redesignate it as 
paragraph (h). New paragraph (g) would contain provisions related to 
authorized representatives, and it will be addressed later. Proposed 
changes are made in response to the President's regulatory reform 
initiative to remove overly prescriptive regulations. The changes are 
also consistent with the spirit of PRWORA allowing State agencies to 
establish their own operating procedures and our belief that State 
agencies should have more flexibility with regard to application 
processing.
    New paragraph (h)(1) would retain the policy contained in current 
paragraph (g)(1) that State agencies provide eligible households an 
opportunity to participate within 30 days of the date of application. 
We would remove, as unnecessary, the third sentence of current 
paragraph (g)(1) referring to the special procedures in 7 CFR 273.2(i) 
for expedited service.
    The first sentence of current paragraph (g)(3), which requires that 
a notice of denial be sent within 30 days if the household is found to 
be ineligible, would be added to new paragraph (h)(1). The remainder of 
current paragraph (g)(3) would be removed to enhance State agency 
flexibility. The second sentence requires the State agency to send a 
notice of denial on the 30th day if a household has failed to appear 
for two scheduled interviews and made no subsequent contact with the 
State agency to express interest in pursuing the application and 
requires the household to file a new application if it is denied under 
these circumstances. This paragraph also requires that the State agency 
deny an application on the 30th day if it was able to conduct an 
interview and request all of the necessary verification, but the 
household failed to provide the verification.
    As stated above, under the Department's proposal, current paragraph 
(h) would be removed. It provides detailed procedures for State 
agencies to follow in the event that final action is not taken on an 
application within 30 days from the date a household applies. We 
propose to replace the provisions under current paragraph (h) with a 
new paragraph (h)(2) which would require State agencies to continue to 
process cases if the State agency is at fault for not processing the 
case within the 30-day time period. If the State agency is at fault for 
delaying the application process, benefits would be restored back to 
the application filing date. If the household is at fault for the 
delay, the State agency may either deny the case or hold it pending for 
an additional period of time to be determined by the State agency but 
not more than 2 months. If the household is at fault for the delay, 
benefits would be provided retroactive to the date the household takes 
the required action.
    In new paragraph (h)(3), we would retain, but consolidate, the 
procedures for determining the cause of a delay, taking into account 
the changes mandated by PRWORA. Delays that are the fault of the State 
agency include, but are not limited, to failure to explore and attempt 
to resolve with the household any unclear and incomplete information 
provided at the interview; failure to inform the household of the need 
for one or members to register for work and allow the members at least 
10 days to complete work registration; failure to provide the household 
with a statement of required verification and allow the household at 
least 10 days to provide the missing verification; and failure to 
notify the household that it could reschedule a missed interview. 
Delays that are the fault of the household include, but are not limited 
to, failure to cooperate with the State agency in resolving any unclear 
or incomplete information provided at the interview; failure to 
register household members for work; failure to provide missing 
verification; and failure to reschedule a missed interview appointment.

[[Page 10871]]

Authorized Representatives--7 CFR 273.2(g)
    We propose to redesignate the provisions of current 7 CFR 273.1(f) 
on authorized representatives as paragraph 7 CFR 273.2(g). We believe 
the authorized representative provisions more appropriately belong 
under 7 CFR 273.2. We also propose to amend the authorized 
representative provisions as discussed below.
    Current provisions regarding the use of authorized representatives 
in the application process are contained in several sections of the 
regulations. Section 273.1(f) contains general requirements for using 
an authorized representative to apply for the program, special 
procedures for drug addict and alcoholic treatment centers and group 
homes acting as authorized representatives, special procedures for use 
of an authorized representative for minor household members, 
restrictions on the use of authorized representatives, and provisions 
for disqualification of authorized representatives. Sections 273.11(e) 
and (f) also contain requirements for use of authorized representatives 
in the certification of residents of treatment centers and group homes, 
respectively. Section 274.5 contains requirements for use of authorized 
representatives to obtain benefits and current 7 CFR 274.10(c) contains 
requirements for emergency authorized representatives. In proposed new 
paragraph (g), we would condense and revise requirements for use of 
authorized representatives that appear in 7 CFR 273.1(f), 7 CFR 
273.11(e) and (f), and 7 CFR 274.5.
    We would move to 7 CFR 273.11(e) and (f) the requirements for 
treatment centers and group homes. The introductory paragraph of 7 CFR 
273.1(f)(2) would be removed as unnecessary. The discussion in 
subparagraph (i) regarding addict and alcoholic treatment centers would 
be included in 7 CFR 273.11(e)(1) in place of the reference to 7 CFR 
273.1(f)(2). In current subparagraph (ii) regarding group living 
arrangements, similar references in the first, second, fourth, fifth, 
and last sentences would be included in 7 CFR 273.11(f)(1). The 6th 
sentence would be included in 7 CFR 273.11(f)(7). The remainder of the 
paragraph would be removed as unnecessary. A reference to 7 CFR 
273.11(e) and (f) would be included in the new paragraph 7 CFR 
273.2(g)(1)(iii).
    Proposed 7 CFR 273.2(g)(1) would be entitled ``Applying for 
benefits.'' In new paragraph (g)(1)(i) we would include the provisions 
of current 7 CFR 273.1(f), (f)(1)(i) and (f)(1)(ii) with minor 
editorial changes. The new paragraph would include the current 
provisions that allow an authorized representative to act for the 
household in the application process and to complete work registration 
forms for those household members required to register for work. It 
would also continue to require the State agency to inform the household 
of its liability for overissuances which result from erroneous 
information given by the authorized representative. We would remove the 
two regulatory references, because they are misleading. The reference 
to 7 CFR 273.11 is intended to assure that, except when the drug and 
alcoholic treatment centers and certain group living arrangements act 
as authorized representatives, the household is told of its liability 
for erroneous information given by the authorized representative. We 
would add regulatory language and remove the regulatory reference to 
ensure proper application of the policy. The intent of the reference to 
7 CFR 273.16 is unclear so we are removing it. The new paragraph would 
retain the criteria in current paragraphs (f)(1)(i) and (f)(1)(ii) that 
nonhousehold members may be designated as authorized representatives 
only if the authorized representative has been designated in writing by 
the head of the household, the spouse, or another responsible member of 
the household, and the authorized representative is an adult who is 
sufficiently aware of relevant household circumstances to properly 
represent the household. We would remove current paragraph (3) 
regarding nonhousehold members who can apply for minors and include the 
content in new paragraph (f)(ii).
    The information in introductory paragraph 7 CFR 274.5(a) and the 
first sentence of paragraph (b) would be removed as unnecessary. The 
contents of paragraph (a)(1) and the second sentence of (a)(2) would be 
included in new paragraph (g)(2) entitled ``Obtaining food stamp 
benefits'' with minor editorial changes. The new paragraph would 
include the current provisions for encouraging the household to name an 
authorized representative for obtaining benefits at the time of 
application, that the representative's name be recorded in the 
household's casefile and on its ID, and that the representative for 
obtaining benefits may be the same person designated to make 
application on behalf of the household. In proposed new paragraph 
(g)(2)(ii), we would include a reference to 7 CFR 274.10(c) which 
provides for designating an emergency authorized representative 
subsequent to the time of certification.
    A new paragraph (3) entitled ``Using benefits'' would be added. 
This paragraph would include the information currently contained in 7 
CFR 274.5(a)(6) and (7) and 274.5(c). The last sentence in 7 CFR 
274.5(c) which prohibits a person disqualified for committing an 
intentional Program violation from using coupons on behalf of the 
household would be removed because it is not administratively feasible 
to enforce this provision.
    The current restrictions on designating authorized representatives 
in 7 CFR 273.1(f)(4) for application processing and 7 CFR 274.5 for 
obtaining benefits would be combined in proposed paragraph 7 CFR 
273.2(g)(4), entitled ``Restrictions on designations of authorized 
representatives.'' We would revise the provisions to omit examples and 
other unnecessary language. Proposed paragraph (4)(i) would provide 
that State agency employees involved in certification and issuance and 
retailers authorized to accept food stamp benefits may not act as 
authorized representatives without the specific written approval of the 
designated State agency official and only if that official determines 
that no one else is available to serve as an authorized representative. 
Proposed paragraph (4)(ii) would provide that individuals disqualified 
for intentional Program violations cannot act as authorized 
representatives while they are disqualified unless no one else is 
available. Proposed paragraph (4)(iii) would include the provisions for 
disqualifying authorized representatives for misrepresentation or 
abuse, and paragraph (4)(iv) would contain the current provision that 
homeless meal providers may not act as authorized representatives for 
homeless food stamp recipients.
    The current restrictions provide that the State agency cannot 
impose a limit on the number of households an authorized representative 
may represent. In the event an employer is designated as the authorized 
representative for his or her employee or that a single authorized 
representative has access to a large amount of benefits, the State 
agency must exercise caution to assure that the household has freely 
requested the assistance of the authorized representative, the 
household's circumstances are correctly represented, the household is 
receiving the correct amount of benefits, and the authorized 
representative is properly using the coupons. We believe these are 
unrealistic expectations for the State agency. Section 11(e)(7) of the 
Act, 7

[[Page 10872]]

U.S.C. 2020(e)(7), allows the Secretary to restrict the number of 
households which may be represented by an individual. We would delegate 
this authority to the State agency in lieu of the current provision in 
order to enable the State agency to prevent abuse.
    With these proposed changes, current 7 CFR 273.1(f) and 7 CFR 274.5 
would be removed. The regulatory site of 7 CFR 274.5 would be reserved 
for future use.
Expedited Service--7 CFR 273.2(i)
    Currently, 7 CFR 273.2 (i) lists the categories of households 
entitled to expedited service and establishes the procedures that State 
agencies must use in providing that service. The PRWORA included 
several provisions affecting the expedited service requirements.
    Section 838 of PRWORA amended Section 11(e)(9) of the Act, 7 U.S.C. 
2020(e)(9) by removing households consisting entirely of homeless 
people as a category of households entitled to expedited service. 
Section 838 also increased the number of days which State agencies have 
to provide expedited service from 5 to 7 calendar days. In accordance 
with these provisions, this rule removes the reference to homeless 
households in current paragraph (i)(1)(iii), renumbers paragraph (iv) 
as (iii), and changes the expedited processing timeframe appearing in 
current paragraph (i)(3) from 5 days to 7 days. Note: These changes are 
also included in another rule which may be published before this rule. 
These are nondiscretionary changes that are being made here to avoid 
unnecessary confusion.
    In response to the President's regulatory reform initiative to 
remove unnecessary, redundant, outdated, or overly prescriptive rules, 
we would remove repetitive definitions and make several changes in the 
procedures for providing expedited service, as discussed below.
    Under current paragraph (i)(2), State agencies are required to 
design their application procedures to identify households eligible for 
expedited service at the time they apply. The proposed rule would 
continue to require State agencies to prescreen applications for 
entitlement to expedited service. In addition, the proposed rule would 
require State agencies to document their evaluations. The current 
paragraph provides screening examples. The examples would be removed in 
the proposed rule, because they are unnecessary.
    We would amend the first sentence of 7 CFR 273.2(i)(3)(i) to add 
language referring to access to benefits through an Electronic Benefit 
Transfer (EBT) system or other electronic access devices in the first 
sentence. We would remove the reference to households residing in 
institutions applying jointly for SSI and food stamps as procedures for 
these households are addressed elsewhere in the regulations. We would 
remove paragraphs (i)(3)(ii) and (i)(3)(v). These two paragraphs 
provide the expedited time frame within which benefits must be provided 
to residents of drug addiction or alcoholic treatment and 
rehabilitation centers, residents of group living arrangements, and 
residents of shelters for battered women and children who are eligible 
for expedited service. As the expedited time frame is no different from 
the requirements for other households eligible for expedited service, 
there is no need for separate regulatory sections for these households.
    We would renumber 7 CFR 273.2(i)(3)(iii) and (i)(3)(iv) as 
paragraphs (i)(3)(ii) and (i)(3)(iii), respectively, to reflect the 
proposed removal of paragraph (i)(3)(ii). We would amend newly 
designated paragraph (i)(3)(ii) to reflect the proposed removal of the 
requirement for an in-office interview discussed earlier in this 
preamble. We would also remove the sentence that provides that the 
first day of the 7-day period within which expedited service must 
commence is the calendar day following application. The first day for 
all application processing requirements is the calendar day following 
application. This sentence is, therefore, repetitive and unnecessary.
    Current paragraph (i)(4) provides the special procedures State 
agencies must use for expedited service. These procedures are very 
detailed requirements that State agencies must follow, including a 
multitude of options. In this rule we propose to significantly 
streamline these requirements as discussed below.
    In 7 CFR 273.2(i)(4)(i), we would remove the references to the 
sources of verification. We would subdivide current paragraph (i)(4)(i) 
into paragraphs entitled ``Verification,'' ``Social security numbers,'' 
and ``Work registration.'' Under new paragraph (i)(4)(iii), we would 
include a requirement that the applicant register for work, but we 
would remove the language about attempting to register other members 
prior to certification. If an authorized representative applies on 
behalf of the household, that person may register a member for work so 
this should not delay the process.
    Current paragraph (i)(4)(i)(B) already provides that the State 
agency may verify factors other than identity, residency, and income 
provided that verification can be accomplished within expedited 
processing standards. We believe that providing specific directions for 
certain additional items is therefore unnecessary. The eligibility 
worker is in the best position to decide what information can be 
verified and how verification can be achieved in a specific case.
    Paragraph (i)(4)(i)(B) currently provides that households entitled 
to expedited service will be asked to furnish an SSN or apply for one 
for each person before the second full month of participation. 
Households entitled to expedited service were allowed to participate 
for the first full month without providing or applying for an SSN 
because of the requirement to combine the prorated allotment for the 
month of application and benefits for the first full month for 
households applying after the 15th of the month. Since Section 828 of 
PRWORA made use of combined allotments a State agency option, as 
discussed below, we propose to provide that households must furnish or 
apply for an SSN prior to the second month's issuance or, if the State 
agency issues combined allotments, prior to the third month's issuance. 
For newborns, we would require the household to provide an SSN or proof 
of an application for an SSN at its next recertification or within 6 
months following the month the baby is born, whichever is later, in 
accordance with 7 CFR 273.6(b)(4). Those household members who do not 
meet these requirements must be allowed to continue to participate if 
they satisfy the good cause requirements specified in 7 CFR 273.6(d).
    We would remove 7 CFR 273.2(i)(4)(ii). This paragraph requires the 
State agency to promptly contact the collateral contact to obtain 
verification. State agencies have the option of verifying information 
provided by the household either through a collateral contact or 
through readily available documentation pursuant to current paragraph 
(i)(4)(i)(A). There is no requirement that verification be accomplished 
solely through a collateral contact. Further, the State agency is 
required to process an application so that benefits can be provided 
within the expedited service time standard, regardless of the method of 
verification used. Therefore, this paragraph is unnecessary.
    We would remove 7 CFR 273.2(i)(4)(iii). The provisions regarding 
certification periods would be removed because they are unnecessary. 
The provisions regarding postponed verification would be included in 
new

[[Page 10873]]

paragraph (i)(4)(i)(B). The provisions regarding notices of eligibility 
and expiration would be removed because they are also included in 7 CFR 
273.10(g)(1).
    Proposed paragraph (i)(4)(ii)(A) would provide that if a household 
applies on or before the 15th of the month and is assigned a 
certification period of longer than one month postponed verification 
must be obtained prior to the second month's issuance. The State agency 
must issue the second month's benefits within seven working days from 
receipt of the verification but not before the first day of the second 
month.
    Proposed paragraph (i)(4)(ii)(B) would provide that if a household 
applies after the 15th of the month postponed verification must be 
submitted prior to the third month's issuance. The third month's 
benefits must be provided within seven working days from the receipt of 
the necessary verification, but not before the first day of the third 
month.
    Newly designated paragraph (i)(5) allows State agencies to issue 
combined allotments to households that apply after the 15th of the 
month and have their applications processed under the expedited service 
procedures. The combined allotment consists of a prorated amount for 
the month of application and the benefits for the first full month of 
participation. Section 203 of the Hunger Prevention Act of 1988 (Pub. 
L. 100-435) amended section 8(c) of the Act, 7 U.S.C. 2017(c), to 
require State agencies to provide combined allotments to all households 
applying after the 15th of the month. Regulations dated June 7, 1989 
(54 FR 24518) implemented this requirement. Section 1732 of the 1990 
Leland Act (Pub. L. 101-624) amended section 8(c)(3) of the Act to make 
use of combined allotments for households processed under the 30-day 
standard a State agency option. This provision was added to 7 CFR 
273.2(g) by regulations dated October 17, 1996 (61 FR 54303). Combined 
allotments were still required for households entitled to expedited 
service. The October 17, 1996 regulations moved that requirement from 7 
CFR 274.2(b)(2) to 7 CFR 273.2(i)(4) and provided that, if necessary, 
verification should be postponed to meet the expedited time frame. 
Section 828 of PRWORA amended section 8(c) of the Act again to make 
combined allotments optional for expedited service households as well 
as households processed under normal procedures. We would amend newly 
designated paragraph (i)(5) to provide that, at State agency option, 
households applying after the 15th of the month may receive a combined 
allotment.
    We would remove 7 CFR 273.2(i)(4)(iii)(D) which prohibits providing 
benefits to households determined ineligible in the month of 
application or the following month or which have failed to provide 
postponed verification. This paragraph would be removed because it is 
not necessary.
    Current paragraph (i)(4)(iv) would be renumbered as paragraph 
(i)(6), and it would be entitled ``Frequency.'' The provision would 
continue to provide that there is no limit to the number of times a 
household can be certified under the expedited service procedures but 
the expedited procedures would not apply at the time of recertification 
if a household reapplies before the end of its current certification 
period.
    Current paragraph (i)(4)(v) would be removed as unnecessary. That 
paragraph provides that households requesting, but not entitled to, 
expedited service must have their applications processed according to 
normal standards.
    We are also proposing to make additional editing changes throughout 
paragraph (i) which are not discussed in detail in this preamble. These 
changes do not affect the procedural requirements but simply provide 
clarity or brevity.
PA, GA and Categorically Eligible Households--7 CFR 273.2(j)
    Current regulations at 7 CFR 273.2(j) mandate categorical 
eligibility for certain households and mandate joint application 
processing requirements for households in which all members are 
receiving public assistance, supplemental security income (SSI), or 
general assistance (GA). Section 835 of PRWORA amended Section 11(e) of 
the Act to eliminate the mandate for joint processing of such cases. 
However, State agencies may opt to continue to jointly process these 
cases. Accordingly, we would revise current paragraph (j) in its 
entirety to: (1) Retain pertinent categorical eligibility provisions; 
(2) remove provisions or references associated with mandatory joint 
application processing; and (3) retain those joint processing 
provisions we believe are necessary to protect the client should a 
State agency opt to continue joint processing of TANF, SSI or GA 
households.
    We would change the title of 7 CFR 273.2(j) to ``Categorical 
eligibility.'' We would remove current paragraphs (j)(1), (j)(3) and 
(j)(5) which set forth mandatory joint processing requirements. 
Although we would remove paragraphs (j)(1) and (j)(3), some statements 
in these paragraphs would be retained but moved to other locations in 
the regulations or in the new paragraph (j). Current paragraph (j)(5) 
also provides that a separate application must be used for TANF/GA food 
stamp applicants. Under the provisions of PRWORA, the type of 
application used is a State agency option; therefore, the provision is 
being removed. With the removal of paragraphs (j)(1) and (j)(3), 
current paragraphs (j)(2) and (j)(4) would be redesignated as 
paragraphs (j)(1) and (j)(2), respectively.
    New paragraph (j)(1) would be entitled ``TANF and SSI households.'' 
and it would be revised in its entirety. We would retain the policy but 
simplify the language. New paragraph (j)(2) would be entitled ``GA 
households.'' The new paragraph would be revised. We would retain the 
policy but make some editorial changes. We would remove current 
paragraphs (j)(4)(vi) regarding categorical eligibility for combination 
households as unnecessary.
Alien Eligibility--7 CFR 273.4
    Under section 6(f) of the Act, 7 U.S.C. 2015(f), and current rules 
at 7 CFR 273.4(a), citizens, nationals, and aliens lawfully admitted 
for permanent residence, refugees, asylees, parolees, and certain other 
specifically listed categories of aliens were eligible to participate 
in the Food Stamp Program, if they met the other eligibility criteria. 
Under section 402 of PRWORA, as amended, citizens and non-citizen 
nationals remain eligible, but the remaining categories of eligible 
aliens have been changed.
    We propose to revise 7 CFR 273.4(a) to remove references to those 
aliens no longer eligible and add provisions referencing the alien 
provisions of Title IV of PRWORA, as amended. We also propose to revise 
the section to remove unnecessary and overly prescriptive requirements. 
As discussed above, we would also make conforming amendments to 7 CFR 
273.2(f)(1)(ii) to address verification of alien eligibility under the 
new alien eligibility requirements and to reference the DOJ interim 
guidance.
    Current regulations at 7 CFR 273.4(a) which provide that a citizen 
is eligible for food stamp benefits do not define ``citizen.'' We 
propose to add a reference in paragraph (a)(1) to the DOJ interim 
guidance which includes a definition of the term. According to Step 3 
A. of the guidance, a citizen is one of the following (subject to 
certain exceptions and qualifications):
    1. A person (other than the child of a foreign diplomat) born in 
one of the several States or in the District of Columbia, Puerto Rico, 
Guam, the U.S.

[[Page 10874]]

Virgin Islands, or the Northern Mariana Islands who has not renounced 
or otherwise lost citizenship;
    2. A person born outside of the United States to at least one U.S. 
citizen parent (sometimes referred to as a ``derivative citizen''); or
    3. A naturalized U.S. citizen.
    The DOJ interim guidance also includes non-citizen nationals under 
the discussion of citizenship. A non-citizen national is a person born 
in an outlying possession of the United States (American Samoa or 
Swain's Island) on or after the date the U.S. acquired the possession, 
a person whose parents are U.S. non-citizen nationals (subject to 
certain residency requirements), or certain persons who elected to 
become nationals but not citizens of the United States pursuant to 
section 302 of the Covenant to Establish a Commonwealth of the Northern 
Mariana Islands in Political Union with the United States of America 
(Pub. L. 94-241, 90 Stat. 263, 48 U.S.C. 1801 note). In the past, Food 
Stamp Program regulations did not distinguish between citizens and non-
citizen nationals. For clarity, we propose to add the term ``non-
citizen national'' to paragraph (a)(2) to provide that non-citizen 
nationals are eligible to participate.
    Section 431 of PRWORA, as amended by section 501 of the OCAA and 
sections 5302, 5562, and 5571 of the Balanced Budget Act, defines a 
qualified alien as:
    (1) An alien who is lawfully admitted for permanent residence under 
the Immigration and Nationality Act (INA);
    (2) An alien who is granted asylum under section 208 of the INA;
    (3) A refugee who is admitted to the United States under section 
207 of the Act;
    (4) An alien who is paroled into the United States under section 
212(d)(5) of the INA for a period of at least 1 year;
    (5) An alien whose removal or deportation is being withheld under 
section 241(b)(3) or 243(h) of the INA;
    (6) An alien who is granted conditional entry pursuant to section 
203(a)(7) of the INA as in effect prior to April 1, 1980;
    (7) A battered alien, an alien whose child has been battered, or an 
alien child of a battered parent; or
    (8) A Cuban or Haitian entrant as defined in section 501(e) of the 
Refugee Education Assistance Act of 1980.
    Section 5562 of the Balanced Budget Act amended the INA citation 
for aliens whose deportation has been withheld to add a reference to 
section 241(b) of the INA. The OCAA amended section 243(h) of the INA 
to consolidate the two former procedures of deportation and exclusion 
into one procedure called removal. The section was renumbered as 
241(b)(3) but appropriate conforming amendments were not made to 
section 402 and other sections of PRWORA which referenced section 
243(h). The Balanced Budget Act corrected that omission.
    Section 501 of the OCAA amended section 431 of PRWORA by adding a 
new paragraph (c) to provide that certain aliens who have been battered 
or subject to extreme cruelty are considered qualified aliens if they 
meet certain criteria. Section 5571(c) of the Balanced Budget Act 
further amended section 431(c) by adding a new paragraph (3) to include 
the alien child of a battered parent as a qualified alien. To be a 
qualified alien based on battery or extreme cruelty, the alien must 
meet the following conditions:
    (1) The alien or the alien's child has been battered or subjected 
to extreme cruelty in the U.S. by a spouse or parent or by a member of 
the spouse or parent's family residing in the same household as the 
alien, but only if the spouse or parent consents to or acquiesces in 
such battery or cruelty; in the case of a battered child, the alien did 
not actively participate in the battery or cruelty; in the case of an 
alien child whose parent has been battered, the child must be living in 
the same household as a parent who has been battered under these 
circumstances;
    (2) The battered alien or child no longer resides in the same 
household as the abuser;
    (3) There is a substantial connection between the battery or 
cruelty and the need for benefits;
    (4) The alien described in paragraph (1) must also have been 
approved or have a petition pending with INS that sets forth a prima 
facie case for status as a spouse or a child of a U.S. citizen under 
INA section 204(a)(1)(A)(ii), (iii) or (iv); classification under 
section 204(a)(1)(B)(ii) or (iii); suspension of deportation and 
adjustment of status under section 244(a)(3); status as a spouse or 
child of a citizen under section 204(a)(1)(A)(i); or classification 
under section 204(a)(1)(B)(i). An alien whose child has been battered 
or subjected to extreme cruelty by a spouse of a parent of the alien 
must have been approved or have a petition pending with INS for 
classification under section 204(a)(1)(B)(ii) or (iii).
    Section 5571 of the Balanced Budget Act also amended section 431 of 
PRWORA to provide that the agency providing the benefits will be 
responsible for determining whether there is a substantial connection 
between the need for benefits and the abuse. Section 5571 also provides 
that the Attorney General must issue guidance concerning the meaning of 
the terms ``battery'' and ``extreme cruelty'' and the standards to be 
used for determining whether there is a substantial connection between 
the abuse and the need for benefits. The Attorney General's guidance 
was published in the Federal Register on December 11, 1997 (62 FR 
75285).
    We do not propose to include in the regulatory language all the 
provisions of the law for establishing eligibility as a battered alien 
because detailed information is available in the DOJ interim guidance 
and the battered aliens are not eligible for food stamps unless they 
meet one of the criteria we propose to list in new paragraph 
(a)(5)(ii).
    Section 5302 of the Balanced Budget Act added Cuban and Haitian 
entrants, as defined in section 501(e) of the Refugee Education 
Assistance Act of 1980, to the list of qualified aliens in section 431 
of PRWORA. We would include the list of qualified aliens in the 
proposed paragraph (a)(5)(i).
    To be eligible for food stamps, most aliens must be both a 
qualified alien as defined in section 431 of PRWORA and meet one of the 
food stamp criteria in section 402 of PRWORA. Section 402, as amended 
by the Balanced Budget Act, limits eligibility for food stamps to 
qualified refugees, asylees, deportees, specified Amerasians, Cuban and 
Haitian entrants, certain legal permanent residents, and veterans and 
active duty personnel and the spouse and unmarried dependent children 
of the veterans and active duty personnel. We would include the list in 
proposed paragraph (a)(5)(ii).
    Under section 402(a)(2)(B) of PRWORA, the eligibility of aliens 
lawfully admitted for permanent residence is limited to those who have 
earned or can be credited with 40 qualifying quarters of work as 
determined under title II of the Social Security Act and as provided 
under section 435 of PRWORA, as amended by section 5573 of the Balanced 
Budget Act. An alien may be credited with all of the qualifying 
quarters worked by a parent of the alien before the alien becomes 18 
and the quarters worked by a spouse of the alien during their marriage, 
if they are still married or the spouse is deceased. We propose to 
include this requirement in the introductory language of the new 
paragraph (b)(1).
    To establish eligibility based on 40 quarters of work, the State 
agency may request information from the Social Security Administration 
through the Quarters of Coverage History System

[[Page 10875]]

(QCHS) and/or obtain verification from the household. State agencies 
may request and receive information regarding qualifying quarters from 
SSA according to SSA instructions. For each individual (other than the 
person who signed the application) whose SSN is submitted to SSA with a 
request for quarters of coverage information, the State agency must 
obtain a signed form consenting to the release of the information. This 
form is to be filed in the household's case file. Section 5573 of the 
Balanced Budget Act authorizes SSA to disclose quarters of coverage 
information concerning an alien and an alien's spouse or parents to 
other government agencies. Therefore, if quarters of coverage based on 
relationship are needed and a signed form cannot be obtained, the State 
agency may submit a request to SSA for information regarding the 
individual's work history. These requests will be processed manually by 
SSA. Procedures for requesting information from SSA are contained in 
SSA's manual for obtaining quarters of coverage information.
    Aliens who can be credited with 40 qualifying quarters, as reported 
by SSA, would be certified, if otherwise eligible. Those who do not 
have 40 quarters according to SSA records and who accept that 
determination would be denied participation. However, individuals who 
believe they should be credited with more quarters of work may request 
that SSA investigate their work history to determine if more quarters 
can be credited. As indicated above under the discussion of 
verification of alien eligibility, we propose to require that if SSA is 
conducting an investigation to determine if more quarters can be 
credited, the applicant may participate pending the results of the 
investigation for up to 6 months from the date of SSA's original 
finding of insufficient quarters. A conforming amendment is being 
proposed to include this requirement in the verification requirements 
in new 7 CFR 273.2(f)(1)(iv)(B).
    SSA has prepared guidance for State agencies to use in requesting 
work history information through the QCHS. Through this system, State 
agencies are able to obtain information about work performed in jobs 
covered by Title II of the Social Security Act and some work that is 
not covered by Title II, such as some employment with federal, State, 
or local governments or nonprofit organizations. If the State agency 
cannot obtain work history information from SSA, the State agency will 
have to obtain verification of work from the applicant or other 
available data sources. This will always be the case for recent 
quarters worked because of the time it takes SSA to update the database 
using the most recent tax returns. Lag quarters are quarters for which 
SSA has not had time to update the information.
    Section 402(a)(2)(B)(ii) of PRWORA also provides that no qualifying 
quarter creditable for a period beginning after December 31, 1996, can 
be included as one of the credited quarters if the individual received 
any Federal means-tested public benefit (as provided under section 403) 
during that quarter. Section 435 of PRWORA provides that no qualifying 
quarter for any period after December 31, 1996, by a parent or spouse 
of the alien may be included if the parent or spouse received any 
Federal means-tested public benefit during that quarter. Section 403(c) 
includes a list of types of assistance or benefits that are exempt from 
the prohibition (exempt assistance). The list includes certain 
emergency medical assistance; short-term, non-cash emergency disaster 
relief; assistance under the National School Lunch Act; assistance 
under the Child Nutrition Act of 1966; certain non-Title XIX public 
health assistance; certain foster care and adoption payments; student 
assistance provided under titles IV, V, IX, and X of the Higher 
Education Act of 1965, and titles III, VII, and VIII of the Public 
Health Service Act; benefits under the Head Start Act; and benefits 
under the Workforce Reinvestment Act. The list also includes in-kind 
services which may not be means-tested, such as soup kitchens and 
short-term shelter, specified by the Attorney General. The DOJ 
published a Notice in the Federal Register on August 30, 1996 (61 FR 
45985), containing a non-exclusive list of the types of exempt in-kind 
services.
    Each federal agency which issues means-tested public benefits is 
responsible for identifying and publishing a list of benefits to which 
the term ``Federal means-tested public benefit'' as used in PRWORA 
applies. According to Federal Register Notices published by HHS (62 FR 
45256) and SSA (62 FR 5284) on August 26, 1997, TANF, Medicaid, and SSI 
are Federal means-tested public benefits. According to a Federal 
Register Notice published by this Department on July 7, 1998 (63 FR 
36653), the Food Stamp Program and the block grant food assistance 
programs in Puerto Rico, American Samoa, and the Commonwealth of the 
Northern Mariana Islands are the only FNS program to which the term 
applies. We are proposing that ``received'' means that the alien 
actually received the assistance or food stamps in the quarter in 
question.
    We propose to provide in paragraph (a)(5)(ii)(A) that if an alien 
was determined eligible for any Federal means-tested public benefit as 
defined by the agency providing the benefit or was certified to receive 
food stamps during any quarter after December 31, 1996, the quarter 
cannot be credited toward the 40-quarter total. Likewise, if the alien 
needs a quarter from a parent or spouse, the parent or spouse's quarter 
cannot be counted if the parent or spouse was determined eligible for 
any Federal means-tested public benefit or was certified to receive 
food stamps during the quarter. For example, if the alien worked and 
his parents received SSI in the first quarter of 1997, the alien would 
have one quarter counted because he worked and he did not receive 
assistance; if the alien did not work, but his parents worked and 
received SSI, the alien would not have any countable quarters.
    Section 402(a)(2)(A) of PRWORA provided that refugees admitted 
under section 207 of the INA, asylees admitted under section 208 of the 
INA, and aliens whose deportation or removal has been withheld under 
sections 243(h) or 241(b)(3) of the INA would be eligible for 5 years. 
Refugees would be eligible for 5 years from the date of entry into the 
country, asylees would be eligible for 5 years from the date asylum was 
granted, and deportees would be eligible for 5 years from the date 
deportation or removal was withheld. Section 5302 of the Balanced 
Budget Act reorganized section 402(a)(2)(A) to separate the 
requirements for eligibility for SSI and food stamps and to provide in 
paragraph (A)(ii)(IV) that an alien granted status as a Cuban or 
Haitian entrant, as defined in section 501(e) of the Refugee Education 
Assistance Act of 1980, would be eligible for 5 years from the date 
granted that status. Section 5306 of the Balanced Budget Act further 
amended section 402(a)(2)(A) of PRWORA to add a new paragraph 
(A)(ii)(V) which provided that certain Amerasians would be eligible for 
5 years from date admitted to the United States as an Amerasian 
immigrant pursuant to section 584 of the Foreign Operations 
Appropriations Act, incorporated as section 101(e) of Public Law 100-
202 and amended by Public Law 100-461. This legislation provided for 
certain Amerasians in Vietnam, with their close family members, to be 
admitted to the U.S. as immigrants through the Orderly Departure 
Program beginning on March 20, 1988. These Amerasians will be admitted 
for permanent residence at the point of entry.
    The AREERA further amended section 402 of PRWORA. Section 503 of

[[Page 10876]]

AREERA amended section 402(a)(2)(A) of PRWORA to extend the time period 
that refugees, asylees, deportees, Cubans, Haitians, and Amerasians can 
be eligible from 5 years to 7 years. Section 402(a)(1) of PRWORA makes 
all other types of qualified aliens (with the exceptions of lawful 
permanent residents with 40 qualifying quarters of work and alien 
members of the armed forces, alien veterans, and certain members of 
such an alien's family) ineligible for food stamps for as long as they 
maintain their current alien status; all other non-qualified aliens are 
ineligible under section 401(a) of PRWORA. Section 504 of AREERA 
amended section 402(a)(2)(F) of PRWORA to provide that aliens who are 
receiving benefits or assistance for blindness or disability as defined 
in section 3(r) of the Food Stamp Act may be eligible for food stamps 
provided that they were lawfully residing in the United States on 
August 22, 1996. Section 505 of AREERA amended section 402(a)(2)(G) of 
PRWORA to provide that aliens who are American Indians born in Canada 
to whom the provisions of section 289 of the Immigration and 
Nationality Act apply or who are members of an Indian tribe as defined 
in section 4(e) of the Indian Self-Determination and Education 
Assistance Act may be eligible for food stamps. Section 506 of AREERA 
added a new section (I) to section 402(a)(2) of PRWORA to make aliens 
eligible if they were lawfully residing in the United States on August 
22, 1996 and they were 65 years of age or older on that date. Section 
507 of AREERA added a new section (J) to section 402(a)(2) of PRWORA to 
make aliens eligible if they were lawfully residing in the United 
States on August 22, 1996 and are currently under 18 years of age. 
Section 508 of AREERA added a new section (K) to section 402(a)(2) of 
PRWORA to make any individual eligible who is lawfully residing in the 
United States and was a member of a Hmong or Highland Laotian tribe at 
the time that the tribe rendered assistance to United States personnel 
by taking part in a military or rescue operation during the Vietnam era 
(8/5/64-5/7/75.) Section 508 further extends food stamp eligibility to 
the spouse, or unremarried surviving spouse, and unmarried dependent 
children of such Hmong or Laotian.
    Section 509 of AREERA amended section 403(b) of PROWRA to provide 
that American Indians made eligible by Section 505 and Hmong and 
Highland Laotians and their families made eligible by Section 508 do 
not have to be qualified aliens to be eligible for food stamps. These 
are the only aliens who can be eligible for food stamps without being a 
qualified alien as defined in Section 431 of PROWRA.
    We propose to include the alien eligibility criteria added by 
AREERA in section 7 CFR 273.4(a).
    The aliens provisions contained in AREERA are effective November 1, 
1998.
    Section 403 of PRWORA, as amended by Balanced Budget Act, provides 
that, with certain exceptions, aliens, including those admitted for 
lawful permanent residence, who enter the country on or after August 
22, 1996, are barred from Federal means-tested public benefits for 5 
years. As noted above, section 402 of PRWORA, as amended by the 
Balanced Budget Act, contains a specific timeframe for the Food Stamp 
Program which is somewhat different. Section 402, as amended, provides 
that for food stamp purposes refugees, asylees, aliens whose 
deportation have been withheld, Cubans, Haitians and Amerasians are 
only eligible for 7 years. The time limits imposed by section 402, as 
amended, govern the Food Stamp Program because that section 
specifically references the Food Stamp Program. Section 403 of PRWORA 
arguably also applies to the Food Stamp Program. This is because food 
stamps are a ``Federal means-tested public benefit under section 403. 
See 63 FR 36653, 36654. However, section 402(a)(2)(A) of PRWORA makes 
refugees, asylees, deportees, Cubans, Haitian, and Amerasians eligible 
for food stamps for 7 years. Following this 7-year eligibility period, 
these groups of qualified aliens are ineligible for as long as they 
remain in one of the described alien categories. Conversely, section 
403(b)(1) exempts these same groups of qualified aliens from the 
initial 5-year ban on the receipt of Federal means-tested public 
benefits. At the expiration of the 5-year ban, a qualified alien 
falling into one of the described alien categories is eligible for 
Federal means-tested public benefits without any time limitation. Thus, 
the application of both sections 402 and 403 of the Food Stamp Program 
would result in an unavoidable conflict: under section 402, aliens 
within the described categories would be eligible for 7 years followed 
by a ban on the receipt of further benefits, while under section 403, 
these same aliens would be eligible for benefits from the time they 
fall within one of the described alien categories without time 
limitation.
    In order to avoid this conflict, we propose to apply the 
requirements of section 402 uniformly to the Food Stamp Program. This 
interpretation avoids the absurd result of separate provisions of 
PRWORA mandating mutually inconsistent eligibility determinations. 
Additionally, this interpretation is supported by Congress' express 
citation to the Food Stamp Act within the body of section 402 (see 
402(a)(3))(B), 7 U.S.C. 1612(a)(3)(B)), while section 403 contains no 
such cross-reference. Thus, we believe the strictures of section 402 
more closely express Congress' intentions for alien participation in 
the Food Stamp Program.
    Section 402, as amended, does not impose any time limit on aliens 
admitted for legal permanent residence who can be credited with 40 
quarters of work. We propose that the five-year ban in section 403 not 
apply to aliens admitted for lawful permanent residence for food stamp 
purposes. We propose to include the seven-year time limit in section 
402 for refugees, asylees, deportees, Cubans, Haitians, and Amerasians 
in new paragraph (a)(2).
    Under section 402(a)(2)(C) of PRWORA, an alien lawfully residing in 
any State who is a veteran honorably discharged for reasons other than 
alien status or who is on active duty in the Armed Forces of the United 
States for reasons other than training or the spouse or unmarried 
dependent child of a veteran or person on active duty is eligible to 
participate. Section 5563 of the Balanced Budget Act amended the 
provision regarding military-related eligibility to: (1) Apply the 
minimum active duty service requirement (24 months or the period for 
which the person was called to active duty); (2) expand the definition 
of ``veteran'' to include military personnel who die while on active 
duty and certain aliens who served in the Philippine Commonwealth Army 
during World War II or served as Philippine Scouts after World War II; 
and (3) add eligibility for the unremarried surviving spouse of a 
deceased veteran, provided the couple was married for at least one year 
or for any period if a child was born of the marriage or was born to 
the veteran and the spouse before the marriage and the spouse has not 
remarried.
    We propose to define an unmarried dependent child for purposes of 
section 402(a)(2)(C) regarding persons with a military connection to 
include a legally adopted or biological dependent child of an honorably 
discharged veteran or active duty member of the Armed Forces if the 
child is under the age of 18 or if a full-time student under the age of 
22. It would also include a child of a decreased veteran provided the 
child was dependent upon the veteran at the

[[Page 10877]]

time of the veteran's death. In addition, we propose to include a 
disabled child age 18 or older if the child was disabled and dependent 
on the active duty member or veteran prior to the child's 18th 
birthday. This definition is consistent with that developed for the 
Supplemental Security Income (SSI) program. We also propose to apply 
this definition of an unmarried dependent child to section 402(a)(2)(K) 
regarding unmarried dependent children of Hmong and Highland Laotians. 
Section 431(a) of PROWRA provides that except as otherwise provided, 
the terms used have the same meaning given such terms in section 101(a) 
of the Immigration and Nationality Act (INA). However, there is no 
definition of a child in section 101(a), and there are two definitions 
in 101(b), one for immigration purposes and one for nationality 
purposes. Because of the ambiguity of the law and the fact that both of 
the INS definitions are much more complicated than the definition used 
for SSI purposes, we propose to use the SSI definition of dependent 
child. We also considered using dependent as used for other food stamp 
purposes such as the work registration exemption, but believe they are 
too restrictive for this purpose.
    We propose to include the eligibility provision for individuals 
with a military connection in new paragraph (a)(5)(ii)(G).
    Under current regulations at 7 CFR 273.4(a)(8) and (a)(9), aged, 
blind, or disabled aliens admitted for temporary or permanent residence 
under section 245A(b)(1) of the INA and special agricultural workers 
admitted for temporary residence under section 210(a) of the INA are 
eligible to participate. The PRWORA does not address the status of 
aliens admitted for temporary residence. Therefore, these aliens are 
eligible only if they meet the requirements of section 402 of PRWORA 
described above, and we propose to remove paragraphs (a)(8) and (a)(9).
    We also propose to remove 7 CFR 273.4(b), (c) and (d) as 
unnecessary and redesignate paragraph (e) as paragraph (b). Current 
paragraph (b) is a partial list of ineligible aliens. Current paragraph 
(c) refers to the provisions in 7 CFR 273.11(c)(2) for treatment of the 
income and resources of an ineligible alien and is unnecessary. Current 
paragraph (d) explains how to treat the income and resources of an 
alien while awaiting a determination of an individual's eligible alien 
status. Provisions governing the treatment of individuals while 
awaiting verification of eligible alien status are located at 7 CFR 
273.2(f)(1)(ii), and it is not necessary to repeat the procedure at 7 
CFR 273.4. We would retain in redesignated paragraph 7 CFR 273.4(b) the 
requirement in current 7 CFR 273.4(e) to report illegal aliens to INS.
    We are proposing a conforming amendment to 7 CFR 273.1(b)(2)(ii), 
concerning ineligible household members. We propose to change the 
reference in 7 CFR 273.1(b)(2)(ii) from ``Sec. 273.4(a)'' to 
``Sec. 273.4'' because both paragraphs 273.4(a) and (b) describe 
eligibility requirements for aliens.
    We are proposing to move the sponsored alien provisions from 7 CFR 
273.11(j) to new 7 CFR 273.4(c) and to renumber 7 CFR 273.11(k) as 7 
CFR 273.11(j). This will consolidate most of the alien provisions.
Inaccessible Resources--Vehicles--7 CFR 273.8(e) and (g)
    On August 21, 1995, we published a final rule implementing section 
1719 of the Mickey Leland Memorial Domestic Hunger Relief Act of 1990 
(Pub. L. 101-624, 104 Stat. 3783), as amended by section 904 of the 
Food, Agriculture, Conservation, and Trade Act of 1991 (Pub. L. 102-
237, 105 Stat.1818). These statutory provisions, which amended section 
5(g) of the Act (7 U.S.C. 2014(g)(5)), expanded the criteria under 
which a resource is considered inaccessible. The final rule required 
State agencies to develop standards for identifying resources which, as 
a practical matter, the household is unable to sell for any significant 
return because the household's interest is relatively slight or because 
the costs of selling the household's interest would be relatively 
great. Under the final rule, a resource so identified is excluded if 
the estimated amount returned to the household from its sale would be 
less than half of the amount of the applicable resource standard for 
the household. For reasons cited in the preamble discussion, we 
determined that the amendment did not apply to negotiable instruments 
or vehicles. Subsequently, through litigation, various courts 
determined that our policy was a reasonable, but not the only possible, 
interpretation of the statute. In the absence of clear Congressional 
direction, the courts gave deference to the decision of the 
administering agency in this matter.
    We now are proposing to pursue a different policy which would 
include vehicles under the inaccessible resources provisions. Since we 
established the current policy in the early 1990's, public policy has 
focused on the challenges of enabling families to attain self-
sufficiency. It has become evident that a more flexible resource policy 
with respect to vehicle ownership would greatly assist individuals and 
families in achieving self-sufficiency. In rural areas, ownership of a 
reliable vehicle is a virtual prerequisite to employment. Even for 
residents of urban areas, ownership of a vehicle to drive to work is an 
increasing necessity as more desirable, higher paying jobs move to 
suburban areas with little or no mass transit access. The current food 
stamp vehicle policy seems antithetical to the broader goal of 
assisting families to become self-sufficient. Too many times low-income 
working households face ``Hobson's choice'' in applying for food 
stamps. If they dispose of a dependable vehicle because its excess fair 
market value would cause the household to exceed the resource limit, 
they may thereby lose the means necessary to seek or maintain 
employment. If they choose to retain the vehicle, they must do without 
the important nutrition support food stamps provide, even though their 
income level would otherwise qualify them for participation.
    We believe it is possible, under our new policy, to eliminate this 
undesirable obstacle to self-sufficiency while not allowing households 
that own expensive vehicles to qualify for food stamps. Under the 
proposed method of evaluating vehicles' resource value, together with 
the existing food stamp income tests, households would have to have 
income significantly higher than 130 per cent of the poverty guidelines 
to be able to afford the monthly payments and insurance to maintain a 
vehicle of more than modest value. Moreover, research findings from our 
Vehicle Exclusion Limit Demonstration Project (VELD) in North Carolina, 
which ran from November 1994 through September 1996, indicate that very 
few low income households have vehicles of more than modest value. See 
(http://www.fns.usda.gov/oane/MENU/Published/FSP/FSP.HTM). The vehicles 
of the substantial majority of households participating in the VELD 
were worth $8,000 or less. The mean fair market value of the 
households' first vehicle excluded was $7,253. It is our judgment that, 
in appropriate circumstances, possession of such a vehicle can be 
compatible with the purposes of the Program.
    Even vehicles of such modest value might not, however, qualify for 
exclusion from countable resources under the proposed rule. Thirty-nine 
percent of VELD participants, for example, had less than $1,000 equity 
in the first vehicle. Thus a significant portion of those households, 
but not all of them, would have benefited from

[[Page 10878]]

application of the inaccessible resource rule to vehicles.
    For these reasons, we have reexamined and proposed to change our 
policy against applying the inaccessible resource provision to 
vehicles. We believe this interpretation is permissible under the 
current statutory authority. We previously took the position that the 
inaccessible resource provision, 7 U.S.C. 2014(g)(5), was inapplicable 
to vehicles. See 60 FR 43347, 43349 (1994). In sustaining our earlier 
interpretation, however, the Federal Courts of Appeals in Alexander v. 
Glickman, 139 F.3d 733 (9th Cir. 1997), and Warren v. North Carolina 
Dept. of Human Resources, 65 F.3d 385 (4th Cir. 1995), concluded that 
the Secretary's interpretation was plausible, but was not the only 
valid interpretation of the statute. The Ninth Circuit opined that 
``Congress clearly intended that the Secretary would determine what was 
and what was not an `inaccessible resource,'' and identified as a 
``plausible construction'' of the statute one that would count vehicles 
``as assets under (g)(2) unless they are inaccessible under (g)(5) * * 
*.'' Alexander, 139 F.3d at 736. The Fourth Circuit concluded that the 
statute was best read not to treat vehicles as subject to the 
inaccessible resource provision, but nonetheless noted that the statute 
was ``ambiguous'' on that issue. Warren, 65 F.3d at 391.
    Accordingly, since the statute affords discretion on the issue of 
whether vehicles may be treated as inaccessible resources, the 
Secretary proposes to exercise his discretion to propose a revision of 
the current policy through this rulemaking. He would amend section 
273.8(e)(18) to allow vehicles to be treated as inaccessible resources 
as described herein. Specifically, he would amend section 273.8(h)(1) 
to add a provision for excluding the value of a vehicle that the 
household is unable to sell for any significant return because the 
household's interest is relatively slight or the costs of selling the 
household's interest would be relatively great.
    In summary State agencies would handle vehicles as follows:
    (1) A vehicle would be completely excluded from the resource test 
if necessary to produce income, used as a home, necessary to transport 
a disabled household member, necessary to carry fuel for heating or 
water for home use, or classified as an inaccessible resource (i.e., 
likely to produce a return of less than $1,000 or $1,500, depending on 
the household's resource limit);
    (2) One nonexempt licensed vehicle regardless of use, plus any 
vehicles which are used for employment or training purposes, would be 
subject to the excess fair market value test only; and
    (3) Any other vehicle the household possesses would be subject to a 
dual test, that is, the higher of the fair market value in excess of 
$4,650 \1\ or the equity value.
    The following examples show how the new policy would work: (1) A 
household is making payments on a 1994 sedan with a fair market value 
of $7,000. The household has no elderly members. The household has no 
other vehicles and it has $500 equity (fair market value less debt) in 
the 1994 sedan. As the household's equity in the vehicle is less than 
$1,000, the entire value of the vehicle would be deemed to be an 
inaccessible resource and would thus be excluded from consideration as 
a resource for eligibility purposes. (2) Alternatively, assume a 
household has a single vehicle with a fair market value of $6,200, the 
sale of which would produce a return of $1,000 or more. In that case, 
the inaccessible resource provision would not apply. The State agency 
would thus evaluate the vehicle according to its excess fair market 
value. The countable fair market value of the vehicle as a resource 
would be $1,350 ($6,000-$4,650 \1\). Assuming the household did not 
have any other countable resources that, combined with the $1,350, 
would exceed the applicable resource limit for the household, the 
household would remain eligible for participation. (3) Assume the 
household has two non-excludable cars, neither of which is used for 
employment-related purposes. The State agency would evaluate the first 
car, which is exempt from the equity test regardless of use, for excess 
fair market value only as in example (2). Because the second car is not 
used to transport household members for employment-related purposes, 
the State agency would establish both this vehicle's fair market value 
and its equity value, and would count toward the household's resources 
the greater of the two amounts. Assuming the second car has fair market 
value of $6,000 and a equity value of $2,200, for example, the equity 
value would exceed the excess fair market value of $1,350, and the 
equity value would be counted. The $2,200 equity value would render 
ineligible a household subject to the $2,000 resource limit.
---------------------------------------------------------------------------

    \1\ Effective October 1, 1996, section 810 of PRWORA amended 
section (5)(g) of the Act to set the fair market value exclusion 
limit at $4,650. See the proposed rule published at 64 FR 37456 for 
further information.
---------------------------------------------------------------------------

    We are interested in receiving public comment on this significant 
proposed change in policy. We would also like to receive public comment 
on the ways in which we could simplify the method for evaluating 
vehicles. Currently, the rules are fairly complex. Some vehicles are 
exempted from consideration as a resource. Others which are nonexempt, 
but are the household's only transportation or are used for employment 
or training are subject only to the fair market test. A third category 
of household vehicles is subject to a dual test, which counts as a 
resource the higher of the fair market value in excess of $4,650 or the 
equity value. Commenters should be mindful that the fair market value 
test is established by statute, while the equity test is subject to 
Departmental discretion.
JTPA Payments--7 CFR 273.9(b)(1)(v)
    Current regulations at 7 CFR 273.9(b)(1)(v) provide that earnings 
of individuals 19 years of age or older who are participating in on-
the-job training programs under Section 204(5), Title II, of the Job 
Training Partnership Act (JTPA), Pub. L. 97-300, must be counted as 
income, unless otherwise excluded under the provisions of 7 CFR 
273.9(c)(7). Section 142 (b) of the original JTPA provided that 
allowances, earnings, and payments to individuals participating in 
programs under JTPA could not be considered as income for Federal 
means-tested programs. Subsequently Pub. L. 99-198, the Food Security 
Act of 1985, amended Section 5(l) of the Act, 7 U.S.C. 2014(l), to 
require counting as income on-the-job training payments provided under 
Section 204(5) of Title II of the JTPA, except for dependents less than 
19 years old. Section 702(b) of Pub. L. 102-367, the Job Training 
Reform Amendments of 1992, restructured the provisions in the JTPA and 
further amended Section 5(l) of the Food Stamp Act by replacing the 
reference to Section 204(5) with references to Section 204(b)(1)(C) and 
Section 264(c)(1)(A). This change requires the exclusion of all on-the-
job training payments received under the Summer Youth Employment and 
Training Program. Moreover, section 199A(c) of the Workforce Investment 
Act (WIA) of 1998 states that all references in any other provision of 
law to a provision of the Comprehensive Employment and Training Act 
(CETA), or of the Job Training Partnership Act (JTPA), as the case may 
be, shall be deemed to refer to the corresponding provision of that 
law. We propose to change the references in 7 CFR 273.9(b)(1)(v) 
accordingly.

[[Page 10879]]

Transitional Housing Payments--7 CFR 273.9(c)(1)(i)(E) and 
(c)(1)(ii)(E)
    Current regulations at 7 CFR 273.9(c)(1)(i) and (ii) exclude the 
full amount of any PA or GA grant made to a third party (vendor 
payment) on behalf of a household residing in transitional housing for 
the homeless. The regulations are based on a provision of the Mickey 
Leland Childhood Hunger Relief Act (Pub. L. 103-66), which was 
implemented in final regulations dated August 29, 1994 (59 FR 44309). 
Section 811 of PRWORA amended Section 5(k)(2)(F) of the Act to remove 
the exclusion for transitional housing payments.
    Because of the many changes in this provision in recent years, we 
are providing a brief historical summary that may be helpful to 
readers. The Food Security Act of 1985 (Pub. L. 99-198), implemented by 
regulations dated September 29, 1987 (52 FR 36390), specifically 
provided that PA or GA payments diverted to a third party on behalf of 
the household for living expenses should be considered income. The law 
reinforced previous policy that payments from governmental assistance 
programs be treated as income. However, the law also provided an 
exclusion for State or local emergency or special assistance vendor 
payments. These payments are excluded to the extent that the payment is 
not normally provided as part of a PA grant and is provided over and 
above the normal grant. In 1987, Pub. L. 100-77, the Stewart B. 
McKinney Homeless Assistance Act, amended the Act by excluding PA or GA 
housing assistance made to a third party on behalf of households 
residing in temporary housing facilities, if the temporary housing unit 
did not have a stove or refrigerator. The provision was to expire on 
September 30, 1989. The Mickey Leland Memorial Domestic Hunger Relief 
Act (Pub. L. 101-624) amended the Act to allow an exclusion for 
households living in transitional housing equal to 50 percent of the 
maximum shelter allowance provided to households receiving assistance 
under Title IV-A of the Social Security Act who live in permanent 
housing and made the provision retroactive to October 1, 1990. Section 
906 of the Food, Agriculture, Conservation, and Trade Act Amendments of 
1991 (Pub. L. 102-237) clarified that the subject provision was 
effective only if the State calculates a shelter allowance to be paid 
under the State Plan of Operation separate and apart from payments for 
other household needs. The 1993 Leland Act (Pub. L. 103-66) provided an 
exclusion for the full amount of the assistance.
    In accordance with PRWORA requirement, we propose to rescind 7 CFR 
273.9(c)(1)(i)(E) and (c)(1)(ii)(E) to eliminate the exclusion for PA 
or GA transitional housing vendor payments. State agencies may continue 
to exclude emergency housing assistance to migrant or seasonal 
farmworker households while they are in the migrant stream and 
emergency and special assistance that is above the normal grant. GA 
payments from a State or local housing authority and assistance 
provided under a program in a State in which no cash GA payments are 
provided may also be excluded. With the removal of paragraph 
(c)(1)(i)(E), current paragraph (c)(1)(i)(F) would become paragraph 
(c)(1)(i)(E). With the removal of paragraph (c)(1)(ii)(E) and the 
removal of paragraph (c)(1)(ii)(A), as described under ``Energy 
Assistance'' below, current paragraphs (c)(1)(ii)(B) through (G) would 
become paragraphs (c)(1)(ii)(A) though (c)(1)(ii)(E).
Earnings of Children--7 CFR 273.9(c)(7)
    Current regulations at 7 CFR 273.9(c)(7) exclude the earned income 
of any household member who is under age 22 and an elementary or 
secondary school student living with a natural, adoptive or stepparent 
or under the parental control of a household member other than a 
parent. Section 807 of PRWORA amended section 5(d)(7) of the Act (7 
U.S.C. 2014(d)(7)) to exclude the income of children age 17 and under. 
Accordingly, we propose to amend 7 CFR 273.9(c)(7) to exclude the 
earned income of any household member who is under age 18. We propose 
to retain all the other provisions of 7 CFR 273.9(c)(7) regarding this 
exclusion which were implemented in the rule published October 17, 1996 
(61 FR 54292).
    Currently, 7 CFR 273.10(e)(2)(i) provides that for prospective 
eligibility and benefit determination, the earned income of a high 
school or elementary school student must be counted beginning with the 
month following the month in which the student turns 22. Section 
273.21(j)(1)(vii)(A) provides that the student's income must be counted 
beginning with the budget month after the month in which the student 
turns 22. We propose to make conforming amendments to these sections to 
change the age from 22 to 18.
Nonrecurring Lump-sum Payments--7 CFR 273.9(c)(8)
    In 7 CFR 273.9(c)(8) regarding nonrecurring lump-sum payments, we 
plan to add a sentence to allow TANF diversion payments to be excluded 
under certain conditions. Current policy is that they may be excluded 
if no more than one payment is anticipated in any 12-month period to 
meet needs that do not extend beyond a 90-day period, the payment is 
designed to address barriers to achieving self-sufficiency rather than 
provide assistance for normal living expenses, and the household did 
not receive a regular monthy TANF payment in the prior month or the 
current month. We are proposing to include this policy except that we 
plan to change the 90-day period to a 4-month period. The Department of 
Health and Human Services uses a 4-month period as the regulatory 
framework for its definition of short-term. (See Federal Register 
Volume 64, No. 69, dated April 12, 1999, page 17759.)
Energy Assistance--7 CFR 273.9(c)(11)
    Under current regulations at 7 CFR 273.9(c)(11), energy assistance 
provided under any Federal law is excluded from consideration as 
income. Energy assistance provided under State or local law which meets 
the requirements specified in the regulations is excluded from income 
if FNS has approved the exclusion. That section also contains detailed 
guidance for determining when assistance is actually provided for the 
``purpose'' of energy assistance.
    Section 808 of PRWORA replaced section 5(d)(11) of the Act with a 
new section 5(d)(11) , 7 U.S.C. 2014(d)(11), which modifies the 
exclusion for Federal and State agency energy assistance payments. 
Federal energy assistance payments are excluded under this provision, 
with one exception. Energy assistance provided under Title IV-A of the 
Social Security Act is not excluded. This eliminates the exclusion of 
energy assistance provided as part of a State's public assistance 
grant. The new provision allows an exclusion for one-time payments or 
allowances made under a Federal or State law for the costs of 
weatherization or emergency repair or replacement of an unsafe or 
inoperative furnace or other heating or cooling device.
    In accordance with PRWORA provisions, we propose to revise 7 CFR 
273.9(c)(11) in its entirety. In the new paragraph (c)(11)(i) we would 
add an exclusion for any payments or allowances made for the purpose of 
providing energy assistance under any Federal law other than Part A of 
Title IV of the Social Security Act. In new paragraph (c)(11)(ii) we 
would add an exclusion for one-time payments issued on an as-needed 
basis under State or

[[Page 10880]]

Federal law for weatherization or emergency replacement or repair of 
heating or cooling devices. For the purposes of this provision, we 
would consider a one-time payment as one which is provided on an as-
needed basis rather than in a regular series of payments. A household 
would have to apply for this assistance each time it incurred a cost 
for weatherization or emergency repair or replacement of a heating or 
cooling device. If one payment is received to replace windows and 
another payment is later received to replace a furnace, each payment 
could be considered a one-time payment. If a down payment on an expense 
is made and the final payment is made when the work is completed this 
would be one payment. All other provisions appearing under current 
paragraph (c)(11) would be removed.
    Section 808 of PRWORA also made a conforming amendment to section 
5(k) of the Act (7 U.S.C. 2014(k)) to remove existing exclusions for 
energy assistance in sections 5(k)(1)(B) and (C). These exclusions 
appear in current regulations at 7 CFR 273.9(c)(1). Previously, section 
5(k)(1)(B) of the Act excluded third-party housing assistance for 
energy and utility expenses, and section 5(k)(1)(C) excluded third-
party energy assistance payments. PRWORA added a new paragraph (C) to 
section 5(k)(1) to exclude only the types of energy assistance listed 
in section 5(d)(11) of the Act, as amended by PRWORA, when the 
assistance is provided in the form of third-party payments. 
Accordingly, we would make a conforming amendment at 7 CFR 273.9(c) to 
remove the income exclusion for GA vendor payments for utility expenses 
in paragraph (c)(1)(ii)(A). It is not necessary to make a conforming 
amendment to the income exclusion provisions at 7 CFR 273.9(c)(1)(i)(C) 
and (c)(1)(ii)(B) regarding energy assistance because they refer to 
paragraph (c)(11), which contains the new exclusion.
    Section 808 of PRWORA also added a new paragraph (4)(A) to section 
5(k) of the Act to provide that, with one exception, a third-party 
payment under a State law for energy assistance is considered to be 
money paid directly to the household. The exception is contained in 
paragraph 5(k)(2)(G) of the Act and refers to assistance provided to a 
third party on behalf of a household under a State or local GA program, 
or comparable program, if, under State law, no assistance under the 
program may be provided directly to the household in the form of a cash 
payment. This exclusion is located in current regulations at 7 CFR 
273.9(c)(1)(ii)(G). Therefore, no changes are needed to implement this 
PRWORA provision. Paragraph 5(k)(4)(B) of the Act, as amended, also 
provides that for purposes of the excess shelter deduction, an expense 
paid on behalf of a household under a State law to provide energy 
assistance is considered an out-of-pocket expense incurred and paid by 
the household. Therefore, the household is entitled to claim the 
expense as a shelter cost. This provision is discussed further under 
the standard utility allowance provision below.
Shelter Costs--7 CFR 273.9(d)(5), Standard Utility Allowance--7 CFR 
273.9(d)(6), and Adjustment of Shelter Deduction--7 CFR 273.9(d)(9)
    We propose to reorganize 7 CFR 273.9(d)(5) and (6) to include all 
provisions related to shelter expenses in revised 7 CFR 273.9(d)(6). 
Current paragraph (d)(5) sets forth the requirements for allowing a 
deduction from the household's income for shelter expenses, including a 
description of allowable shelter costs and the special provisions for 
homeless households. Current paragraph (d)(6) describes the procedures 
for establishing and using a standard utility allowance as a shelter 
cost deduction. We believe these two sections of regulations are 
closely related and should be combined. Therefore, we would move the 
provisions of paragraph (d)(5), combine them with the provisions in 
paragraph (d)(6), and retitle the revised paragraph (d)(6) as ``Shelter 
costs.'' Paragraph (d)(7) regarding child support would be redesignated 
as (d)(5).
    1. Homeless households. Current regulations at 7 CFR 273.9(d)(5)(i) 
provide that State agencies must use a standard estimate of the shelter 
expenses for households in which all members are homeless and are not 
receiving free shelter throughout the month. State agencies may develop 
their own standards or use an annually adjusted standard provided by 
FNS. In October 1995, the standard was updated to $143 per month for FY 
1996. The regulation is based on a provision of the Mickey Leland 
Domestic Hunger Relief Act (Pub. L. 104-624) which amended section 
11(e)(3)(E) of the Act (7 U.S.C. 2020(e)(3)(E)) to require that State 
agencies develop standard shelter estimates. The provision authorized 
the Secretary to issue regulations to preclude the use of the standard 
shelter estimate for homeless households with extremely low shelter 
costs. The State agency was required to use the estimate in determining 
benefits unless a household verified higher expenses. Readers may refer 
to the final regulations implementing this provision published on 
December 4, 1991 (56 FR 63594) for a more complete discussion of the 
issues involved. In implementing this provision, FNS provided that the 
homeless shelter estimate would be used in determining the household's 
excess shelter deduction. That is, if the household claimed no shelter 
costs exceeding the estimate, the estimate would be considered to be 
the household's total shelter cost and the amount of the estimate over 
50 percent of the household's income would be the household's excess 
shelter deduction.
    Section 809 of PRWORA amended section 11(e)(3) of the Act to remove 
the homeless shelter provision and added a new paragraph (5) to section 
5(d) of the Act (7 U.S.C. 2014(d)(5)) to provide that State agencies 
may develop an optional standard homeless shelter allowance not to 
exceed $143 per month. The new paragraph provides that the State agency 
may use the allowance in determining eligibility and allotments for 
homeless households and that the State agency may make a household with 
extremely low shelter costs ineligible for the allowance.
    The Conference Report accompanying PRWORA (House Report 104-725) 
indicates that the homeless shelter allowance is to be used in 
determining a homeless household's excess shelter deduction. However, 
the provision was added to the Act as a separate deduction. The 
language of the law is clear that the allowance is to be used as a 
deduction in determining eligibility and allotments. The law does not 
indicate that the standard is to be used in computing the excess 
shelter expense, as is the case with the standard utility allowance. 
Since the language is clear, there is no reason to refer to the 
legislative history of the provision. Therefore, we propose to revise 
current 7 CFR 273.9(d)(5)(i) (redesignated as paragraph (d)(6)(i)) to 
add an optional homeless shelter deduction from net income. Households 
claiming the homeless shelter deduction would be entitled to no other 
shelter deduction. They could, however, be entitled to a deduction for 
excess shelter expenses instead of the homeless shelter deduction if 
they verified actual costs. We are also proposing a conforming 
amendment to 7 CFR 273.10(e)(1)(i) to add a new paragraph (G) to 
include the standard homeless shelter deduction.
    2. Excess shelter deduction. Currently, 7 CFR 273.9(d)(5)(ii) 
provides that households are allowed a deduction for shelter costs in 
excess of 50 percent of the household's income after all other 
deductions have been subtracted. It provides that the shelter deduction 
cannot exceed the maximum limit

[[Page 10881]]

established for the area, unless the household contains a member who is 
elderly or disabled. It indicates that the shelter deduction limit 
applicable for use in the States, the District of Columbia, Guam, and 
the Virgin Islands will be prescribed in Federal Register notices. 
Paragraphs (5)(d)(ii)(A) through (E) describe allowable shelter 
expenses.
    The provisions of current paragraph (d)(5)(ii) concerning 
application of the excess shelter expense limit in households with and 
without an elderly or disabled member would be included in the 
introductory language of new 7 CFR 273.9(d)(6)(ii).
    Current paragraph (d)(5)(ii) provides that the maximum shelter 
deduction amounts will be published in General Notices published in the 
Federal Register. In 7 CFR 273.9(d)(9), the shelter deduction amounts 
and adjustments are described. Section 809 of PRWORA sets the limits 
for the various areas by year. Therefore, we propose to remove these 
provisions and provide instead that FNS will notify State agencies when 
the amount of the excess shelter limits change.
    We propose to amend current 7 CFR 273.9(d)(5)(ii)(C) to expand the 
list of allowable utility costs to include fuel or electricity used for 
household purposes other than heating or cooling (including cooking) as 
an allowable utility expense. These additions are being made in 
response to comments on the proposed rule published November 22, 1994 
(59 FR 60087) titled Excess Shelter Expense Limit and Standard Utility 
Allowances (ESE) rule.
    The provisions of current (d)(5)(ii)(A) through (E), with the 
modifications outlined above, would be included in new paragraph 
(d)(6)(ii)(A) through (E). In addition, we would remove an unnecessary 
sentence referring to the excess shelter deduction from 7 CFR 
273.10(e)(1)(i)(E).
    3. Standard utility allowance--7 CFR 273.9(d)(6) Under the proposed 
reorganization of 7 CFR 273.9(d)(6) outlined above, provisions for 
utility standards would be contained in 7 CFR 273.9(d)(6)(iii) and 
would be organized as follows. The provisions for developing standards 
would be located in paragraph (iii)(A), and requirements for updating 
standards would be contained in paragraph (iii)(B). Provisions 
governing entitlement to the standard containing heating or cooling 
expenses would be included in paragraph (iii)(C). Household options 
would be addressed in paragraph (iii)(D), a new option to allow States 
to mandate use of the standards would be addressed in paragraph 
(iii)(E), and the requirements for shared expenses would be addressed 
in paragraph (iii)(F). Changes are being proposed as required by PRWORA 
and to enhance State flexibility and simplify the regulations. In 
addition, we are taking this opportunity to review the proposed changes 
in the ESE rule and to repropose several provisions which have been 
modified in response to comments. The final ESE rule was withdrawn from 
clearance when it became apparent that pending legislation would make 
several of the proposed provisions obsolete.
A. Developing Standards
    Current regulations at 7 CFR 273.9(d)(6)(i) allow State agencies to 
offer a single standard utility allowance that includes the cost of 
heating and/or cooling, cooking fuel, electricity not used to heat or 
cool the residence, the basic service fee for one telephone, water, 
sewerage, and garbage and trash collection to households that incur a 
heating or cooling cost, receive energy assistance under the Low-Income 
Home Energy Assistance Act of 1981 (LIHEA), or receive other energy 
assistance but still incur out-of-pocket expenses. For the purposes of 
this proposed rule, we propose to identify this allowance as the 
heating and/or cooling standard utility allowance (HCSUA). Instead of 
offering a single HCSUA, State agencies may offer an individual 
standard allowance for each utility expense, such as electricity, 
water, sewerage, or trash collection.
    Section 890 of the PWORA, which amended section 5(d) of the Act, 
allows State agencies to develop one or more standards that include the 
cost of heating and cooling and one or more standards that do not 
include the cost or heating and cooling. Currently, there is no 
regulatory provision for a limited utility allowance (LUA) that 
includes utility expenses other than heating or cooling and is offered 
to households that do not have a heating or cooling expense but do 
incur the costs of other utilities. However, prior to enactment of 
PRWORA, approximately half of the State agencies had been granted 
waivers to offer an LUA to households that do not qualify for the SUA. 
The new authority for developing an LUA would be contained in proposed 
paragraph (d)(6)(iii)(A).
    We propose to provide in paragraph (d)(6)(iii)(A) that State 
agencies may establish an LUA that includes at least two utilities 
other than telephone. State agencies may offer individual standards to 
households that incur only one utility expense. We would also provide 
that State agencies may use different types of standards but cannot 
allow households to use two standards that include the same expense. 
The State agency may vary the standards by factors such as household 
size, geographical area, or season. However, only utility costs 
identified in proposed paragraph (d)(6)(ii)(C) are allowable expenses. 
As provided in Policy Memo 3-97-04, dated May 9, 1997, States in which 
the cooling expense is minimal may include the cooling cost in the LUA 
as part of the electricity component.
    The proposed ESE rule would have allowed State agencies to 
establish an LUA that includes electricity, water, sewerage, and 
garbage or trash collection and is available only to households that 
have no heating or cooling costs but incur the cost of electricity and 
either water or sewerage. Four of the nine State agencies that 
commented on this proposal objected to the requirement that households 
incur specific utility costs to qualify for an LUA. They asked that the 
rule be revised to give State agencies greater latitude in developing 
an appropriate LUA and that the regulations not mandate which expenses 
a household would have to incur to receive the LUA.
    We are not reproposing the LUA provisions of the ESE rule in this 
proposed rule because they have been superseded by Section 809 of 
PRWORA as discussed above. However, in this proposed rule, we are 
including several ESE provisions regarding standards and entitlement to 
a HCSUA.
B. Updating Standards
    Current regulations at 7 CFR 273.9(d)(6)(iv) require State agencies 
to submit the methodology used in developing a standard to FNS for 
approval. These current rules also require State agencies to review and 
adjust the standard annually to reflect changes in the cost of 
utilities. The proposed ESE rule would have required State agencies 
that develop new standards to use FNS-approved methodologies, review 
and adjust the standards annually, and submit revised amounts to FNS 
for approval. The final ESE rule would have required State agencies to 
submit methodologies used in developing and updating standards to FNS 
every 3 years, when they are revised, or upon a request from FNS.
    Two State agencies commented on these provisions. One asked whether 
standards would have to be submitted each year or only if costs have 
risen significantly and whether a threshold would be established for 
increases. The other objected to the requirement to submit 
methodologies every 3 years and suggested that FNS redistribute FNS

[[Page 10882]]

Notice 79-47, which contained methodology guidance and examples.
    In response to comments received and the desire to eliminate 
burdensome mandates, we would remove the requirement for annual 
submission of the amounts of the standards. Under this proposal, in new 
7 CFR 273.9(d)(6)(ii), State agencies would be required to review 
standards periodically, make adjustments, and to notify FNS if the 
amount changes. They may, at their option, establish thresholds for 
making adjustments. We would also require that methodologies be 
submitted for approval when a standard is developed or changed. We plan 
to provide guidance on methodologies similar to FNS Notice 79-47. In 
the interim, we will make copies of the Notice or similar guidance 
available for distribution upon request.
C. Entitlement
    Section 5(e)(7)(iv) of the Act, as revised by section 809 of 
PRWORA, provides that recipients of LIHEA are entitled to use an HCSUA 
only if they incur out-of-pocket heating or cooling expenses in excess 
of the amount of the assistance paid on behalf of the household to an 
energy provider, that a State agency may use a separate HCSUA for 
households receiving LIHEA, and that the LIHEA must be considered to be 
prorated over the heating or cooling season. Section 2605(f)(2) of the 
LIHEA Act of 1981 (42 U.S.C. 8624(f)), provides that LIHEA payments 
must be deemed to be expended by such household for heating or cooling 
expenses, without regard to whether such payments or allowances are 
provided directly to, or indirectly for the benefit of such household.
    Current regulations at 7 CFR 273.9(d)(6)(ii) provide that the 
standard utility allowance which includes a heating or cooling 
component must be made available only to households which incur heating 
and cooling costs separately and apart from their rent or mortgage. 
These households include residents of rental housing who are billed on 
a monthly basis by their landlords for actual usage as determined 
through individual metering, recipients of LIHEA, or recipients of 
indirect energy assistance payments other than LIHEA who continue to 
incur out-of-pocket heating or cooling expenses during any month 
covered by the certification period. Households in public or private 
housing with a central meter who are billed only for excess usage are 
not permitted to use the HCSUA. (Renters must be billed on a monthly 
basis by their landlords for actual usage as determined through 
individual metering to be entitled to use the HCSUA.) A household not 
entitled to the HCSUA may claim actual expenses.
    In the ESE rule published November 22, 1994, we proposed to revise 
7 CFR 273.9(d)(6)(ii) to clarify and simplify the rules for determining 
entitlement to an HCSUA. For more information regarding the background 
of the provisions governing entitlement to the HCSUA, readers may refer 
to the preamble to the proposed rule.
    One proposed change in the ESE rule would have extended use of the 
HCSUA to households that live in separate residences but share a single 
utility meter. For example, there may be two separate houses on a lot 
that share one gas meter. Under current policy, if two households live 
separately but have one meter, the households are prohibited from 
sharing the HCSUA, and the State agency cannot grant the HCSUA to both 
households even though both incur heating or cooling costs separately 
from their rent. Under the ESE proposed change, the State agency was 
required to grant the full heating or cooling standard to both 
households if both incur or anticipate incurring out-of-pocket heating 
or cooling expenses separately from their rent or receive or anticipate 
receiving LIHEA. Five commenters supported the proposal, and under this 
rule both households would be entitled to the full HCSUA.
    Under another proposed change in the ESE rule, the HCSUA would have 
been made available to households in private rental housing who are 
billed by their landlords on the basis of individual usage or who are 
charged a flat rate separately from their rent. One commenter suggested 
that all households that incur heating or cooling costs as part of 
their rent should be allowed to use the HCSUA because all landlords who 
include heating or cooling costs in the rent are passing the cost on to 
the renter. The State agency believes it is cumbersome and error-prone 
to require verification from the landlord concerning the ``flat 
amount'' that is charged for heating or cooling. We realize that State 
agencies may experience some problems in verifying whether a particular 
household incurs a heating or cooling expense separately from the rent 
amount. However, section 5(e)(7)(C)(ii)(I) of the Act does not permit 
use of an HCSUA for a household that does not incur such a heating or 
cooling expense. Therefore, only those households with an identifiable 
heating or cooling expense may use the HCSUA. We have considered the 
comments and are including the ESE proposed rule changes regarding the 
entitlement of renters to the HCSUA with minor revisions for clarity in 
this proposed rule at new 7 CFR 273.9(d)(6)(iii).
    Three comments were received concerning residents of public housing 
and entitlement to the HCSUA. Two State agencies requested that 
residents of public housing be allowed the HCSUA and one suggested that 
``public housing'' be defined. One commenter suggested that the rule 
clarify that households in public housing that incur a heating or 
cooling expense separately from their rent (not just for excess usage) 
are entitled to the HCSUA. As explained in the preamble to the proposed 
ESE rule (59 FR 60088), households in public housing that incur only 
the cost of excess usage are not allowed to use an HCSUA. Section 
5(e)(7)(C)(ii)(II) of the Act prohibits State agencies from allowing 
the HCSUA to households in a public housing unit which has central 
utility meters and charges households only for excess heating or 
cooling costs. However, to address State agency concerns and to 
simplify administration we are proposing that State agencies may elect 
to include excess heating and cooling costs in the LUA and offer the 
lower standard to public housing residents. Households in public 
housing that incur an out-of-pocket expense for heating or cooling that 
is other than an expense for excess usage would be entitled to use the 
HCSUA. As used in the proposed new paragraph (d)(6)(iii), ``public 
housing'' refers to housing provided by local Public Housing 
Authorities under provisions of the U.S. Housing Act of 1937, as 
amended, 42 U.S.C. 1401, et seq.
    The ESE proposed rule would have allowed State agencies to 
anticipate entitlement to an annualized HCSUA based on the expectation 
that the household would incur heating or cooling costs or receive a 
LIHEA payment in the next heating or cooling season. This change was 
intended to reduce the problems associated with determining when a 
household is entitled to an annualized HCSUA. Under the ESE rule 
proposal, a household that incurs or expects to incur out-of-pocket 
heating or cooling costs during the next heating or cooling season 
(except a household in public housing with a central meter where the 
household is billed only for excess usage) would be entitled to an 
HCSUA regardless of when the certification period begins or ends. The 
ESE rule further proposed that the household would continue to be 
entitled to the HCSUA until it no longer expects to incur heating or 
cooling costs during the

[[Page 10883]]

next heating or cooling season. The State agency would be required to 
reexamine a household's entitlement to the HCSUA at recertification, 
when the household moves, or when the household voluntarily reports a 
change affecting entitlement to the HCSUA.
    In response to comments and the desire to increase State agency 
flexibility in using utility standards, this new proposal does not 
contain the changes proposed in the ESE regarding anticipation of 
entitlement to an HCSUA. Instead, this proposed rule in 7 CFR 
273.9(d)(6)(iii) would allow State agencies the discretion to develop 
and use whatever procedures they deem appropriate so long as they 
comply with the requirements of the Act and the LIHEA Act regarding use 
of an HCSUA. The following requirements of the Act and the LIHEA Act 
are included in proposed 7 CFR 273.9(d)(6)(iii) for clarity:
    (1) An allowance for a heating or cooling expense may not be used 
for a household that does not incur a heating or cooling expense.
    (2) A household that incurs a heating or cooling expense but is 
located in a public housing unit which has central utility meters and 
charges households only for excess heating or cooling costs is not 
entitled to a standard that includes heating or cooling costs. However, 
the State agency may use the excess costs in developing an overall LUA 
or develop a standard specifically for households which pay excess 
heating or cooling costs.
    (3) For purposes of determining any excess shelter expense 
deduction, the full amount of LIHEA energy assistance payments must be 
deemed to be expended by such household for heating or cooling 
expenses, without regard to whether such payments or allowances are 
provided directly or indirectly to the household.
    (4) An HCSUA must be made available to households receiving energy 
assistance (other than LIHEA) only if the household incurs out-of-
pocket heating or cooling expenses. A State agency may use a separate 
utility standard for these households.
    (5) An HCSUA may not be used for a household that shares the 
heating or cooling costs with and lives with another individual not 
participating in the Program, another participating household, or both, 
unless the HCSUA is prorated between the household and the other 
individual, household, or both.
    (6) A State agency that has not made the use of a standard 
mandatory (as provided in paragraph (d)(6)(iii)(E)) must allow a 
household to switch between the standard and a deduction based on 
actual utility costs at the end of any certification period.
    As indicated above and in the preamble to the proposed ESE rule (59 
FR 60089), provisions of LIHEA control (without specifically repealing) 
sections 5(e)(7)(iv)(I) through (IV) of the Food Stamp Act which 
provides that (1) recipients of LIHEA are entitled to the HCSUA only if 
they incur expenses that exceed the LIHEA payments, (2) State agencies 
may use a separate standard for households that receive LIHEA, (3) 
State agencies using a single allowance are not required to reduce the 
allowance for households that receive LIHEA, and (4) the LIHEA must be 
prorated over the entire heating or cooling season. Section 2704(f)(2) 
of the LIEHA (42 U.S.C. 8624(f)) provides that LIHEA payments must be 
treated consistently regardless of whether the payments are received 
directly or indirectly and that the full amount of the payments must be 
considered to be expended by the household for heating or cooling 
expenses. These requirements would be included in new paragraph 
(d)(6)(ii)(C).
    The proposed ESE rule provided that households receiving indirect 
energy assistance other than LIHEA must incur an out-of-pocket expense 
to qualify for the HCSUA. One State agency commented that households 
receiving direct non-LIHEA energy assistance, such as utility 
reimbursements from the Department of Housing and Urban Development 
(HUD), should be entitled to the HCSUA regardless of whether they incur 
out-of-pocket utility expenses. The State agency asked that the term 
``indirect'' be removed from the final ESE rule because it could create 
the impression that HCSUA entitlement is affected by the method in 
which non-LIHEA energy assistance is received. In response to this 
comment, we are including in new paragraph (d)(6)(iii) the basic 
requirements for allowing a deduction when a household receives direct 
or indirect assistance in paying its shelter expenses. If a household 
receives direct assistance that is counted as income and incurs a 
deductible cost, the entire expense is included in the excess shelter 
deduction computation. If the household's bill is paid by a vendor 
payment that is counted as income, the household is likewise entitled 
to the expense.
    However, there is a distinction in Program regulations between 
entitlement to a deduction for an expense paid directly by the 
household and an expense paid by a vendor payment if the vendor payment 
is excluded from income consideration. As provided in 7 CFR 
273.10(d)(1)(i), in all cases except vendored assistance provided under 
the LIHEA Act, a deduction is not allowed for an expense paid by a 
vendor payment that is excluded from income. The LIHEA Act requires 
that households receiving LIHEA payments be treated as if they had 
incurred the expense. HUD utility reimbursement payments and some other 
utility assistance are excluded from income and there is no legislative 
provision requiring that households receiving these payments be treated 
as if they had incurred the expense. If a heating or cooling expense is 
paid by an excluded vendor payment other than a LIHEA payment, the 
household is not entitled to the HCSUA unless the household incurs an 
expense that exceeds the amount of the payment. We agree with the 
commenter that this area of the proposed ESE rule needed clarification 
and have attempted to clarify the provision in this rule.
    In summary, this proposed rule would amend 7 CFR 273.9(d)(6)(iii) 
to provide increased State agency flexibility in applying the 
requirements of the Act and the LIHEA Act regarding entitlement to an 
HCSUA.
    We are proposing to delete the last sentence in 7 CFR 
273.2(f)(1)(iii) which prohibits a household that wishes to claim 
expenses for an unoccupied home from using the standard utility 
allowance. We are proposing to add a sentence to 7 CFR 
273.9(d)(6)(ii)(C) to provide that only one standard utility allowance 
can be allowed if the household has both an occupied home and an 
unoccupied home.
D. Household Options
    Current regulations at 7 CFR 273.9(d)(6)(vii) provide that 
households may claim verified actual costs rather than a standard 
allowance (except for the telephone standard). Under current rules at 7 
CFR 273.9(d)(6)(viii), households have the right to switch between the 
use of actual utility costs and a standard at the time of 
recertification and one additional time during each 12-month period. 
Section 5(e)(7)(iii)(II) of the Act, as amended by section 809 of 
PRWORA, provides that a State agency that has not made use of a 
standard mandatory must allow a household to switch between actual 
expenses and the standard or vice versa only at recertification. 
Therefore, the option to switch one additional time during each 12-
month period is being removed. Since some households may be certified 
for 24 months under the certification period requirements of section 
3(c) of the Act, as amended by PRWORA, we propose that these households 
be allowed to switch at the

[[Page 10884]]

time of the mandatory interim contact. Under the proposed 
reorganization of the regulations, the ``switching'' requirements would 
be included in 7 CFR 273.9(d)(6)(iii)(D).
    As indicated in the preamble to the ESE rule (59 FR 60092), current 
policy is that households may choose between actual expenses and a 
standard when they move. We proposed that the redetermination of 
entitlement to a standard when a household moves would not be 
considered a ``switch.''
    Four State agencies supported this provision in their comments. One 
of these recommended that it would be preferable to remove the 
switching provision from the regulations. However, the limitation on 
changing from actual costs to a standard or vice versa is contained in 
section 5(e) of the Food Stamp Act and cannot be removed by regulation. 
Another commenter supported the proposal but requested that the rule be 
clarified to indicate that the household can opt for either the 
standard or actual costs when it moves.
    The proposed ESE rule provision to require a State agency to 
provide an opportunity for a household that moves to select either the 
standard or actual costs at the new address is included in this 
proposed rule in new paragraph (d)(6)(iii)(D) with clarification.
E. Mandatory standards
    Section 809 of PRWORA amends section 5(d) of the Act to provide in 
section 5(d)(7)(C)(iii)(I) that a State agency may, at its option, make 
use of a standard utility allowance mandatory for all households with 
qualifying utility costs, provided:
    (a) The State agency has developed one or more standards that 
include the cost of heating and cooling and one or more standards that 
do not include the cost of heating and cooling, and
    (b) The standards will not increase Program costs.
    Households that are entitled to the standard will not be able to 
claim actual costs even if they are higher. Households not entitled to 
the standard will be able to claim actual allowable costs. Using 
mandatory standards does not bestow entitlement to a standard a 
household would not otherwise be entitled to receive. For example, 
households in public housing units which have central utility meters 
and charge households only for excess heating or cooling costs are not 
entitled to a standard that includes heating or cooling costs, but they 
may claim the LUA.
    We propose to provide in paragraph (d)(6)(iii)(E) that States using 
both an HCSUA and LUA may mandate use of a standard, provided that use 
of the mandatory standard does not increase Program costs and the 
standards have been approved by FNS. Requests for approval to use a 
single standard for a utility (such as a water standard) would be 
required to include the figures upon which the standard is based. If a 
State wants to mandate use of utility standards but does not want 
individual standards for each utility, the State would be required to 
submit information showing the approximate number of food stamp 
households that would be entitled to the nonheating and noncooling 
standard and their average utility costs before implementation of the 
mandatory standards, the standards the State proposes to use, and an 
explanation of how the standards were computed.
F. Sharing
    Section 5(e)(7)(iii)(II) of the Act requires proration of an HCSUA 
when households live together and share the cost. Current regulations 
at 7 CFR 273.9(d)(6)(viii) provide that if a household lives with and 
shares utility expenses with another household, the State agency must 
prorate a standard among the households or allow the actual costs of 
each household. The State agency determines the proration method if a 
standard is used.
    The ESE proposed rule would have revised paragraph (d)(6)(viii) to 
provide that households living together and sharing expenses could 
claim actual costs or a share of a standard. It would have prohibited 
State agencies from allowing households to use a combination of actual 
costs and a share of the standard. That is, State agencies could not 
allow one household to claim a share of the utility standard and allow 
another household sharing the expense to claim actual costs.
    Four of the eight comments we received on this provision supported 
it. Two State agencies objected to the requirement to prorate the 
telephone allowance and recommended that this be a State agency option. 
One State agency did not see how the proposal would simplify the policy 
regarding households that live together and share heating or cooling 
costs. The State agency suggested that each household be allowed the 
full standard. One State agency objected to the provision prohibiting 
State agencies from mixing a share of the standard and actual costs 
because the cases involved might be handled by different eligibility 
workers.
    Although the Act requires that an HCSUA be prorated among 
households that share the heating or cooling expense, it does not 
require that all standards be prorated and does not specify how the 
HCSUA should be prorated. Therefore, we are not proposing to regulate 
in this area.
G. Adjustment of standard deduction--7 CFR 273.9(d)(8)
    Current paragraph (d)(8) describes adjustments to be made to the 
standard deduction. Section 809 of PRWORA sets the amounts by area. 
This paragraph would be removed since the amounts are now specified in 
the law.
Proration of benefits at recertification--7 CFR 273.10(a)
    Current regulations at 7 CFR 273.10(a)(1)(ii) provide that the term 
``initial month'' means the first month for which the household is 
certified for participation in the Food Stamp Program following any 
period of more than one month, fiscal or calendar depending on the 
State's issuance cycle, during which the household was not certified. 
By revising section 8(c)(2)(B) of the Act to provide that ``initial 
month'' means the first month for which an allotment is issued to a 
household following any period in which the household was not 
certified, section 827 of PRWORA reinstated the requirement to prorate 
benefits which existed prior to the Mickey Leland Childhood Hunger 
Relief Act (Pub. L. 104-624). Under the new statutory provision, 
benefits are prorated at initial certification and at recertification 
if there has been any break in certification following the last month 
of certification, except for migrant and seasonal farmworker 
households. For migrant and seasonal farmworkers, the term initial 
month means the first month for which the household is certified 
following any period of more than 30 days during which the household 
was not certified. We propose to amend 7 CFR 273.10(a)(1)(ii) and 7 CFR 
274.10(a)(2) to provide that for all other households ``initial month'' 
means the first month for which a household is certified following any 
break in participation.
Certification periods--7 CFR 273.10(f)
    Under current regulations at 7 CFR 273.10(f), certification periods 
are assigned according to the stability of a household's circumstances. 
Households consisting entirely of unemployable or elderly individuals 
with very stable income are certified for up to 12 months, provided 
other household circumstances are expected to remain stable. Current 
regulations are based on Section 3(c) of the Act (7 U.S.C. 2012(c)), 
which, prior to enactment of PRWORA, provided specific

[[Page 10885]]

certification period requirements depending on the type of household.
    Section 801 of PRWORA amended section 3(c) of the Act and 
eliminated specific certification periods by type of household. PRWORA 
now provides that the certification period cannot exceed 12 months, 
except that the certification period may be up to 24 months for 
households in which all adult household members are elderly or 
disabled. Section 801 requires that the State agency have at least one 
contact with each certified household every 12 months.
    We have granted waivers to several State agencies to allow 
certification periods of 24 months for households consisting entirely 
of elderly or disabled members with no earned income. These waivers 
will no longer be necessary since section 801 increases State agency 
flexibility to assign 24-month certification periods to households 
whose only adult members are elderly or disabled. However, Section 801 
also amended the Act to remove the Department's authority to waive the 
requirements of the Act concerning certification periods. Therefore, we 
will no longer be able to grant waivers of the 12-month certification 
period limit for households that are not elderly or disabled. We note 
that the language in the law provides that all adult members must be 
elderly or disabled rather than the language in the waivers which 
provided that all members had to be elderly or disabled. Therefore 
households in which all adult members are elderly or disabled may be 
certified up to 24 months even if there are children in the household.
    Accordingly, we propose to amend 7 CFR 273.10(f) to reflect the new 
certification period requirements of PRWORA. We propose that households 
cannot be certified for no more than 12 months, except households in 
which all adult members are elderly or disabled may be certified for no 
more than 24 months, and that the State agency must have at least one 
contact every 12 months with each certified household. Therefore, if a 
household in which all adult members are elderly or disabled is 
certified for 18 months, the State agency must have at least one 
contact with the household by the end of the first 12 months. State 
agencies may use any method they choose for this contact, including a 
change report form or a telephone call.
    In approving waivers to allow 24-month certification periods for 
elderly or disabled households, we included a special condition for 
treatment of one-time medical expenses. Current regulations at 7 CFR 
273.10(d)(3) provide that households reporting one-time-only medical 
expenses during their certification period may elect to have a one-time 
deduction or to have the expense averaged over the remaining months of 
the certification period. This provision assumes a certification period 
of no more than 12 months. Averaging an expense over more than 12 
months could result in a very small expense each month. Therefore, we 
required as a condition of waiver approval that State agencies give the 
household three options for budgeting the expense. We propose to 
include those options in 7 CFR 273.10(f)(1)(iii) as follows: Households 
certified for more than 12 months that incur a one-time medical expense 
in the first 12 months of the certification period may elect to (a) 
budget the expense in one month, (b) average the expense over the 
remainder of the first 12 months of the certification period, or (c) 
average it over the remainder of the certification period. One-time 
expenses reported after the 12th month of the certification period 
would be allowed in one month or averaged over the remainder of the 
certification period, at the household's option. This guarantees that 
households will not be adversely affected because averaging the cost 
over more than 12 months would have a negligible benefit impact in each 
month. A reference to the budgeting options is also proposed to be 
added to 7 CFR 273.10(d)(3) for conformity.
    In addition to removing the provision of section 3(c) of the Act 
that the 12-month limit on certification periods could be waived, 
section 801 of PRWORA removed the requirement that the certification 
period of households in which all members received PA or GA must 
coincide with the period of the grant. It also removed the requirement 
that monthly reporting households be certified for 6 or 12 months, 
unless a waiver was granted. We propose to revise 7 CFR 273.10(f) and 
to remove 7 CFR 273.21(a)(3) to reflect these changes. We also propose 
to include in the new 7 CFR 273.10(f)(2), the provision at 7 CFR 
273.21(t) that monthly reporting households residing on reservations 
must be certified for 2 years, unless a waiver is approved. This 
requirement is based on section 6(c)(1)(C)(iv) of the Act, which was 
not affected by the amendment to section 3(c).
    We propose to include in revised 7 CFR 273.10(f)(3) the provision 
of current 7 CFR 273.10(f)(9) concerning the assignment of 
certification periods to households claiming a deduction for legally 
obligated child support payments. We believe the law allows us to 
mandate certification periods that are less than 12 months if the 
household is not required to report child support information monthly 
or quarterly.
    We also propose to make a conforming amendment to remove 7 CFR 
272.3(c)(5) from the regulations and renumber paragraphs (c)(6) and 
(c)(7). Paragraph (c)(5), which authorized waivers of the certification 
period requirements in section 3(c) of the Act, is now obsolete. We 
also propose to make a conforming amendment to remove 7 CFR 
273.11(a)(5), which addresses certification period requirements for 
households with self-employment income. This paragraph is unnecessary 
because the provision regarding certification period length for these 
households was removed from the Act by PRWORA.
    To provide more State agency flexibility in its day-to-day 
operations of the Program, we would amend the regulations to add a new 
paragraph 7 CFR 273.10(f)(4) allowing the State agency to shorten a 
household's currently assigned certification period under certain 
circumstances with a notice of adverse action. We have traditionally 
prohibited shortening certification periods once established, except in 
the following instances: a PA or GA household's certification period is 
shortened in accordance with 7 CFR 273.12(f); in accordance with Policy 
Memo 85-03, the State agency needs to adjust the caseload to more 
evenly distribute the workload, a household reports a change that 
indicates that the new circumstances are very unstable, or the 
household fails to provide required information regarding a change in 
household circumstances. When a household's certification period is 
shortened under these circumstances, a notice of expiration must be 
sent; or for households subject to monthly reporting, a State agency 
must shorten the certification period with an adequate notice in 
accordance with 7 CFR 273.21(m).
    State agencies have continually argued that there are other 
situations under which the State agency should have the authority to 
shorten the certification period and close the case. The situations 
described by State agencies over time have been: a household is not 
using its benefits timely (i.e., not drawing down on their EBT account 
or not redeeming their Authorization to Participate card for coupons); 
a household is suspected of trafficking or otherwise misusing benefits; 
a household is not reporting earned or unearned income properly; a 
change in program operations (such as converting the caseload to a new

[[Page 10886]]

computer system) warrants the adjustment of certification periods of 
all or part of a State agency's caseload; or the State agency wants to 
align food stamp certification periods with the certification periods 
of other programs.
    We have carefully considered the current policy in light of State 
agency concerns and our current statutory authority. To recap the 
pertinent statutory provisions, section 11(e)(4) of the Act (7 U.S.C. 
2019(e)(4)) provides that the State agency must issue a notice of 
expiration to households prior to the start of the last month of the 
assigned certification period. Section 11(e)(10) of the Act (7 U.S.C. 
2019(e)(10)) provides that the State agency must issue a notice of 
adverse action to reduce or terminate a household's benefits within an 
assigned certification period. Further, if the household timely 
requests a hearing to contest the proposed reduction or termination of 
benefits, the State agency must continue benefits at the level 
authorized immediately prior to the notice of adverse action. Once 
continued, benefits will remain at the prior level until a hearing 
official issues an adverse decision or the certification period ends, 
whichever comes first. These statutory provisions act independently of 
one another. In other words, section 11(e)(4) of the Act contemplates 
that States will use the notice of expiration to advise a household 
that its certification period is ending. Section 11(e)(10) of the Act 
contemplates that once a household receives notification that it is 
authorized for benefits, States will use the notice of adverse action 
if it becomes necessary to reduce or terminate benefits within an 
assigned certification period. We have come to believe that the current 
practice of shortening certification periods with the notice of 
expiration is not the best reading of section 11(e)(10) of the Act. Use 
of the notice of expiration in the situations noted previously 
improperly shortens the period of continued benefits the household is 
entitled to receive had it instead received a notice of adverse action. 
Accordingly, we are proposing to eliminate the use of the notice of 
expiration as a vehicle for shortening certification periods, with one 
exception, which we will discuss below. Despite our concerns over the 
use of the notice of expiration, we will not require State agencies to 
change their procedures pending issuance of final rules on this issue.
    We propose to retain the long-standing procedure for adjusting the 
certification periods of households leaving the TANF rolls, with a 
modification. Current 7 CFR 273.10(f)(4) requires that State agencies 
adjust food stamp participation of TANF leavers with a notice of 
adverse action when it is clear that changes in the household's 
circumstances require a reduction or termination of benefits. In this 
instance, the State agency already has sufficient information about the 
household to enable a seamless transition to nonassistance status. 
Current 7 CFR 273.10(f)(5) outlines the procedures a State agency must 
follow when TANF leavers do not fully apprise the State agency of their 
new circumstances and the State agency does not possess enough 
information to make an informed determination about their continuing 
food stamp eligibility. In some cases, the State agency may need only 
one or two pieces of information or documentation to determine 
continuing eligibility; in others, a more thorough review of the 
circumstances may be in order, depending on the level of information 
available in the case file. We believe it would be preferable to avoid 
requiring the household to report for a full recertification, if a 
response to a notice to the household requesting information could 
clear up a few remaining points of eligibility. Thus adjusting the 
household's participation with a notice of adverse action may be an 
appropriate option. However, there are instances where the changes in 
circumstances may be extensive and questions concerning continuing 
eligibility would not be resolved easily through a limited contact with 
the household. In this regard, a household receiving TANF participates 
in the Program based on categorical eligibility. Eligibility is deemed 
because of receipt of TANF, and not necessarily verified as in the case 
of nonassistance households. Thus, when receipt of TANF assistance 
ends, the household may be considered to be more closely in the 
position of a new applicant for food stamps. The State agency might not 
have collected information about or considered eligibility factors 
pertinent to nonassistance households in the initial certification 
process. Factors of eligibility not pertinent to the eligibility of a 
categorically eligible household now may become relevant. We feel that 
this situation justifies use of the notice of expiration, in lieu of 
the notice of adverse action. Closing the case with a notice of 
expiration allows the State agency to request that the household report 
for an interview and recertification in a non-confrontational way. 
However, we are proposing an option which would allow State agencies to 
close cases with a notice of adverse action, provided the State agency 
has sent the household a notice clearly specifying the actions a 
household must take to continue its eligibility. This two-step 
procedure is discussed in detail in the following paragraph. States 
have used the procedures outlined in 7 CFR 273.10(f)(5) since the 
implementation of the Food Stamp Act of 1977. We encourage public 
comment on the continuing workability of these procedures and the 
possibility of alternatives to the current procedure. Our aim is to 
find the most effective way to allow States to continue to provide 
nutritional support for families leaving TANF.
    Outside the context of transitioning TANF households to 
nonassistance status, we believe that State agencies should be allowed 
to require households to explain changes in household circumstances 
during a certification period, especially in suspected intentional 
Program violation situations, and shorten certification periods if 
warranted by no response or an unsatisfactory response from the 
household. Therefore, we propose to consolidate in new paragraph (f)(4) 
most situations where shortening the certification period would be 
allowed. The vehicle for early closure of cases would be the notice of 
adverse action. State agencies may no longer use the notice of 
expiration to shorten certification periods for the reasons cited 
previously. The new paragraph provides specific authority to shorten 
the certification period when the State agency has information 
indicating that the household is not reporting income properly, the 
household has become ineligible, a household reports a change that 
indicates that the new circumstances are very unstable, or the 
household fails to provide adequate information regarding a change in 
household circumstances other than income. We considered other 
situations where States felt that they needed authority to close food 
stamp cases earlier than originally authorized. However, we determined 
that only the instances listed above rose to a level of urgency 
requiring early termination of benefits.
    The proposal limits such action to those situations specifically 
described here to ensure that State agencies apply this new policy only 
under the most compelling circumstances. We are proposing a two-step 
process for shortening certification periods. First, the State agency 
must provide the household written notice that it has reason to believe 
the household's circumstance have changed. The notice must clearly 
specify the basis for the State agency's belief and the actions the

[[Page 10887]]

State agency expects the household to take. The notice must give the 
household at least 10 days to contact the State agency and clarify its 
situation. Second, at the end of the period allowed for responding to 
the notice, the State agency may issue a notice of adverse action 
shorten the certification period if: (1) the household does not 
respond; (2) the household does not provide sufficient information to 
clarify its circumstances; or (3) the household agrees that changes in 
its circumstances warrant filing a new application. The notice of 
adverse action must meet the requirements of 7 CFR 273.13 and explain 
the reason for the action. After hearing from the household, State 
agencies may also find that no further action is required or that 
benefits may be adjusted without shortening the assigned certification 
period. We are also proposing conforming changes to new 7 CFR 
273.10(f)(2) and 7 CFR 273.11(g)(5) in light of the above.
    Lastly, under the proposal in paragraph (f)(5), we would continue 
to prohibit lengthening of a household's current certification period 
once it is established. The lengthening of certification periods could 
result in some households continuing to receive benefits that they 
should not. FNS would continue to consider waiver requests from State 
agencies to lengthen assigned certification periods. Some State 
agencies have requested and have been granted a waiver by FNS to 
lengthen certifications, usually due to a specific one-time problem 
situation such as implementing a new computer system. It should be 
noted, however, that PRWORA limits certification periods to 12 months, 
except for households in which all adult members are elderly or 
disabled. Therefore, FNS cannot allow extension of certification 
periods beyond 24 months for households in which all adult members are 
elderly or disabled or beyond 12 months for other households. This 
limitation is reflected in the proposed language.
Self-employment Expenses--7 CFR 273.11(a)(4) and (b)(2)
    Current regulations at 7 CFR 273.11(a)(4) contain requirements for 
determining the allowable costs that can be excluded in determining the 
amount of self-employment income to be counted. Paragraph (a)(4)(i) 
provides that the allowable costs of producing self-employment income 
include, but are not limited to, certain identifiable costs. Section 
273.11(b)(1) provides that households with income from boarders may 
elect from among several methods of determining the cost of doing 
business, including a flat amount or fixed percentage of the gross 
income, provided that the method used to determine the flat amount or 
fixed percentage is objective and justifiable and is stated in the 
State's food stamp manual. Paragraph (b)(2) provides that households 
with income from day care may choose one of the following in 
determining the cost of meals provided to the individuals: the actual 
documented costs of meals, a standard per-day amount based on estimated 
per-meal costs, or the current reimbursement amounts used in the Child 
and Adult Care Food Program. These procedures for using standard 
estimates of costs for households with self-employment from boarders or 
day care were added to the regulations in a final rule dated October 
17, 1996 (61 FR 54318). In this rule, we propose to consolidate 
allowable costs of producing self-employment income and include them in 
a revised paragraph (b).
    To simplify the certification process and respond to State agency 
requests for increased flexibility, we would add in new paragraph 
(b)(3)(iii) an option for State agencies to use the same standard self-
employment expense amounts or percents established for households 
receiving TANF benefits under Title IV-A of the Social Security Act.
    In addition, section 812 of PRWORA required the Department to 
establish by August 22, 1997, a procedure by which a State may submit a 
method for producing a reasonable estimate of the cost of producing 
self-employment income in place of calculating actual costs. FNS issued 
a guidance memorandum in compliance with the statutory requirement on 
August 1, 1997. The method proposed by the State agency and submitted 
to FNS for approval must be designed so that it does not increase 
Program costs. The method may be different for different types of self-
employment.
    To implement the provisions of section 812 of PRWORA, we propose to 
amend 7 CFR 273.11 to provide in new paragraph (b)(3)(iv) that State 
agencies may submit requests to FNS to use a simplified method of 
calculating self-employment expenses for specified categories of 
businesses. The request must include a description of the proposed 
method, information concerning the number and type of households 
affected, and documentation indicating that the proposed procedure 
would not increase Program costs. We are soliciting comments on this 
proposed procedure for submission of State agency requests and 
suggestions for other methods.
    Current regulations allow households to choose between a standard 
amount or actual costs in claiming expenses incurred in producing 
boarder and day-care income. However, section 812 of PRWORA requires 
FNS to establish a procedure whereby States may request to use a method 
of producing a reasonable estimate of excludable expenses ``in lieu of 
calculating the actual cost of producing self-employment income.'' In 
accordance with this provision, we propose that State agencies, rather 
than households, must determine whether to use actual costs or another 
approved method to determine self-employment expenses.
    We also propose to take this opportunity to completely revise 7 CFR 
273.11(a) to simplify the regulations and increase State agency 
flexibility. Currently, 7 CFR 273.11(a) contains special procedures for 
determining a household's income from self-employment. Current 
regulations provide that income received from self-employment is offset 
by the cost of producing the self-employment income. The remaining 
income is then averaged over the number of months it is intended to 
cover. We would revise and combine portions of paragraphs (a)(1), 
(a)(2), and (a)(3) and remove superfluous language and examples without 
changing any policy contained in those provisions. We would not include 
in the proposed paragraph (a) the provision of current paragraph (a)(5) 
regarding certification periods for certain self-employment households 
because it is no longer necessary, as discussed earlier in this 
preamble under the section title ``Certification periods.''
    To increase State agency flexibility, we would eliminate some 
prescriptive requirements in the current regulations at 7 CFR 273.11(b) 
regarding the treatment of shelter expenses paid by boarders. 
Currently, paragraph (b)(1)(i) specifies that contributions made by the 
boarder to the household to cover its shelter expenses are included as 
income to the household. The current provision further specifies that 
expenses paid by the boarder to someone outside of the household cannot 
be counted as income to the proprietor household. In addition, the 
current regulation in paragraph (b)(1)(iii) provides requirements 
addressing whether costs paid by the boarder count in determining the 
proprietor household's entitlement to a shelter deduction. We would 
eliminate these prescriptive requirements in favor of letting State 
agencies determine the appropriate way to handle these shelter 
expenses. The provision of current paragraph (b)(1)(ii) allowing 
options for determining the cost of doing business

[[Page 10888]]

for households with boarders would be included in proposed new 
paragraph (b)(3)(ii) and modified to remove overly prescriptive 
language.
Treatment of the Income and Resources of Ineligible Aliens--7 CFR 
273.11(c)(2)
    Current regulations at 7 CFR 273.11(c)(2) provide that the benefits 
of a household containing either a person disqualified for failure to 
provide a social security number or an ineligible alien must be 
determined as follows: the resources of the ineligible member count in 
their entirety to the rest of the household; all but a pro rata share 
of the ineligible household member's income is counted; and the 20 
percent earned income deduction is applied to the prorated income 
earned by the ineligible member, and all but the ineligible member's 
pro rata share of the household's allowable shelter, child support, and 
dependent care expenses which are either paid by or billed to the 
ineligible member is allowed as a deductible expense for the household. 
We propose to renumber paragraph (c)(3) as (c)(4), to remove the 
provisions regarding ineligible aliens from (c)(2), and add a new 
paragraph (c)(3) for ineligible aliens.
    Section 818 of PRWORA amended section 6(f) of the Act (7 U.S.C. 
2015(f)) and grants State agencies the statutory authority to count all 
or all but a pro rata share of the income of an alien who is in an 
ineligible category listed under the alien provisions of 6(f) of the 
Act, i.e., those ineligible prior to PRWORA. They are primarily 
visitors, tourists, diplomats, students, and undocumented aliens. We 
propose to list the categories of aliens eligible under the Act in new 
paragraphs (c)(3)(i)(A) through (D). Proposed paragraph (c)(3)(i) would 
provide that State agencies must count all of the resources and either 
all or all but a pro rata share of the income and deductions of these 
ineligible aliens.
    One State agency asked if it could count all of the alien's income 
for purposes of applying the gross income test and only all but a pro 
rata share for other purposes. The State agency was concerned that 
counting a pro rata share of the alien's income could result in some 
households with ineligible aliens being eligible whereas a similar 
household made up of citizens with the same income would be ineligible 
based on gross income. To remedy this situation, we propose to allow 
the State agency to count all of the alien's income for purposes of 
applying the gross income test for eligibility purposes but only count 
a pro rata share for applying the net income test and determining the 
level of benefits. This State agency option applies to aliens who do 
not meet the alien eligibility requirements in section 6(f) of the Food 
Stamp Act.
    Additional categories of aliens were made ineligible for food stamp 
benefits by PRWORA, beyond those ineligible under section 6(f) of the 
Act. The majority of these aliens are refugees and asylees who have 
been in this country for more than 7 years and lawful permanent 
residents except those who can be credited with 40-quarters of work or 
who were living in this country on August 22, 1996, and were elderly on 
that date or are now disabled or under age 18. The treatment of the 
income and resources of these additional categories of ineligible 
aliens were not addressed by PRWORA. Congress did not grant State 
agencies statutory authority to count all or all but a pro rata share 
of the income of aliens made ineligible by PRWORA. Further, the amended 
version of subsection 6(f) of the Act is explicitly limited by its 
plain language to aliens in categories ineligible prior to the 
enactment of PRWORA. Therefore, we have examined various options for 
counting the resources and income of those categories of aliens newly 
made ineligible by PRWORA.
    Current regulations at 7 CFR 273.11(c) and (d) provide several 
methods for the treatment of ineligible household members. Section 
273.11(c)(1) provides that all of the income and resources of a 
household member who is ineligible because of an intentional program 
violation disqualification or workfare or work requirement sanction 
must be counted in determining the eligibility and benefits of the rest 
of the household. Section 273.11(c)(2) provides that all of the 
resources and all but a pro rata share of the income of a member who is 
an ineligible alien or who does not provide a social security number 
must be counted. Section 273.11(d) provides that the resources and 
income of other ineligible household members, such as an ineligible 
student, cannot be considered available to the household with whom the 
individual resides. In addition, 7 CFR 273.1(b)(1) provides that the 
income and resources of certain nonhousehold members, including roomers 
and live-in attendants who may participate as separate households, are 
excluded in determining the eligibility and benefits of the individuals 
with whom they live.
    Data from the Integrated Quality Control System indicate that most 
of the ineligible lawful permanent resident aliens live in households 
with children, many of whom are citizens. Further, these ineligible 
aliens have not violated any Program rules and have been legally 
admitted for permanent residence. Therefore, we are proposing to allow 
the State agency to pick one State-wide option for determining the 
eligibility and benefit level of households with members who are aliens 
made ineligible under PRWORA. State agencies may either: (1) count all 
of the aliens' resources and a pro-rated share of the aliens' income 
and deductions; or (2) count all of the aliens' resources, not count 
the aliens' income and deductions, but cap the resulting allotment for 
the eligible members at the allotment amount the household would 
receive were it not for the PRWORA eligibility restrictions. Option (1) 
merely continues the policy that most State agencies are pursuing with 
respect to PRWORA-ineligible aliens. State agencies operating State 
Option Programs under section 8(j) of the Act may find option (2) 
attractive in terms of simplifying administration. This option would 
require two benefit calculations. In calculation (1), the State agency 
would determine eligibility and benefit level as if all PRWORA-
ineligible aliens could still receive Federal benefits. In calculation 
(2), the State agency would determine eligibility and level of benefits 
for the eligible members, excluding the income and deductions of the 
PRWORA-ineligible aliens; however, the benefit amount could not exceed 
the amount determined in calculation (1). In State Option Programs, the 
difference between calculation (1) and calculation (2) would be the 
State's share of benefits payable to FNS. Funding for state-to-state 
technical assistance visits will be available through our State 
Exchange program for States wishing to learn about the automation 
procedures necessary for implementation of this option. We are 
proposing to allow a second variance exclusion period under 7 CFR 
275.12(d)(2)(vii) for States which implement option 1, and then decide 
at a later date to implement option 2. For aliens ineligible under 
section 6(f) of the Act and for those unable or unwilling to document 
their alien status, the proposed rule would reflect the statute which 
permits the State agency the option to count all or all but a pro rata 
share of such an alien's income and require that all of such an alien's 
resources be counted.
    Congress has explicitly and in plain statutory language specified 
how the income and resources of aliens ineligible under section 6(f) of 
the Act should be counted. Conversely, Congress has been silent as to 
how such counting should be accomplished for aliens eligible under 
section 6(f) of the

[[Page 10889]]

Act but ineligible under PRWORA. With this in mind, we specifically 
invite comments on our proposal to treat the income and resources of 
aliens made ineligible by PRWORA.
Residents of Drug and Alcoholic Treatment and Rehabilitation Centers--7 
CFR 273.11(e)
    Current rules at 7 CFR 273.11(e) set forth the procedures for 
certifying residents of a drug addict or alcoholic treatment and 
rehabilitation (DAA) centers for Program participation. The Department 
is proposing to revise the title of paragraph (e) and paragraphs (e)(1) 
through (5) to make the procedures clearer, to take into account 
electronic benefit transfer (EBT) issuances, and to add two new 
provisions contained in Section 830 of PRWORA.
    Paragraph 11(e)(1) provides that individuals in DAA centers may 
individually apply for food stamp benefits, but certification must be 
accomplished through an authorized representative who is an employee of 
the treatment center. Section 830 of PRWORA amended section 8 of the 
Act (7 U.S.C. 2017(f)) to allow the State agency the option of 
requiring households to designate the DAA center as their authorized 
representative for the purpose of receiving allotments on behalf of the 
households. We are proposing that this change be included in new 
paragraph (e)(1) and that it would only apply with regard to obtaining 
and using benefits on behalf of the household. The current regulatory 
requirement in paragraph (e)(1) that households residing in treatment 
centers must apply and be certified through an authorized 
representative would continue to apply. We are proposing that a 
reference to this section be added to new 7 CFR 273(g)(3)(i) as 
contained in this proposed action which concerns authorized 
representative for other households.
    Paragraph (e)(5)(i) of current rules provides that if a resident 
leaves the DAA center, the center must provide the household with its 
full allotment if the allotment has been issued and no portion of the 
allotment has been spent by the center on behalf of the household. If a 
resident household leaves the center prior to the 16th of the month and 
a portion of the allotment has already been spent by the center on 
behalf of the household, the center must provide the departing 
household with one-half of its monthly allotment. If the household 
leaves the center on or after the 16th of the month, the household is 
not be entitled to any portion of the allotment. The center must return 
any unspent benefits of a household that has left the center to the 
State agency. Section 830 of PRWORA amended section 8 of the Act to 
allow State agencies the option of providing an allotment for the 
individual to: (a) the center as an authorized representative for a 
period that is less than 1 month; and (b) the individual, if the 
individual leaves the center. Since State agencies will generally not 
know in advance when a resident is going to leave the center, we are 
proposing that State agencies be allowed to routinely issue allotments 
for household's in DAA centers on a semi-monthly basis, e.g., half of 
the allotment could be issued on the first of the month and half could 
be issued on the 16th of the month. We are proposing to include this 
option in new paragraph (e)(4).
    We are also taking this opportunity to propose provisions to take 
into account various EBT systems being used, but still maintain the 
requirement that the household have access to one-half of its monthly 
allotment if it leaves the DAA before the 16th of the month.
    Under some EBT systems, DAA centers are authorized as retail stores 
and have point of sale devices (POS) located at the centers. This 
occurs only if the State has obtained the appropriate waivers from FNS 
to do so. The amounts transacted through the POS are deposited into the 
authorized retailer's bank account. The households' EBT cards may be 
transacted at the facility's POS either by the household or a 
representative of the DAA. An amount per meal, per day, per week or the 
full allotment may be transacted at one time. All POS devices must have 
refund capabilities. Therefore, if the DAA has a POS an amount could be 
refunded to the household's account and debited from the DAA's daily 
settlement amount.
    Other State EBT systems allow the State agency to transfer, via 
computer terminal, the allotments of individual households into a 
single account for the DAA. The DAA is given its own EBT card which it 
can use at authorized food stores. When a household leaves the facility 
and this is properly reported, the State can transfer benefits from the 
DAA aggregated account back to the individual household account. States 
remain responsible for monitoring DAA facilities. EBT systems help the 
State in monitoring because States may review the DAA records showing 
when clients leave the DAA and then review EBT data to determine if 
benefits had been properly returned to the client's EBT account.
    We do not intend to endorse a single EBT design, but any design or 
State procedures used as part of the design used to accommodate DAA 
facilities must assure that a household has access to one-half of its 
allotment when it leaves the center before the 16th of the month. This 
policy requirement may be easily met if the State opts to issue semi-
monthly allotments. However, the requirement must be met regardless of 
issuance frequency or the issuance system.
    The Department proposes to delete current paragraphs (e)(3)(i) 
through (iii) which provide that the expedited and regular processing 
standards apply to residents of DAA centers as well as other households 
and the requirement for the State agency to process changes in 
circumstances and recertification for these households the same as 
other households. These provisions still apply, but it is not necessary 
to specifically mention them.

Sponsored Aliens--7 CFR 273.11(j)

    We are proposing to move the sponsored alien provisions from 7 CFR 
273.11(j) to new paragraph 7 CFR 273.4(c) and to renumber 7 CFR 
273.11(k) as 7 CFR 273.11(j). This will consolidate most of the alien 
provisions.
    Current rules at 7 CFR 273.11(j) establish special procedures for 
determining the income and resources of sponsored aliens. Sponsored 
aliens are individuals lawfully admitted to the United States for 
permanent residence. A sponsor is a person who executed an affidavit of 
support on behalf of an alien as one of the conditions required for the 
alien's entry into the United States. The current rules require that a 
portion of the gross income and resources of the sponsor and the 
sponsor's spouse (if living with the sponsor) be deemed to the 
sponsored alien for a period of 3 years from the date of the sponsored 
alien's entry into the country as a lawfully admitted permanent 
resident alien. Under Section 5(i) of the Food Stamp Act, the income of 
the sponsor and the sponsor's spouse (if living with the sponsor) is 
the total annual income reduced by the income eligibility standard for 
a household equal in size to the sponsor's household and deeming 
continues for only 3 years. The Act also requires that $1,500 be 
subtracted from the resources of the sponsor and the sponsor's spouse 
to be deemed to the alien.
    Section 421 of PRWORA, as modified by the OCAA and the Balanced 
Budget Act, contains several provisions which revise the current 
requirements. First, section 421(a)(1) provides that, notwithstanding 
any other provision of law, the income and resources of the alien must 
be deemed to include all of

[[Page 10890]]

the income and resources of any person who executed an affidavit of 
support pursuant to section 423 of PRWORA which is a legally binding 
affidavit. Section 421(a)(2) provides that the income and resources of 
the spouse (if any) of the person executing the affidavit are to be 
deemed to the alien. Section 421(b) provides that the deeming must 
continue until the alien becomes a citizen or has worked 40 qualifying 
quarters of coverage as defined under title II of the Social Security 
Act or can be credited with such qualifying quarters. Any quarter 
creditable for a period beginning after December 31, 1996, cannot be 
credited if the alien received any Federal means-tested public benefit 
during the quarter. Section 403 includes a list of types of assistance 
exempt from the prohibition against allowing a quarter of work credit 
for a quarter in which an alien received any means-tested public 
benefit. This list of exempt assistance is addressed in the discussion 
of alien eligibility requirements above.
    The income and resources of ineligible sponsored aliens would 
include the income and resources of the sponsor and would be counted in 
determining the eligibility and benefits of the rest of the household, 
in accordance with 7 CFR 273.11(c).
    Section 552 of OCAA amends section 421 of PRWORA to provide two 
exceptions to the requirement that all of the income and resources of 
the sponsor(s) and sponsor's spouse be deemed to the sponsored alien. 
For indigent aliens deeming is limited to the amount actually provided 
by the sponsor to the alien for a period beginning on the date of such 
determination and ending 12 months after such date. The Department 
proposes that the State agency establish criteria for determining when 
an alien is unable to obtain food and shelter considering all income 
and assistance provided by individuals and thus should be considered 
indigent. The agency must notify the Attorney General of each such 
determination, including the names of the sponsor and the sponsored 
alien involved. Deeming is eliminated for 12 months for battered alien 
spouses and children and parents of battered children if the benefit 
provider determines that the battering is substantially connected to 
the need for benefits. Section 5571 of the Balanced Budget Act includes 
the alien child of a battered parent in this provision. Deeming of the 
batterer's income and resources is eliminated after 12 months if the 
battery is: (1) Recognized by a court or the Immigration and 
Naturalization Service; and (2) has a substantial connection to the 
need for benefits. These provisions do not apply if the battered alien 
lives with the batterer.
    Section 423, as amended by section 551(a) of the OCAA, provides 
that the sponsored alien provisions in PRWORA apply to aliens who are 
sponsored under a new legally binding affidavit of support. It also 
requires that if a sponsored alien has received any benefits under a 
means-tested public benefit program, the State agency must request 
reimbursement by the sponsor in the amount of such assistance. If 
within 45 days after requesting reimbursement, the sponsor has not 
indicated a willingness to commence payment, legal action may be 
brought against the sponsor pursuant to the affidavit of support. The 
Department of Justice (DOJ) published an interim rule with request for 
comments on the new affidavits of support and reimbursement provisions 
in the Federal Register on October 20, 1997 (62 FR 54346). The rule is 
effective on December 19, 1997, and the new affidavits of support 
should be used for all aliens who become sponsored after that date.
    We propose to revise 7 CFR 273.11(j) to incorporate PRWORA, OCAA, 
and Balanced Budget Act provisions and to streamline the section by 
increasing State agency flexibility and removing redundant 
requirements. The following revisions are proposed:
    1. Paragraph (j)(1) would be revised to add a reference to section 
213A of the INA, which contains requirements for the affidavit of 
support. We would incorporate the definition of ``sponsor'' in the 
definition of ``sponsored alien'' and remove the definitions of ``Date 
of entry'' and ``Date of admission'' because those terms are no longer 
relevant to the new deeming requirements.
    2. The introductory text of current paragraph (j)(2) would be 
revised to incorporate the requirement of PRWORA that all of the 
sponsor's income and resources be counted in determining the 
eligibility and benefits of the sponsored alien and that deeming lasts 
until the alien becomes a citizen or can be credited with 40 qualifying 
quarters of coverage. The current provision in paragraph (j)(2)(v) 
requiring that the income and resources of both the sponsor and 
sponsor's spouse be counted in determining eligibility would be 
removed. We would remove the provisions of current regulations in 
paragraph (j)(2)(i)(A) allowing a 20 percent deduction from the 
sponsor's earned income and paragraph (j)(2)(i)(B) allowing a deduction 
for an amount equal to the Food Stamp Program's monthly gross income 
eligibility limit for a household equal in size to the sponsor's 
household. We would also remove the provision allowing use of the 
income amount reported for AFDC purposes in current paragraph 
(j)((2)(ii). We would remove the provision of paragraph (j)(2)(iv) 
which limits the deemed amount of the sponsors' resources to those in 
excess of $1,500 because PRWORA requires deeming all of the sponsors' 
resources. With the removal of these provisions, current paragraphs 
(j)(2)(iii) regarding money paid to the alien by the sponsor and 
(j)(2)(iv) requiring that the income and resources of the sponsor be 
divided among the number of aliens sponsored by that sponsor would be 
retained and be designated as paragraphs (j)(2)(i) and (j)(2)(ii), 
respectively. Current paragraph (j)(2)(vii) which provides specific 
procedures for handling changes in sponsors would not be included in 
this proposal in order to provide State agency flexibility. We believe 
that the State agency is in the best position to make these decisions. 
Requirements contained elsewhere in current regulations for reporting 
and acting on changes that affect a household's eligibility or benefit 
levels are already comprehensive and we believe there is no additional 
Federal interest to be protected by providing specific procedures for 
this particular kind of change.
    3. Current paragraph (j)(3) exempts the following aliens from the 
deeming provisions: aliens whose sponsor is participating in the Food 
Stamp Program in the same household as the sponsored alien or in a 
separate household, aliens who are sponsored by a group as opposed to 
an individual, and aliens not required to have sponsors. We propose to 
delete the exemption for aliens whose sponsor is participating in the 
Food Stamp Program in a separate household from the sponsored alien. We 
propose to retain the exemption for sponsored aliens who are included 
in the same household as the sponsor so that the sponsor's income and 
resources will not be double counted. We propose to add exemptions for 
indigent aliens and certain battered aliens and the child of a battered 
alien as provided in the OCAA and the Balanced Budget Act and to 
require reporting to Attorney General of each indigent determination.
    4. We would retain the provisions of current paragraph (j)(4) 
concerning the sponsored alien's responsibility for obtaining the 
cooperation of the sponsor and providing information about the sponsor 
to the State agency.
    5. We would not include the provisions of current paragraph (j)(5)

[[Page 10891]]

which lists specific responsibilities of the State agency for 
processing cases involving households with sponsored aliens. We believe 
that these requirements are unnecessary because the State agency is 
aware of the information about the sponsor that must be obtained and 
there is no need to provide detailed regulatory requirements.
    6. We would renumber current paragraph (j)(6) concerning procedures 
for acting on a household's application pending receipt of verification 
about the sponsor's income and resources as paragraph (j)(5). We would 
not include the last sentence of current paragraph (j)(6) in the new 
paragraph (j)(5). That sentence requires State agencies to assist 
aliens in obtaining verification in accordance with the provisions of 
current 7 CFR 273.2(f)(5). In accordance with amendments made by PRWORA 
discussed above, the requirement to assist households in obtaining 
verification is being removed from the regulations.
    7. We propose to remove current paragraph (j)(7) requiring the 
Department to enter into a Memorandum of Agreement between the 
Department and other Federal agencies as this is a Federal 
responsibility, and it is addressed by DOJ's interim rule published on 
October 20, 1997, (62 FR 54346).
    8. We also propose to remove the provisions of current paragraph 
(j)(8) concerning overissuances which may result from the use of 
incorrect sponsor information. Section 423(e) of PRWORA requires State 
agencies to request reimbursement from sponsors for food stamps issued 
to sponsored aliens. State agencies shall follow the collection 
procedures prescribed in INS regulations at 8 CFR 213a.4. Amounts 
collected shall be transmitted to FNS.

Notice of Adverse Action--7 CFR 273.13

    We are also taking this opportunity to clarify what is meant by a 
Notice of Adverse Action (NOAA) period. Current rules at 7 CFR 
273.13(a) require a State agency to provide a household timely and 
adequate advance notice before taking any action to reduce or terminate 
a household's benefits, unless exempt from these requirements pursuant 
to 7 CFR 273.13(b). This procedure allows households an opportunity to 
request a fair hearing and continuation of benefits until the matter is 
settled by hearing officials. If the household does not request a 
continuation of benefits, the adverse action is effective no later than 
the month following the month in which the notice of adverse action 
period expires.
    Pursuant to current regulations at 7 CFR 273.13(a)(1), the NOAA is 
considered timely if the advance notice period conforms to that period 
of time defined by the State agency as an adequate notice for its 
public assistance caseload, provided that the notice period includes at 
least 10 days from the date the notice is mailed to the date upon which 
the action becomes effective. At the time the regulations were written, 
the adequate notice period for public assistance cases in most States 
was 10-15 days. With the increased flexibility under PRWORA for State 
agencies to make changes in public assistance procedures, we anticipate 
that many States may make significant changes in the NOAA procedures 
for public assistance. Such changes could result in shorter or longer 
NOAA periods. Current regulations restrict using public assistance NOAA 
periods which are less than 10 days from the date the notice is issued, 
but do not limit using public assistance notice periods which may be 
unnecessarily lengthy. The purpose of the current provision is to 
provide due process for households by establishing a set period of time 
for household to request a fair hearing and continuation of benefits 
while awaiting the hearing decision. We do not believe it is 
appropriate to have a lengthy time period for households to request a 
fair hearing and continuation of benefits. In addition, longer NOAA 
periods have the potential to increase Program costs.
    In order to ensure that food stamp households have adequate time to 
reply to a NOAA and request a fair hearing and continuation of benefits 
while limiting the potential for increased Program costs, we are 
proposing to change the regulations at 7 CFR 273.13 to clarify that the 
NOAA period must be a set period of time. Most State agencies currently 
have a notice period of 10-18 days for household's to respond. There is 
nothing in our current records to indicate that this time span has 
caused problems for either households or State agencies. We propose to 
amend 7 CFR 273.13(a)(1) to clarify that the NOAA is considered timely 
if the advance notice period conforms to that period of time defined by 
the State agency as an adequate notice for its public assistance 
caseload, provided that the notice period is a set period of time which 
is no less than 10 days and no more than 18 days from the date the 
notice is mailed to the date the notice period expires. We are not 
proposing any change to current regulations which provide that the 
adverse action take affect in the month following the month in which 
the notice expires, unless the household has requested a continuation 
of benefits pending the outcome of a fair hearing.

Recertification--7 CFR 273.14

    We would propose amendments to 7 CFR 273.14 to conform the 
recertification application process to the changes made pursuant to 
PRWORA relative to the initial application process (discussed earlier 
in this preamble). More specifically, we would:
    1. Remove the second sentence of paragraph (b)(1)(ii) which 
provides that a model notice of expiration (NOE) is available from FNS. 
FNS will no longer be developing model forms.
    2. Remove paragraph (b)(1)(iii), which encourages State agencies to 
send a recertification form, interview appointment letter, and 
statement of required verification with the NOE. Since this was only a 
recommendation, it is not necessary.
    3. Revise paragraph (b)(2)(i) to remove those statements which 
provide that a new application form must be obtained, that the 
application can be the same as that used at initial certification or a 
special recertification form, and that the forms must be approved by 
FNS. Under PRWORA, as discussed earlier, these procedures are no longer 
required. We would also remove, as unnecessary or overly prescriptive, 
those statements regarding the use and/or approval of joint 
applications for PA, GA and/or SSI households and the use of 
recertification forms for monthly reporting and nonmonthly reporting 
households. The proposal would provide: (a) That the recertification 
process must only be used for those households applying for 
recertification prior to the end of the current certification period; 
(b) that the State agency must, at a minimum, obtain sufficient 
information that, when added to information already contained in the 
casefile, will ensure an accurate determination of eligibility; (c) 
that the method of obtaining and recording information from the 
applicant household must be established by the State agency and may 
include a specially designed recertification application or the State 
agency may choose to simply annotate changes since the last 
certification on an existing application; (d) that the State agency 
must issue a notice of required verification, which would provide a 
clear written statement of the acts a household must perform to 
cooperate with the application process, identify potential sources of 
verification, and offer assistance to special needs

[[Page 10892]]

households; and (e) that a new signature, whether handwritten or 
electronic, be obtained from the applicant at the time of each 
recertification.
    4. Remove the provision of paragraph (b)(2)(ii) that State agencies 
may request the household to bring the recertification form to the 
interview or return it by a specified date because it is unnecessary.
    5. Revise (b)(3)(i) regarding interviews. State agencies would only 
be required to have a face-to-face interview once every 12 months. We 
would add a new sentence to clarify that if a telephone interview is 
conducted, the State agency must mail the application to the household 
to obtain the necessary signature.
    6. Remove the second sentence of paragraph (b)(3)(ii), which 
requires the State agency to conduct an annual face-to-face interview 
at the same time as the PA or GA interview. PRWORA eliminated the 
requirement for a single food stamp/PA interview.
    7. Remove the first two sentences of paragraph (b)(3)(iii). The 
provisions regarding interview scheduling are unnecessary. We propose 
to retain the requirement that the State agency schedule interviews so 
that the household has at least 10 days to provide the required 
verification before the certification period expires.
    8. Remove the second sentence of paragraph (b)(4) regarding the 
notice of required verification because the notice is no longer 
required. We propose to add the phrase ``and benefits cannot be 
prorated'' to the last sentence for clarification.
    9. Revise and simplify the language in current paragraph (e) 
regarding delays in application processing but retain the current State 
agency options.

Fair Hearings--7 CFR 273.15

    Under Section 11(e)(10) of the Food Stamp Act (7 U.S.C. 
2020(e)(10)) and current rules at 7 CFR 273.15(a), the State agency 
must provide a fair hearing to any household adversely affected by any 
action of the State agency which affects the participation of the 
household in the FSP. The current rules at 7 CFR 273.15(j) further 
specify that the State agency may not deny or dismiss a request for a 
hearing unless: (1) the request is not received within the allowable 
time period specified in the rules; (2) the request is withdrawn in 
writing by the household or its representative; or (3) the household or 
its representative fails, without good cause to appear at the scheduled 
hearing.
    Section 839 of PRWORA amended Section 11(e)(10) of the Food Stamp 
Act to specify that, ``at the option of a State, at any time prior to a 
fair hearing determination under this paragraph, a household may 
withdraw, orally or in writing, a request by the household for the fair 
hearing. If the withdrawal request is an oral request, the State agency 
shall provide a written notice to the household confirming the 
withdrawal request and providing the household with an opportunity to 
request a hearing.''
    We are proposing to implement Section 839 by revising 273.15(j) to 
specify that State agencies may accept an expression (orally or in 
writing) to withdraw a fair hearing request from the household. State 
agencies electing to accept oral withdrawals of the fair hearing 
request must, as required by Section 11(e)(10), provide the household 
with a written notice confirming the withdrawal.

Simplified Food Stamp Program--7 CFR 273.25

    The PRWORA provides State agencies with a number of options to 
align the rules and procedures between the TANF program and the Food 
Stamp Program (FSP). One such option available is the Simplified Food 
Stamp Program (SFSP). Under a SFSP, States may determine food stamp 
benefit levels for households receiving TANF by using food stamp 
requirements, TANF rules and procedures, or a combination of the two.
    Since the purpose of an SFSP is to simplify program requirements 
for State agencies as well as for applicants and recipients by aligning 
TANF and FSP rules and procedures, the Department recognizes that over-
regulating the SFSP is contrary to the goals of simplification. As a 
result, the Department is publishing regulations on the area of the 
statute where the Department has explicit authority to establish 
program rules. Except where discretion is provided, the Department 
believes the statutory language governing the SFSP provides sufficient 
guidance for State agencies choosing to implement such programs.
    Legislation governing the Simplified Food Stamp Program (SFSP) at 7 
U.S.C. 2035(c)(3) provides the Department with authority to establish 
criteria for approving participation in SFSPs for households in which 
at least one, but not all members, receive assistance under a State 
program funded under part A of title IV of the Social Security Act (42 
U.S.C. 601 et seq.). This rulemaking establishes criteria for limits on 
benefit losses that the Department will implement under this 
discretionary authority. The Department is addressing the limit on 
benefit losses in rulemaking because of its particular impact on 
households.
Definitions--Sec. 273.25(a)
    For purposes of this section, the following definitions are 
proposed:
    1. Simplified Food Stamp Program (SFSP) means a program authorized 
under 7 U.S.C. 2035.
    2. Temporary Assistance for Needy Families (TANF) means assistance 
from a State program funded under part A of title IV of the Social 
Security Act (42 U.S.C. 601 et seq.).
    3. Pure-TANF household means a household in which all members 
receive assistance under a State program funded under part A of title 
IV of the Social Security Act (42 U.S.C. 601 et seq.).
    4. Mixed-TANF household means a household in which 1 or more 
members, but not all members, receive assistance under a State program 
funded under part A of title IV of the Social Security Act (42 U.S.C. 
601 et seq.).
Benefit Reduction for Mixed-TANF Households Under the Simplified Food 
Stamp Program--Sec. 273.25(b)
    Under the regular Food Stamp Program (FSP), certain deductions have 
ensured that households receive the appropriate level of food 
assistance to meet basic nutritional needs. The Department wishes to 
maintain benefit levels under a SFSP so that mixed-TANF households 
continue to be able to meet their nutritional needs.
    At the same time, the Department supports the objectives for 
simplification. In establishing approval criteria for mixed-TANF 
households, the Department considered requiring a medical deduction 
and/or standard deduction for mixed-TANF households. As the 
Department's overall objective is to ensure benefits are not reduced 
beyond a certain point for these households, it was felt that requiring 
specific deductions was too prescriptive. The Department, therefore, is 
proposing to limit benefit reductions and provide States with 
flexibility in deciding the best mechanism for achieving the desired 
results.
    In formulating a threshold for benefit reduction for mixed-TANF 
households, the Department considered criterion used under 
demonstration authority which stipulates that projects reducing 
benefits by more than 20 percent for more than 5 percent of 
participating households cannot include more than 15 percent of the 
State's total caseload. The Department, however, rejected this 
criterion for the SFSP due to several major differences between

[[Page 10893]]

demonstration projects and SFSPs. Demonstration projects are time-
limited. Consequently, any benefit reductions experienced by households 
participating in these projects last only for the duration of the 
project. SFSPs, however, have no time-limit. Any benefit reductions 
under an SFSP are permanent unless the SFSP is terminated or the 
household loses eligibility for the SFSP. Demonstration projects also 
require a research evaluation which provides an opportunity to 
determine its effects and make changes in program design based on these 
findings. SFSPs have no comparable evaluation requirements that would 
provide information necessary to determine any long-term nutritional 
gains or losses a household may experience under an SFSP. Finally, a 
methodology similar to that used for demonstration projects which allow 
large benefit reductions for a small percentage of households has the 
potential to create inequities in its application. Under demonstration 
project authority for example, a State would be allowed to operate a 
project with benefit reductions of 50 percent for 4 percent of its food 
stamp caseload; however, another State would be prohibited from 
operating a project in which benefits are reduced by 21 percent for 6 
percent of its caseload. It can be argued that the second situation is 
far less severe than the first in terms of impact on households 
although the second situation could not be approved.
    Since benefits under the regular FSP are based on the Thrifty Food 
Plan which is the least costly of several food plans developed by the 
Department that meet nutritional dietary standards, any reductions, 
regardless of how small, limit a household's access to a nutritious, 
healthy diet. The Department, however, wishes to balance this concern 
with the needs of States for flexibility in program design while 
ensuring compliance with legislative requirements that SFSPs do not 
increase costs to the Federal government. As a result, the Department 
is proposing criterion for approving mixed-TANF households that it 
believes will achieve the appropriate balance between these priorities. 
If a State's SFSP reduces benefits for mixed-TANF households, then no 
more than 5 percent of these participating households can have benefits 
reduced by 10 percent or more of the amount they are eligible to 
receive under the regular FSP and no mixed-TANF household can have 
benefits reduced by 25 percent or more of the amount it is eligible to 
receive under the regular FSP (5/10/25 percent benefit reduction 
requirement). In other words, the Department is proposing a 3-tier 
standard to limit benefit loss in which: 1) there is no limit on the 
number of participating mixed-TANF households that can have benefit 
reductions of 9.99 percent or less of the amount they are eligible to 
receive under the regular FSP; 2) no more than 5 percent of 
participating mixed-TANF households can have benefits reduced between 
10 and 24.99 percent of the amount they are eligible to receive under 
the regular FSP, and 3) no mixed-TANF household can have benefits 
reduced by 25 percent or more of the amount it is eligible to receive 
under the regular FSP. Under this criterion, FNS does not limit the 
number of households experiencing a loss of benefits until the 
reduction reaches the 10 percent level. In addition, the Department 
believes that benefit reductions of 25 percent or more would 
significantly impair a household's nutritional security, and is 
therefore prohibiting reductions of this magnitude.
    Since minor reductions in monthly allotments that are relatively 
small could result in changes exceeding the requisite threshold, the 
Department is proposing to disregard benefit reductions of $10 or less 
from this requirement. For example, an $8 reduction to a $40 monthly 
allotment would not be considered when applying the 5/10/25 percent 
benefit reduction requirement even though benefits are reduced by 20 
percent.
    In determining the extent of benefit reduction beyond the regular 
FSP, the Department will take into consideration the program options 
that are available to States and any administrative waivers approved 
for a State. For example, consider when a State uses the legislative 
option to reduce food stamp benefits under the regular FSP by 25 
percent when a household member fails to comply with a TANF 
requirement. The State then requests to use its TANF procedures under 
an SFSP to impose a 30 percent reduction in benefits for the same 
violation. In determining the amount of benefit loss under the State's 
simplified proposal, FNS would consider the 25 percent reduction that 
is already allowable under the regular FSP. Consequently, the State's 
proposal is considered to reduce benefits beyond the regular FSP by 5 
percent (the difference between 30 and 25 percent) rather than 30 
percent.
    If a State chooses to include mixed-TANF households in its SFSP, 
the State must include in its plan an analysis showing the impact of 
the SFSP on benefit levels for these participating households and the 
amount of any benefit reductions compared to the benefit amount the 
household would receive under the regular FSP. In order for FNS to 
accurately evaluate the program's impact, States must describe in 
detail the methodology used as the basis for this analysis. If it is 
determined by FNS that a SFSP will reduce benefits for mixed-TANF 
households beyond the 5/10/25 benefit reduction requirement excluding 
reductions of $10 or less, the plan will not be approved for these 
households. To ensure compliance with the benefit reduction requirement 
once an SFSP is operational, States must describe in their plans and 
have approved by FNS a methodology for measuring benefit reductions for 
mixed-TANF households on an on-going basis throughout the duration of 
the SFSP. In addition, States must report periodically to FNS the 
amount of benefit loss experienced by mixed-TANF households 
participating in the State's SFSP. The frequency of the reports will be 
determined by FNS taking into consideration such factors as the number 
of mixed-TANF households participating in the SFSP and the amount of 
benefit loss attributed to these households through initial or on-going 
analyses. If it is determined that an approved SFSP is reducing 
benefits beyond the allowable thresholds, the State will need to modify 
its SFSP to bring it into compliance.

Part 274--Issuance and Use of Coupons

    Mail Issuance--7 CFR 274.2
    Prior to the enactment of PRWORA, Section 11(e)(25) of the Food 
Stamp Act (7 U.S.C. 2020(e)(25)) required State agencies to issue food 
stamp benefits through a mail issuance system in rural areas where 
households experience transportation difficulties in obtaining 
benefits. Current rules at 7 CFR 274.2(g) specify the requirements that 
State agencies must meet in determining the rural areas in need of mail 
issuance. The regulations at 7 CFR 272.2(g) also require State agencies 
to submit an attachment to the State Plan of Operation describing mail 
issuance requirements.
    Section 835 of PRWORA deleted direct-mail issuance requirements.
    To implement this provision, we are proposing to remove the 
mandatory mail issuance requirements from State plan requirements at 7 
CFR 272.2(d)(1)(xi) and 7 CFR 274.2(g)(1) and (g)(2). This proposal 
would retain, however, the basic provisions at 7 CFR 274.2(g) requiring 
State agencies to issue food stamp benefits through a direct mail 
issuance system in rural areas where households experience 
transportation difficulties in obtaining

[[Page 10894]]

benefits. These provisions would apply unless an EBT system is in 
place. Under this proposal, the State agency would determine the rural 
areas which are in need of direct mail issuance. Furthermore, in areas 
where direct mail issuance would continue, the State agency would 
determine if any households or geographic areas would be granted an 
exception. Finally, we are proposing to eliminate State plan 
requirements at 7 CFR 272.2(d)(1)(xi) although exceptions to direct 
mail issuance would be reported to FNS as specified at 7 CFR 
272.3(a)(2) and (b)(2). 7 CFR 272.3(a)(2) and 7 CFR 272.3(b)(2) require 
State agencies to prepare and provide staff with Operating Guidelines 
and to submit their operating guidelines to FNS.
    We believe retaining this basic requirement would ensure that 
benefits are provided to all eligible households in a fair and timely 
manner as required by Section 835 of PRWORA. Once implemented, EBT will 
replace the need for mail issuance. More than 70 percent of food stamp 
benefits are currently issued through an EBT system and, by law, EBT 
must be implemented in all States nationwide by 2002.

Part 277--Payments of Certain Administrative Costs of State 
Agencies

Funding for Program Informational Activities--7 CFR 277.4
    Section 11(e)(1) of the Food Stamp Act and the regulations at 7 CFR 
272.5(c) allow State agencies, at their option, to conduct activities 
designed to inform low-income households about the availability, 
eligibility requirements, application procedures, and benefits of the 
FSP. States electing to conduct Program informational activities must 
obtain FNS approval as specified in the current rules at 7 CFR 
272.2(d)(1)(ix). State agencies with approval from FNS are reimbursed 
at the 50 percent rate under Section 16(a) of the Food Stamp Act (7 U. 
S. C. 2025(a)) and 7 CFR Part 277 of the corresponding regulations.
    Section 847 of PRWORA amended Section 16(a)(4) of the Food Stamp 
Act to specify that Federal reimbursement funding not include 
``recruitment activities.'' We are proposing to implement Section 847 
of PRWORA by amending 7 CFR 277.4(b) to prohibit Federal reimbursement 
for recruitment activities. State agencies seeking reimbursement from 
FNS for Program informational and educational activities would continue 
to be required to provide a plan to FNS as specified at 7 CFR 
272.2(d)(1)(ix). However, we are interested in receiving comments about 
the usefulness of this plan and ideas about how to make the plan 
approval process more efficient. We would also welcome comments on how 
to encourage additional State agencies to prepare Program informational 
plans.

Implementation

    The provisions of PRWORA, as amended by the Balanced Budget Act, 
were effective and required to be implemented by State agencies on the 
date of enactment of PRWORA (August 22, 1996) for new applicants and no 
later than the next recertification for recipients, unless otherwise 
noted. Therefore, we propose that the effective date and required 
implementation date for sections 402, 807, 808 and 811 of PRWORA would 
be August 22, 1996 for new applicants and no later than recertification 
for recipients. Section 402 of PRWORA, as amended by section 510 of the 
OCAA, specified that the alien eligibility requirements cannot apply 
until April 1, 1997, to an alien who received benefits on August 22, 
1996, unless the alien is ineligible for another reason. State agencies 
were required to recertify all aliens between April 1 and August 22, 
1997.
    Section 551 of the OCAA amended section 423 of PRWORA to provide 
that the sponsored alien provisions of section 421 of PRWORA apply to 
new legally binding affidavits of support executed on or after a date 
specified by the Attorney General. The Attorney General issued a notice 
in the Federal Register on October 20, 1997 setting this date as 
December 19, 1997. The Attorney General determined the PRWORA's legally 
binding affidavit of support requirement would not apply to an alien 
who had, prior to December 19, 1997: (1) applied for admission (via 
application for either an immigrant visa or adjustment of status); and 
(2) had an official interview with either a consular or immigration 
officer (62 FR 54346, 54347.) Therefore, the proposed provisions in 7 
CFR 273.11(j) of this action apply only to sponsored aliens who had an 
official interview with a consular or immigration official on or after 
December 19, 1997, and whose sponsors signed an affidavit of support on 
or after December 19, 1997.
    The provision of section 809 of PRWORA allowing a shelter deduction 
for homeless households was effective August 22, 1996. There is no 
required implementation date because the deduction is a State option. 
However, section 809 removed the provision of section 11(e) of the Act 
requiring use of a standard shelter estimate for homeless households. 
Therefore, State agencies were required to discontinue use of the 
estimate for new applicants on August 22, 1996 and no later than 
recertification for recipients.
    Section 827 of PRWORA, which requires proration of benefits after 
any break in certification, was effective on August 22, 1996, and 
required to be implemented at recertification of affected households. 
Section 847 of PRWORA, which prohibits Federal reimbursement for 
recruitment activities was effective on August 22, 1996.
    Sections 801, 809, 812, 818, 828, 830, 835, 836, 839, 840, and 848 
of PRWORA were effective on August 22, 1996 but have no required 
implementation date because they allow, but do not require, action by 
the State agency.
    Sections 503 through 509 of AREERA are effective on November 1, 
1998.
    Accordingly, we propose to incorporate into the final rule, at 7 
CFR 272.1(g), the effective dates and implementation dates as discussed 
in the previous paragraphs of this section of the preamble. The 
provisions of the final rule are proposed to be effective 60 days after 
publication and must be implemented no later than 180 days after 
publication. The provisions would have to be implemented no later than 
the required implementation date for all households newly applying for 
Program benefits on or after the required implementation date. The 
current caseload would be required to be converted no later than the 
next recertification following the implementation date. Any variances 
would be excluded from quality control analysis in accordance with 7 
CFR 275.12(d)(2)(vii) and 7 U.S.C. 2025(c)(3)(A). We would allow a 
second variance exclusion period under 7 CFR 275.12(d)(2)(vii) for 
States which first implement option 1 under proposed 7 CFR 
273.11(c)(3)(ii), and then decide at a later date to implement option 
2.

List of Subjects

7 CFR Part 272

    Alaska, Civil rights, Claims, Food and Nutrition Service, Food 
stamps, Grant programs-social programs, Reporting and recordkeeping 
requirements, Unemployment compensation, Wages.

List of Subjects

7 CFR Part 273

    Administrative practice and procedure, Aliens, Claims, Employment, 
Food and Nutrition Service, Food stamps, Fraud, Government employees, 
Grant programs-social programs, Income taxes, Reporting and 
recordkeeping requirements, Students, Supplemental Security Income, 
Wages.

[[Page 10895]]

7 CFR 274

    Food and Nutrition Service, Food stamps, Fraud, Grant program-
social programs, Reporting and recordkeeping requirements.

7 CFR Part 277

    Administrative practice and procedure, Food stamps, Fraud, Grant 
programs-social programs, Penalties.
    Accordingly, 7 CFR Parts 272, 273, 274, and 277 are proposed to be 
amended as follows:
    1. The authority citation for Parts 272, 273, 274, and 277 
continues to read as follows:

    Authority: 7 U.S.C. 2011-2036.

PART 272--REQUIREMENTS FOR PARTICIPATING STATE AGENCIES


Sec. 272.2  [Amended]

    2. In Sec. 272.2:
    a. Paragraph (a)(2) is amended by removing the thirteenth sentence; 
and
    b. Paragraph (d)(1)(xi) is removed and paragraph (d)(1)(xii) is 
redesignated as paragraph (d)(1)(xi).


Sec. 272.3  [Amended]

    3. In Sec. 272.3:
    a. In paragraph (b)(1), the words ``, except the Application for 
Food Stamps,'' and the last sentence of the paragraph are removed; and
    b. Paragraph (c)(5) is removed, and paragraphs (c)(6) and (c)(7) 
are redesignated as paragraphs (c)(5) and (c)(6), respectively.
    4. In Sec. 272.4:
    a. Paragraph (d) is removed:
    b. Paragraphs (e), (f), (g), and (h) are redesignated as paragraphs 
(d), (e), (f), and (g) respectively; and
    c. Newly redesignated paragraph (f) is revised to read as follows:


Sec. 272.4  Program administration and personnel requirements.

* * * * *
    (f) Hours of operation. State agencies are responsible for setting 
the hours of operation for their food stamp offices. In doing so, State 
agencies shall take into account the special needs of the populations 
they serve including households containing a working person.
* * * * *
    5. In Sec. 272.5:
    a. Paragraph (b)(1)(i) is redesignated as the text of paragraph 
(b)(1) and revised;
    b. Paragraphs (b)(1)(ii) and (b)(1)(iii) are removed;
    c. Paragraphs (b)(2) and (b)(3) are redesignated as (b)(3) and 
(b)(4) respectively; and
    d. Paragraph (b)(1)(iv) is redesignated as paragraph (b)(2).
    The revisions read as follows:


Sec. 272.5  Program informational activities.

* * * * *
    (b) Minimum requirements. * * *
    (1) FNS shall encourage State agencies to develop Nutrition 
Education Plans as specified at 7 CFR 272.2(d)(2) to inform applicant 
and participant households about the importance of a nutritious diet 
and the relationship between diet and health.
* * * * *
    6. In Sec. 272.8:
    a. Paragraph (a)(1) introductory text is amended by removing the 
word ``shall'' in the first, second, and third sentences, and adding 
the word ``may'' in its place;
    b. Paragraph (a)(1) introductory text is further amended by 
revising the last sentence;
    c. Paragraph (a)(2) introductory text is amended by removing the 
word ``shall'' in the first sentence, and adding the word ``may'' in 
its place;
    d. Paragraph (a)(2)(i) is revised;
    e. Paragraph (a)(4) is revised;
    f. Paragraph (a)(5) is removed;
    g. Paragraphs (b), (d), (e), (f), and (j) are removed, and 
paragraphs (c), (g), (h), and (i) are redesignated as paragraphs (b), 
(c), (d), and (e), respectively;
    h. Newly redesignated paragraphs (b) and (e) are revised; and
    i. A new paragraph (f) is added.
    The addition and revisions read as follows:


Sec. 272.8  State income and eligibility verification system.

    (4) Agreements.
    (a) General. (1) * * * Data exchange agencies, at a minimum, are:
* * * * *
    (2) * * *
    (i) Temporary Assistance to Needy Families;
* * * * *
    (4) Prior to requesting or exchanging information with other 
agencies, State agencies shall execute data exchange agreements with 
those agencies. The agreements shall specify the information to be 
exchanged and the procedures which will be used in the exchange of 
information. These agreements shall be part of the State agency's Plan 
of Operation.
* * * * *
    (b) Alternate data sources. A State agency may continue to use 
income information from an alternate source or sources to meet any 
requirement under paragraph (a) of this section.
* * * * *
    (e) State Plan of Operation. The data exchange agreements conducted 
by the State agency with data sources specified in paragraph (a)(1) of 
this section must be included in an attachment to the State Plan of 
Operation as required in Sec. 272.2(d). This document must include a 
description of procedures used and agreements with the other agencies 
and programs specified in paragraph (a) of this section. The State 
agency shall submit revisions to the attachment if and when changes to 
the procedures used or agreements with other agencies or programs 
occur.
    (f) Documentation. The State agency shall document, as required by 
Sec. 272.2(f)(6), information obtained through the IEVS both when an 
adverse action is and is not instituted.


Sec. 272.11  [Amended]

    7. In Sec. 272.11:
    a. Paragraph (a) is amended by removing the word, ``shall'' and 
adding the word ``may'' in its place;
    b. Paragraph (b)(2)(iii) is amended by removing the words ``as 
outlined in paragraph (d)(1) of this section,'';
    c. Paragraph (d)(1) and the heading of paragraph (d)(2) are 
removed, and the text of paragraph (d)(2) is redesignated as the text 
of paragraph (d);
    d. The text of newly redesignated paragraph (d) is amended by 
removing the words ``as described in paragraph (d)(1) of this 
section''; and
    e. Paragraph (e)(2) is removed, and paragraph (e)(1) is 
redesignated as the text of paragraph (e).

PART 273--CERTIFICATION OF ELIGIBLE HOUSEHOLDS


Sec. 273.1  [Amended]

    8. In Sec. 273.1, paragraph (f) is removed and paragraph (g) is 
redesignated as paragraph (f).
    9. In Sec. 273.2, the section heading and paragraphs (a) through 
(j) are revised to read as follows:


Sec. 273.2  Office operations and application processing.

    (a) Office operations. State agencies must establish procedures 
governing the operation of food stamp offices that the State agency 
determines best serve households in the State, including households 
with special needs, such as, but not limited to, households with 
elderly or disabled members, households in rural areas with low-income 
members, homeless individuals, households residing on reservations, and 
households in areas in which a substantial number of members of low-
income households speak a language other than English, and households 
with earned income (working households). The State agency must provide 
timely, accurate, and fair service to applicants for, and participants 
in, the Food Stamp

[[Page 10896]]

Program. The State agency cannot, as a condition of eligibility, impose 
additional application or application processing requirements. The 
State agency must have a procedure for informing persons who wish to 
apply for food stamps about the application process and their rights 
and responsibilities. The State agency shall base food stamp 
eligibility solely on the criteria contained in the Act and the 
regulations.
    (b) Application processing. The application process must include 
filing and completing an application, being interviewed, and providing 
verification of certain information.
    (1) Application design. The State agency, in the development of its 
food stamp application, may use an electronic format and electronic 
signature. The design and format of the application are the State 
agency's responsibility. The State agency may design a separate 
application for food stamps or include the necessary food stamp 
information in a multi-program application designed by the State 
agency.
    (2) Application contents. The State agency's application must 
include the following:
    (i) All information necessary to comply with the Act and the 
regulations. Notifications to households may be included on the 
application itself or a separate document;
    (ii) The following nondiscrimination statement must appear on the 
application itself even if a joint program application is being used.
    ``The U.S. Department of Agriculture (USDA) prohibits 
discrimination in all its programs and activities on the basis of race, 
color, sex, religion, national origin, or political beliefs. Persons 
with disabilities who require alternative means for communication of 
program information (Braille, large print, audiotape, etc.) should 
contact USDA's TARGET Center at (202) 720-2600 (voice and TDD).
    ``To file a complaint of discrimination, write to USDA, Director, 
Office of Civil Rights, Room 326-W, Whitten Building, 14th and 
Independence Avenue, SW, Washington, D.C. 20250-9410 or call (202) 720-
5964 (voice and TDD). USDA is an equal opportunity provider and 
employer.''
    (iii) Written notifications required by other Federal laws, such 
as, but not limited to those in paragraphs (b)(2)(iii)(A) through 
(b)(2) (iii)(D). The notifications may be on the application itself or 
provided with the application on a separate document.
    (A) Notification that the Civil Rights Act of 1964 allows for the 
collection of racial and ethnic data in connection with the Food Stamp 
Program (as required by Sec. 272.6(g) of this chapter), that the 
information is voluntary and only serves to help us comply with the 
Civil Rights Act, and that it will not affect whether the application 
is approved.
    (B) Notification that information available through the IEVS will 
be requested, used and may be verified through collateral contact when 
discrepancies are found by the State agency and that such information 
may affect the household's eligibility and level of benefits. This 
applies only to State agencies which opt to use IEVS.
    (C) Notification that the alien status of any household member may 
be subject to verification by INS through the submission of information 
from the applicant to INS. The resulting information received from INS 
may affect the alien's eligibility. This statement is required even if 
a State agency opts not to use INS' SAVE system for this and other 
purposes pursuant to the Privacy Act.
    (D) Notification of the following facts through a written statement 
on or provided with the application and any other document where social 
security numbers are obtained.
    (1) The Food Stamp Act requires the collection of social security 
numbers (SSN) as a condition of food stamp eligibility and failure to 
provide a SSN may result in the household member who fails to provide a 
SSN being ineligible to receive food stamps;
    (2) Collection of the information is authorized under 42 U.S.C. 
2000 and 7 USC 2011-2036; and
    (3) A statement of how the social security number will be used and 
to whom it may be disclosed. The SSN will be used to check the identity 
of household members, to prevent duplicate participation and to make 
mass food stamps changes. It will also be used to check information 
provided by the household against information in food stamp records and 
against other Federal, state and local government agency computer 
matching systems. This could mean that employers, banks and other 
parties may be contacted. SSNs may be disclosed to auditors to assure 
that cases are properly certified and to the Internal Revenue Service 
for the purpose of collecting food stamp claims through tax refund 
offset. SSNs may be released to a court, magistrate, or administrative 
tribunal when required in civil or criminal proceedings.
    (3) Jointly processed cases. If a State agency has a procedure that 
allows applicants to apply for the food stamp program and another 
program at the same time, the State agency shall notify applicants that 
they may file a joint application for more than one program or they may 
file a separate application for food stamps independent of their 
application for benefits from any other program. All food stamp 
applications, regardless of whether they are joint applications or 
separate applications, must be processed for food stamp purposes in 
accordance with food stamp procedural, timeliness, notice, and fair 
hearing requirements. No household shall have its food stamp benefits 
denied solely on the basis that its application to participate in 
another program has been denied or its benefits under another program 
have been terminated without a separate determination by the State 
agency that the household failed to satisfy a food stamp eligibility 
requirement. Households that file a joint application for food stamps 
and another program and are denied benefits for the other program shall 
not be required to resubmit the joint application or to file another 
application for food stamps but shall have its food stamp eligibility 
determined based on the joint application in accordance with the food 
stamp processing time frames from the date the joint application was 
initially accepted by the State agency.
    (c) Filing an application.
    (1) Filing process. An adult member of the household, or an 
authorized representative as provided in paragraph (g) of this section, 
must sign the application and submit it to the food stamp office. An 
adult representative of each applicant household must certify in 
writing, under penalty of perjury, that the information contained in 
the application is true and that all members of the household are 
citizens or are eligible aliens. The application may be submitted in 
person, by fax or other electronic transmission, by mail, or by 
completing an on-line electronic application in person at the food 
stamp office. The household may file an incomplete application as long 
as it contains the applicant's name and address, and is signed by an 
adult member of the household or the household's authorized 
representative. Applications signed through the use of electronic 
signature techniques or applications containing a handwritten signature 
and then transmitted by fax or other electronic transmission are 
acceptable.
    (2) Household's right to file. State agencies shall post signs or 
make

[[Page 10897]]

available other advisory materials explaining a person's right to file 
an application on the day of their first contact with the food stamp 
office and explaining the application processing procedures. State 
agencies shall notify all persons who contact a food stamp office and 
either request food assistance or express financial and other 
circumstances which indicate a probable need for food assistance, of 
their right to file an application and encourage them to do so. For 
purposes of this paragraph (c)(2), encourage means that State agencies 
have a responsibility, at a minimum, to inform individuals who express 
an interest in food assistance, or express concerns which indicate food 
insecurity, about the Food Stamp Program and their right to apply. The 
State agency shall make food stamp applications readily accessible to 
all potentially eligible households and to anyone who requests one. The 
State agency shall provide an application in person or by mail to 
anyone who requests one. If a household requests to receive an 
application through the mail, the State agency must mail the 
application by the next business day. Households must be allowed to 
file an application on the same day the household or its authorized 
representative contacts the State agency food stamp office in person or 
by telephone during office hours and expresses interest in obtaining 
food stamp assistance. The State agency may require households to file 
an application at a specific certification office or allow them to file 
an application at any certification office within the State or project 
area. If an application is received at an incorrect office, the State 
agency shall advise the household when the application is received of 
the address and telephone number of the correct office and shall 
forward the application for the household not later than the next 
business day.
    (3) Withdrawing an application. A household may voluntarily 
withdraw its application at any time prior to the determination of 
eligibility. The State agency shall document in the case file the 
reason for withdrawal, if any was stated by the household, and that 
contact was made with the household to confirm the withdrawal. The 
State agency shall notify the household of its right to reapply for 
food stamp benefits at any time after it withdraws its current 
application.
    (4) Notice of required verification. The State agency must provide 
each applicant household, at the time of application for certification 
and recertification, a clear written statement explaining what the 
household must do to cooperate in obtaining verification and otherwise 
completing the application process, and identifying potential sources 
of required verification. The notice must also inform special needs 
households of the State agency's responsibility to assist the household 
in obtaining required verification, provided the household is 
cooperating with the State agency as specified in paragraph (d)(1) of 
this section. Such households include, but are not limited to, 
households with elderly or disabled members, households in rural areas 
with low-income members, homeless individuals, households residing on 
reservations, and households in areas in which a substantial number of 
members of low-income households speak a language other than English.
    (d) Household cooperation.
    (1) Cooperation with application processing. If the household 
refuses to cooperate with the State agency in completing the food stamp 
application process, the State agency shall deny the application at the 
time of refusal. For a determination of refusal to be made, the 
household must be able to cooperate, but clearly demonstrate that it 
will not take the necessary actions that are required to complete the 
application process. If there is any question as to whether the 
household has merely failed to cooperate, as opposed to refused to 
cooperate, the household cannot be denied. The household must also be 
determined ineligible if it refuses to cooperate in any subsequent 
interview or review of its case, including interviews or reviews 
generated by reported changes or discrepancies discovered by the State 
agency during the certification period, interviews at the time of 
application for recertification, and quality control reviews. The 
scheduling of in-office interviews to resolve discrepancies reported or 
discovered during a household's certification period must be limited to 
those situations in which the State agency has new information 
indicating a potential intentional Program violation situation. Refusal 
to appear for such an interview would result in termination of the 
case. In all cases, where the State agency determines that benefits 
will be reduced or terminated, households are entitled to a notice of 
adverse action, unless exempt, pursuant to the provisions of 
Sec. 273.13.
    (2) Quality control review. The household must be determined 
ineligible if it refuses to cooperate in any subsequent review of its 
eligibility as part of a quality control review. If a household is 
terminated for refusal to cooperate with a quality control reviewer, 
the household may reapply, but cannot be determined eligible until it 
cooperates with the quality control reviewer. If a household which was 
terminated for refusal to cooperate with a State quality control review 
reapplies after 90 days from the end of the annual review period, the 
household cannot be determined ineligible for the refusal to cooperate 
with a State quality control reviewer during the completed review 
period, but must provide verification in accordance with paragraph 
(f)(1)(xii) of this section. If a household terminated for refusal to 
cooperate with a Federal quality control reviewer reapplies after seven 
months from the end of the annual review period, the household cannot 
be determined ineligible for its refusal to cooperate with a Federal 
quality control reviewer during the completed review period, but must 
provide verification in accordance with paragraph (f)(1)(xii) of this 
section.
    (e) Interviews.
    (1) Face-to-face interview. Except for households certified for 
longer than 12 months, households must have a face-to-face interview 
with an eligibility worker at initial certification and at least once 
every 12 months thereafter. If a household in which all adult members 
are elderly or disabled is certified for 24 months in accordance with 
Sec. 273.10(f)(1), or a household residing on a reservation is required 
to submit monthly reports and is certified for 24 months in accordance 
with Sec. 273.10(f)(2), a face-to-face interview is not required during 
the certification period. Interviews may be conducted at the food stamp 
office or another mutually convenient location of the State agency's 
choosing, including a household's residence. The individual interviewed 
may be the head of household, spouse, any other responsible member of 
the household, or an authorized representative. The applicant may bring 
any person he or she chooses to the interview. The interviewer shall 
not simply review the information that appears on the application, but 
shall explore and resolve with the household unclear and incomplete 
information. The applicant's right to privacy must be protected during 
the interview. The interview may be conducted separately or jointly 
with an interview for other types of assistance programs for which the 
household has applied. If the interview will be conducted in a 
household's residence, it must be scheduled in advance with the 
household. Interviews should be scheduled so as to allow the household 
at least 10 days to provide

[[Page 10898]]

requested verification before the end of the 30-day processing period.
    (2) Waivers of the face-to-face interview. The State agency shall 
waive the face-to-face interview required in paragraph (e)(1) of this 
section in favor of a telephone interview on a case-by-case basis 
because of household hardship situations as determined by the State 
agency. The State agency shall document the case file to show when a 
waiver was granted because of a hardship. The State agency may opt to 
waive the face-to-face interview in favor of a telephone interview for 
all households which have no earned income and all members of the 
household are elderly or disabled. Regardless of any approved waivers, 
the State agency must grant a face-to-face interview to any household 
which requests one. The State agency has the option of conducting a 
telephone interview or a home visit that is scheduled in advance with 
the household if the office interview is waived.
    (f) Verification. Verification is the use of documentation or a 
contact with a third party to confirm the accuracy of statements or 
information. The State agency must give households at least 10 days to 
provide required verification. Paragraph (i)(4) of this section 
contains verification procedures for expedited service cases.
    (1) Mandatory verification. Prior to initial certification, State 
agencies must verify the following information:
    (i) Identity. The identity of the person making application must be 
verified. Where an authorized representative applies on behalf of a 
household, the identity of both the authorized representative and the 
head of household must be verified.
    (ii) Residency. The household's residency must be verified except 
where verification of residency cannot reasonably be accomplished (such 
as residency for homeless households, some migrant farmworkers, and 
households who have recently moved to the area).
    (iii) Social security numbers. Except for TANF and SSI 
categorically eligible households described in paragraph (j) of this 
section, the State agency must verify social security numbers (SSN) 
reported by households by submitting them to the Social Security 
Administration (SSA) for verification according to procedures 
established by SSA. The State agency may accept as verified an SSN that 
has been verified by another program participating in the IEVS 
described in Sec. 272.8 of this chapter. The State agency cannot delay 
the certification for or issuance of benefits to an otherwise eligible 
household solely to verify the SSN of a household member. If an 
individual is unable to provide an SSN or does not have an SSN, the 
State agency must follow the procedures in Sec. 273.6. Newly obtained 
SSNs must be verified at recertification.
    (iv) Alien eligibility. The immigration status of aliens must be 
verified. The Department of Justice (DOJ) Interim Guidance On 
Verification of Citizenship, Qualified Alien Status and Eligibility 
Under Title IV of the Personal Responsibility and Work Opportunity 
Reconciliation Act of 1996 (Interim Guidance) (62 FR 61344, November 
17, 1998) contains information on acceptable documents and INS codes. 
State agencies should use the Interim Guidance until DOJ publishes a 
final rule on this issue. Thereafter, State agencies should consult 
both the Interim Guidance and the DOJ final rule. Where the Interim 
Guidance and the DOJ final rule conflict, the latter should control the 
alien eligibility determination. As provided in Sec. 273.4 the 
following information may also be relevant to the eligibility of some 
aliens: date of admission or date status was granted; military 
connection; battered status; if the alien was lawfully residing in the 
United States on August 22, 1996; membership in certain Indian tribes; 
if the person was age 65 or older on August 22, 1996; if a lawful 
permanent resident can be credited with 40 qualifying quarters of 
covered work and if any Federal means-tested public benefits were 
received in any quarter after December 31, 1996; or if the alien was a 
member of certain Hmong or Highland Laotian tribes during a certain 
period of time or is the spouse or unmarried dependent of such a 
person. If applicable to the alien's eligibility, these factors must 
also be verified. An alien is ineligible until acceptable documentation 
is provided unless:
    (A) The State agency has submitted a copy of a document provided by 
the household to INS for verification. Pending such verification, the 
State agency cannot delay, deny, reduce or terminate the individual's 
eligibility for benefits on the basis of the individual's immigration 
status.
    (B) The applicant or the State agency has submitted a request to 
SSA for information regarding the number of quarters of work that can 
be credited to the individual, SSA has responded that the individual 
has fewer than 40 quarters, and the individual provides documentation 
from SSA that SSA is conducting an investigation to determine if more 
quarters can be credited. If SSA indicates that the number of 
qualifying quarters that can be credited is under investigation, the 
individual may be certified pending the results of the investigation 
for up to 6 months from the date of the original determination of 
insufficient quarters.
    (v) Disability.
    (A) Verification of a person's disability must be obtained.
    (B) To determine if a disabled person qualifies as a separate 
household under Sec. 273.1(a)(2)(ii), the State agency must use the 
most recent list of disabilities issued by SSA to determine if a 
disability is considered permanent under the Social Security Act. If 
the disability is on the list, the State agency must determine if the 
person is unable to purchase and prepare meals because of such 
disability. If the person suffers from a nondisease-related severe, 
permanent physical or mental disability that is not on SSA's list, and 
it is obvious to the caseworker that the person is unable to purchase 
and prepare meals because of the disability, no verification is 
required. If it is not obvious to the caseworker, the caseworker must 
require a statement from a physician or licensed or certified 
psychologist certifying that the individual is unable to purchase and 
prepare meals because the individual suffers from one of the 
disabilities on the SSA list or other nondisease-related, severe, 
permanent physical or mental disability. The elderly and disabled 
individual (or his or her authorized representative) is responsible for 
obtaining the cooperation of the individuals with whom he or she 
resides in providing the necessary income information about the others 
for purposes of this provision.
    (vi) Gross nonexempt income. Gross nonexempt income must be 
verified. However, where all attempts to verify the income have been 
unsuccessful because the person or organization providing the income 
has failed to cooperate with the household and the State agency, and 
all other sources of verification are unavailable, the eligibility 
worker must determine an amount to be used for certification purposes 
based on the best available information.
    (vii) Medical expenses. The amount of medical expenses (including 
the amount of reimbursements) deductible under Sec. 273.9(d)(3) must be 
verified. Verification of other factors, such as whether an expense is 
deductible or entitlement of the person incurring the cost to the 
medical deduction, is required if questionable.
    (viii) Legal obligation and actual child support payments. The 
household's legal obligation to pay child support, the

[[Page 10899]]

amount of the obligation, and the monthly amount of child support the 
household actually pays must be verified.
    (ix) Shelter costs for homeless households. Homeless households 
claiming shelter expenses must provide verification of their shelter 
expenses to qualify for the homeless shelter deduction if the State 
agency has such a deduction.
    (x) Utility expenses. The household must provide verification of 
utility expenses (for its current home and an unoccupied home) claimed 
in excess of the standard allowance if the expenses would actually 
result in a deduction and the State agency does not mandate the use of 
utility standards.
    (xi) Unverified expenses. If required verification of an allowable 
expense cannot be obtained within the 30-day processing time, the State 
agency must advise the household that its eligibility and benefit level 
will be determined without allowing the unverified expense. If the 
household's actual utility expenses cannot be verified within the 30-
day processing time, the State agency must use the standard utility 
allowance, provided the household is entitled to use the standard as 
specified in Sec. 273.9(d).
    (xii) Refusal to cooperate with QC reviewer. State agencies must 
verify all factors of eligibility for households which have been 
terminated for refusal to cooperate with a State quality control 
reviewer and which reapply after 90 days from the end of the annual 
review period. State agencies must verify all factors of eligibility 
for households who have been terminated for refusal to cooperate with a 
Federal quality control reviewer and reapply after seven months from 
the end of the annual review period.
    (2) Verification of questionable information.
    (i) Prior to certification, the State agency must verify all 
factors that could affect the household's eligibility and benefit 
level, including household composition, if they are questionable. The 
State agency must establish guidelines to be followed in determining 
what will be considered questionable information. These guidelines 
cannot prescribe verification based on race, religion, ethnic 
background, or national origin; and they cannot target groups such as 
migrant farm workers or Native Americans for more intensive 
verification under this paragraph (f)(2)(i).
    (ii) If a member's citizenship is questionable, the State agency 
must verify the member's citizenship in accordance with attachment 4 of 
the DOJ Interim Guidance. After DOJ issues final rules, State agencies 
should consult both the Interim Guidance and the final rule. Where the 
Interim Guidance and the DOJ final rule conflict, the latter should 
control the eligibility determination. The State agency must accept 
participation in another program as acceptable verification if 
verification of citizenship was obtained for that program. The member 
whose citizenship is in question is ineligible to participate until the 
issue is resolved.
    (3) State agency options. In addition to the verification required 
in paragraphs (f)(1) and (f)(2) of this section, the State agency may 
elect to mandate verification of any other factor which affects 
household eligibility or allotment level. Such mandatory verification 
policy must be applied to all households on a Statewide basis or 
throughout a project area and cannot be selectively imposed on a case-
by-case basis. The optional verification does not apply in those 
offices of the SSA which, in accordance with paragraph (k) of this 
section, provide for the food stamp certification of households 
containing recipients of Supplemental Security Income (SSI) and social 
security benefits. However, the State agency may negotiate with those 
SSA offices with regard to mandating verification of these options.
    (4) Sources of verification. State agencies must establish their 
own standards for sources of verification, subject to the provisions of 
this paragraph (f)(4). Such standards shall emphasize determining the 
adequacy of the documentary evidence the household provides to support 
the statement on the application. State agencies shall not limit 
households to one specific form of verification, if other documents can 
equally prove its statements. Home visits may be used as verification 
only when documentary evidence is insufficient to make a firm 
determination of eligibility or benefit level, or cannot be obtained, 
and the home visit is scheduled in advance with the household. State 
agencies may use a collateral contact, that is, oral confirmation of a 
household's circumstances by a person outside of the household, as 
verification. The collateral contact may be made either in person or 
over the telephone. The State agency may select a collateral contact if 
the household fails to designate one or designates one which is 
unacceptable to the State agency, but shall first apprise the household 
of the selection and afford the household an opportunity to verify the 
information using alternate means. Where unverified information from a 
source other than the household contradicts statements made by the 
household, the household must be afforded a reasonable opportunity to 
resolve the discrepancy prior to a determination of eligibility or 
benefits. If unverified information is obtained through the IEVS, as 
specified in Sec. 272.8 of this chapter, the State agency must follow 
the procedures in paragraph (f)(8)(iv) of this section.
    (5) Responsibility for obtaining verification. The household has 
primary responsibility for providing documentary evidence to support 
statements on the application, reported changes in household 
circumstances, and statements provided at recertification and to 
resolve any questionable information. Households may supply 
verification in person, through the mail, facsimile or other electronic 
device, or through an authorized representative. State agencies shall 
not require households to present verification in person at the food 
stamp office, except as provided in paragraph (d)(1) of this section. 
The State agency shall accept any reasonable documentary evidence 
provided by the household.
    (6) Documentation. The State agency must document the case file to 
support eligibility, ineligibility, and benefit level determinations. 
Documentation must be in sufficient detail to permit a reviewer to 
determine the reasonableness and accuracy of the determination. The 
State agency may store records electronically.
    (7) Verification subsequent to initial certification. Information 
required to be verified in paragraphs (f)(1), (f)(2) and (f)(3) of this 
section must be verified again when changes are reported during the 
certification period or at recertification which would affect 
eligibility or the benefit level and when unchanged information becomes 
questionable.
    (8) Optional use of IEVS.
    (i) The State agency may obtain information through IEVS in 
accordance with procedures specified in Sec. 272.8 of this chapter and 
use it to verify the eligibility and benefit levels of applicants and 
participating households.
    (ii) The State agency must take action, including proper notices to 
households, to terminate, deny, or reduce benefits based on information 
obtained through IEVS which is considered verified upon receipt. 
Information considered verified upon receipt is social security, SSI, 
TANF, and Unemployment Insurance Benefits (UIB) information obtained 
from the agencies administering those programs. If the information 
about a particular household is questionable,

[[Page 10900]]

the information is considered unverified upon receipt, and the State 
agency must take action as specified in paragraph (f)(8)(iii) of this 
section.
    (iii) Except as noted in this paragraph (f)(8)(iii), prior to 
taking action to terminate, deny, or reduce benefits based on 
information obtained through IEVS which is considered unverified upon 
receipt or questionable, State agencies must independently verify the 
information. Information that is considered unverified upon receipt may 
include but is not limited to unearned income information from IRS, 
wage information from SSA and SWICAs, and questionable information. 
Except with respect to unearned income information from IRS, if a State 
agency has information which indicates that independent verification is 
not needed, such verification is not required.
    (iv) Independent verification includes verification of the amount 
of the resources or income involved and when the household had the 
resources or received the income. The State agency must obtain 
independent verification of unverified information obtained from IEVS 
by contacting the household or the appropriate income or resource 
source. If the State agency chooses to contact the household, it must 
inform the household of the information which it has received and 
provide the household with a reasonable opportunity to respond. If the 
household fails to respond in a timely manner (or when the household or 
appropriate source provides the independent verification), the State 
agency must properly notify the household of the action it intends to 
take and provide the household with an opportunity to request a fair 
hearing prior to any adverse action.
    (9) Optional Use of SAVE. Households are required to submit 
documents to verify the immigration status of aliens. State agencies 
that verify the validity of such documents through the INS SAVE system 
in accordance with Sec. 272.11 of this chapter must use the following 
procedures.
    (i) The written consent of the alien is not required for the State 
agency to contact INS to verify the validity of documents the household 
presents.
    (ii) Pending resolution of discrepancies between the Alien Status 
Verification Index database and information submitted by the household, 
the State agency must not delay, deny, reduce, or terminate the alien's 
eligibility for benefits on the basis of the individual's alien status.
    (iii) If the State agency determines that the alien is not in an 
eligible alien status, the State agency must take action, including 
proper notices to the household, to terminate, deny or reduce benefits.
    (iv) The use of SAVE must be documented in the casefile or other 
agency records. When the State agency is waiting for a response from 
SAVE, agency records must contain either a notation showing the date of 
the State agency's transmission or a copy of the INS Form G-845 sent to 
INS. Once the SAVE response is received, agency records must show 
documentation of the ASVI Query Verification Number or contain a copy 
of the INS-annotated Form G-845. Whenever the response from automated 
access to the ASVI directs the eligibility worker to initiate secondary 
verification, agency records must show documentation of the ASVI Query 
Verification Number and contain a copy of the INS Form G-845.
    (g) Authorized representatives. Representatives may be authorized 
to act on behalf a household in the application process, in obtaining 
food stamp benefits, and in using food stamp benefits.
    (1) Application process. When a responsible member of the household 
cannot complete the application process, a nonhousehold member may be 
designated as the authorized representative for application processing 
purposes. The household member or the authorized representative may 
complete work registration forms for those household members required 
to register for work. Except for those situations in which a drug and 
alcoholic treatment center or other group living arrangement acts as 
the authorized representative, the State agency must inform the 
household that the household will be held liable for any overissuance 
that results from erroneous information given by the authorized 
representative.
    (i) A nonhousehold member may be designated as an authorized 
representative for application processing purposes provided that the 
person is an adult who is sufficiently aware of relevant household 
circumstances and the authorized representative designation has been 
made in writing by the head of the household, the spouse, or another 
responsible member of the household. Paragraph (g)(4) of this section 
contains further restrictions on who can be designated an authorized 
representative.
    (ii) In the event the only adult living with a household is a 
nonhousehold member as defined in Sec. 273.1(b), the adult may be the 
authorized representative for the minor household member(s).
    (iii) Residents of drug addict or alcoholic treatment centers and 
group homes must apply and be certified through the use of authorized 
representatives in accordance with Sec. 273.11(e) and Sec. 273.11(f).
    (2) Obtaining food stamp benefits. An authorized representative may 
be designated to obtain benefits, and the designation should be done at 
the time of certification. Even if the household is able to obtain 
benefits, it should be encouraged to name an authorized representative 
for obtaining benefits in case of illness or other circumstances which 
might result in an inability to obtain benefits. The name of the 
authorized representative must be recorded in the household's case 
record and on the food stamp identification (ID) card, as provided in 
Sec. 274.10(a)(1) of this chapter. The authorized representative for 
obtaining benefits may or may not be the same individual designated for 
application processing purposes. The State agency must develop a system 
by which a household may designate an emergency authorized 
representative in accordance with Sec. 274.10(c) of this chapter to 
obtain the household's benefits for a particular month.
    (3) Using benefits. A household may allow any household member or 
nonmember to use its ID card and benefits to purchase food or meals, if 
authorized, for the household. Drug or alcohol treatment centers and 
group living arrangements which act as authorized representatives for 
residents of the facilities must use food stamp benefits for food 
prepared and served to those residents participating in the Food Stamp 
Program (except when residents leave the facility as provided in 
Sec. 273.11(e) and (f)).
    (4) Restrictions on designations of authorized representatives. The 
State agency must restrict the use of authorized representatives for 
purposes of application processing and obtaining food stamp benefits as 
follows:
    (i) State agency employees who are involved in the certification or 
issuance processes and retailers who are authorized to accept food 
stamp benefits may not act as authorized representatives without the 
specific written approval of a designated State agency official and 
only if that official determines that no one else is available to serve 
as an authorized representative.
    (ii) An individual disqualified for an intentional Program 
violation cannot act as an authorized representative during the 
disqualification period, unless the State agency has determined that no 
one else is available to serve as an authorized representative. The 
State agency must separately determine whether the individual is needed 
to

[[Page 10901]]

apply on behalf of the household, or to obtain benefits on behalf of 
the household.
    (iii) If a State agency has determined that an authorized 
representative has knowingly provided false information about household 
circumstances or has made improper use of coupons, it may disqualify 
that person from being an authorized representative for up to one year. 
The State agency must send written notification to the affected 
household(s) and the authorized representative 30 days prior to the 
date of disqualification. The notification must specify the reason for 
the proposed action and the household's right to request a fair 
hearing. This provision is not applicable in the case of drug and 
alcoholic treatment centers and those group homes which act as 
authorized representatives for their residents.
    (iv) Homeless meal providers, as defined in Sec. 271.2 of this 
chapter, may not act as authorized representatives for homeless food 
stamp recipients.
    (v) In order to prevent abuse of the program, the State agency may 
set a limit on the number of households an authorized representative 
may represent.
    (h) Normal processing. 
    (1) Thirty-day standard. The State agency must provide eligible 
households that complete the initial application process an opportunity 
to participate (as defined in Sec. 274.2(b) of this chapter) as soon as 
possible, but no later than 30 calendar days following the filing date. 
The filing date is the date an application that contains the 
applicant's name and address and the signature of a responsible member 
of the household or the household's authorized representative is filed 
at the correct office. Day one of the 30-day period is the day after 
the date an application is filed. When a resident of an institution 
jointly applies for SSI and food stamps prior to leaving the 
institution in accordance with Sec. 273.1(e)(2), the filing date is the 
date the applicant is released from the institution. Households that 
are found to be ineligible must be sent a notice of denial as soon as 
the decision is made but no later than 30 days following the date of 
application.
    (2) Delayed actions. If the State agency cannot act on an 
application within 30 days because of a delay on its part, the State 
agency must continue to process the case. If the State agency 
determines that the household is eligible, the household is entitled to 
benefits retroactive to the date of application. If the State agency 
cannot act on the application within 30 days because of a delay on the 
household's part, the State agency must either deny the case or hold 
the case pending for an additional period of time. The State agency may 
determine the length of the application pending period, provided the 
period is not more than 2 months in addition to the month of 
application. If the household caused the delay, the State agency must 
provide benefits retroactive to the date the household takes the 
required action.
    (3) Determining cause for delayed actions. The State agency must 
determine the cause of a delay in processing using the following 
criteria:
    (i) Delays that are the fault of the State agency include, but are 
not limited to, the following:
    (A) Failure to explore and attempt to resolve with the household 
any unclear and incomplete information at the interview;
    (B) failure to inform the household of the need for one or more 
members to register for work and failure to allow the members at least 
10 days to complete work registration;
    (C) Failure to provide the household with a statement of required 
verification and failure to allow the household at least 10 days to 
provide the missing verification; or
    (D) Failure to notify the household that it could reschedule a 
missed interview appointment.
    (ii) Delays that are the fault of the household include, but are 
not limited to, the following:
    (A) Failure to cooperate with the State agency in resolving any 
unclear or incomplete information provided at the interview;
    (B) Failure to register household members for work;
    (C) Failure to provide missing verification; or
    (D) Failure to reschedule a missed interview appointment.
    (4) Combined allotments. At State agency option, households which 
apply after the 15th of the month may be issued a combined allotment 
which includes prorated benefits for the month of application and full 
benefits for the next month provided that the month of application is 
an initial month (as described in Sec. 273.10(a)), and the household 
has completed the application process within 30 days of the date of 
application and been determined eligible for those benefits. The 
benefits must be issued in accordance with Sec. 274.2(c) of this 
chapter.
    (i) Expedited service. 
    (1) Entitlement. The following households are entitled to expedited 
service:
    (i) Households with less than $150 in monthly gross income, as 
computed in Sec. 273.10(e), provided their liquid resources do not 
exceed $100;
    (ii) Migrant or seasonal farmworker households who are destitute, 
as defined in Sec. 273.10(e)(3), provided their liquid resources do not 
exceed $100; or
    (iii) Households whose combined monthly gross income and liquid 
resources are less than the household's monthly rent or mortgage and 
utilities (or utility standard in accordance with Sec. 273.9(d)), or 
less than the homeless shelter standard if the household is homeless.
    (2) Identifying households needing expedited service. The State 
agency shall screen all applications at the time they are filed to 
identify households entitled to expedited service and shall document 
their evaluation.
    (3) Processing time. Households entitled to expedited service must 
have their cases processed in accordance with the following provisions 
(except during periods of allotment reductions or suspensions as 
provided in Sec. 271.7(e)(2) of this chapter).
    (i) Benefit delivery. The State agency must make benefits available 
to the household in accordance with Sec. 274.2(b) of this chapter not 
later than the seventh calendar day following the date the application 
was filed. If the State agency elects to interview the household 
outside of the office, the State agency must conduct the interview and 
make benefits available not later than the seventh calendar day 
following the date the application was filed (unless the household 
cannot be reached to schedule the interview).
    (ii) Telephone interviews. If the State agency conducts a telephone 
interview and mails the application to the household for signature, the 
mailing time involved and the time during which the household has the 
application in its possession is not counted in the seven-day standard.
    (iii) Late determinations. If the State agency fails to identify a 
household as being entitled to expedited service at the time the 
application is filed, but subsequently discovers this, benefits must be 
made available to the household not later than the seventh calendar day 
following the date the State agency discovers the household is entitled 
to expedited service.
    (4) Special procedures. The State agency must use the following 
procedures for households entitled to expedited service.
    (i) Verification. 
    (A) Mandatory verification. Prior to certification, the State 
agency must verify the identity of the person making

[[Page 10902]]

the application. All reasonable efforts must be made to verify 
residency, income (including, if appropriate, a statement that the 
household has no income), and liquid resources within the expedited 
processing time frame. State agencies may verify other factors as well, 
but benefits cannot be delayed beyond the delivery standard prescribed 
in paragraph (i)(3) of this section solely because eligibility factors 
other than identity have not been verified.
    (B) Postponed verification. 
    (1) If a household applies on or before the 15th of the month, any 
verification that was postponed must be submitted prior to the second 
month's issuance. If a certification period of longer than one month is 
assigned, the State agency must issue the second month's benefits 
within seven working days from receipt of the necessary verification 
but not before the first day of the second month.
    (2) If a household applies after the 15th of the month, 
verification that was postponed must be submitted prior to the third 
month's issuance. If a certification period of longer than two months 
is assigned, the State agency must issue the third month's benefits 
within seven working days from receipt of the necessary verification 
information but not before the first day of the third month.
    (ii) Social security numbers. Households entitled to expedited 
service must be asked to furnish or apply for an SSN for each household 
member prior to the second month's issuance, or if the State agency 
issues combined allotments as provided in paragraph (i)(5) of this 
section, prior to the third month's issuance. Those household members 
who do not meet this requirement must be allowed to continue to 
participate if they satisfy the good cause requirements specified in 
Sec. 273.6(d). The household must provide an SSN or proof of an 
application for an SSN for a newborn within 6 months after the month 
the baby is born.
    (iii) Work registration. With regard to the work registration 
requirements specified in Sec. 273.7, the State agency must, at a 
minimum, require the applicant to register (unless exempt). The State 
agency may attempt to register other members within the expedited 
service time frame.
    (5) Combined allotments. Households that apply for initial benefits 
(as described in Sec. 273.10(a)) after the 15th of the month and are 
eligible to receive benefits for the initial month and the next month 
may, at the option of the State agency, receive a combined allotment 
consisting of prorated benefits for the initial month of application 
and benefits for the first full month of participation within the 
expedited service time frame. If necessary, verification must be 
postponed to meet the expedited time frame. The benefits must be issued 
in accordance with Sec. 274.2(c) of this chapter.
    (6) Frequency. There is no limit to the number of times a household 
can be certified under expedited procedures as long as, prior to each 
expedited certification, the household either completes the 
verification that was postponed at the last expedited certification or 
was certified under normal processing standards since the last 
expedited certification. The provisions of this section do not apply at 
recertification if a household reapplies before the end of its current 
certification period.
    (j) Categorical eligibility. Households in which each member 
receives TANF or SSI benefits pursuant to the provisions of paragraph 
(j)(1) of this section, or receives certain GA benefits pursuant to the 
provisions of paragraph (j)(2) of this section, are considered to be 
categorically eligible for food stamps based on their status as 
recipients of such benefits. For the purpose of the provisions of 
paragraphs (j)(1) and (j)(2) of this section, individuals are 
considered recipients of TANF, SSI, or GA benefits if they are actually 
receiving such benefits, they are authorized to receive such benefits 
but the actual payments have not been received, the benefits are 
suspended or recouped, or the benefits are not paid because the grant 
is less than a minimum benefit level. Residents of institutions who are 
found by SSA to be potentially eligible for SSI are not considered 
categorically eligible until such time as a final SSI eligibility 
determination has been made and they are released from the institution. 
Individuals not receiving TANF, SSI, or GA benefits who are entitled to 
Medicaid only are not considered categorically eligible. The food stamp 
benefit level of categorically eligible households must be computed in 
accordance with food stamp procedures contained in Sec. 273.10.
    (1) TANF and SSI Households. Except as provided in this paragraph 
(j)(1), households in which each member receives SSI or TANF benefits 
are considered categorically eligible to participate in the Food Stamp 
Program. Categorical eligibility means that the household is eligible 
for food stamps without regard to the amount of its resources (whether 
or not it transferred resources to become eligible) or the amount of 
its gross and net income. In addition, information regarding the social 
security numbers of household members, sponsored alien information, and 
residency are deemed to be acceptable without verification. A household 
is not categorically eligible if any member of the household has been 
disqualified for an intentional Program violation in accordance with 
Sec. 273.16 or the entire household has been disqualified from the 
Program for any reason. All other food stamp eligibility criteria 
apply, including, but not limited to, the definition of a food stamp 
household in Sec. 273.1, the ineligible alien provisions in Sec. 273.4, 
and the work requirements of Sec. 273.7. The household must complete 
the food stamp application process, cooperate in providing necessary 
information for food stamp purposes and submit required reports.
    (i) Ineligible members. No person can be included as an eligible 
member of a categorically eligible household if that person is one of 
the ineligible household members listed in Sec. 273.1(b)(2).
    (ii) Joint processing. Households that apply jointly for TANF or 
SSI and food stamp benefits and whose food stamp eligibility depends on 
their categorical eligibility status must be issued benefits from the 
beginning of the period for which TANF or SSI benefits are paid or the 
original food stamp application date, whichever is later. However, in 
accordance with Sec. 273.1(e)(2), food stamp benefits cannot be issued 
to residents of public institutions who apply jointly for SSI and food 
stamp benefits prior to their release from the institution.
    (2) GA households. Except as specified in paragraph (j)(2)(ii) of 
this section, households in which each member receives benefits from a 
State or local GA program which meets the criteria in paragraph 
(j)(2)(i) of this section are categorically eligible.
    (i) Qualifying GA programs. The GA program must meet the criteria 
in paragraph (j)(2)(i)(A) of this section or be certified by FNS in 
accordance with paragraph (j)(2)(i)(B) of this section.
    (A) The program must:
    (1) Have income and resource standards which may be separate from 
or included in the benefit computation and which do not exceed the 
limits for income and resources of the Food Stamp Program, TANF 
program, or SSI program. The rules for the GA program apply in 
determining countable income and resources for purposes of this 
provision;
    (2) Provide GA benefits as defined in Sec. 271.2 of this part; and
    (3) Provide ongoing benefits which are not limited to emergency 
assistance.

[[Page 10903]]

    (B) If a GA program does not meet all of the criteria in paragraphs 
(j)(2)(i)(A) of this section, the State agency may request 
certification of the program by FNS as one that is appropriate for 
categorical eligibility. In requesting certification, the State agency 
must submit to the appropriate FNS regional office a description of the 
program containing, at a minimum, the type of assistance provided, the 
income and resource eligibility limits, and the period for which the GA 
is provided.
    (ii) Ineligible households. A household is not considered 
categorically eligible if it:
    (A) Refuses to cooperate in providing to the State agency 
information that is necessary for making a determination of its 
eligibility or for completing any subsequent review of its eligibility, 
as described in paragraph (d) of this section or Sec. 273.21(m)(l)(ii); 
or
    (B) Is disqualified for failure to comply with a work requirement 
of Sec. 273.7.
    (iii) Ineligible members. No person can be included as an eligible 
member in any household which is otherwise categorically eligible if 
that person is one of the ineligible household members listed in 
Sec. 273.1(b)(2).
    (iv) Verification requirements. In determining whether a household 
is categorically eligible, the State agency must verify that each 
member receives PA or SSI benefits, or GA benefits from a GA program 
that meets the criteria in paragraph (j)(2)(i) of this section; the 
household has not been disqualified as provided in paragraph 
(j)(2)(ii); and no individuals have been disqualified as provided in 
paragraph (j)(2)(iii) of this section.
    (v) Deemed eligibility factors. When determining the eligibility 
for a categorically eligible household, all Food Stamp Program 
provisions apply except the following:
    (A) Resources. None of the provisions of Sec. 273.8 apply to 
categorically eligible households except the second sentence of 
Sec. 273.8(a) pertaining to categorical eligibility and Sec. 273.8(i) 
concerning transfer of resources. The provisions in Sec. 273.10(b) 
regarding resources available at the time of the interview do not apply 
to categorically eligible households.
    (B) Gross and net income limits. None of the provisions of 
Sec. 273.9(a) relating to income eligibility standards apply to 
categorically eligible households, except the fourth sentence 
pertaining to categorical eligibility. The provisions in 
Sec. 273.10(a)(10)(i) and Sec. 273.10(c) relating to the income 
eligibility determination also do not apply to categorically eligible 
households.
    (C) Residency. The household's residency is deemed to be 
acceptable. Verification is not needed.
    (D) Sponsored aliens. The sponsored alien information is deemed to 
be acceptable. Verification is not needed.
    (vi) Zero benefit households. The provision of 
Sec. 273.10(e)(2)(iii)(A) which allows a State agency to deny the 
application of a household with three or more members entitled to no 
benefits because its net income exceeds the level at which benefits are 
issued does not apply to categorically eligible households. All 
eligible households of one or two persons must be provided the minimum 
benefit, as required by Sec. 273.10(e)(2)(ii)(C).
* * * * *
    10. In Sec. 273.4:
    a. Paragraphs (a) and (c) are revised.
    b. Paragraphs (b) and (d) are removed, and paragraph (e) is 
redesignated as paragraph (b).
    The revisions read as follows:


Sec. 273.4  Citizenship and alien status.

    (a) Household members meeting citizenship or alien status 
requirements. No person is eligible to participate in the Food Stamp 
Program unless that person is:
    (1) A U. S. citizen;
    (2) A U. S. alien national;
    (3) An individual who is:
    (i) An American Indian born in Canada who possesses at least 50 per 
centum of blood of the American Indian race to whom the provisions of 
section 289 of the Immigration and Nationality Act (8 U.S.C. 1359) 
apply; or
    (ii) A member of an Indian tribe as defined in section 4(e) of the 
Indian Self-Determination and Education Assistance Act (25 U.S.C. 1359) 
which is recognized as eligible for the special programs and services 
provided by the United States to Indians because of their status as 
Indians;
    (4) An individual who is:
    (i) Lawfully residing in the United States and was a member of a 
Hmong or Highland Laotian tribe at the time that the tribe rendered 
assistance to United States personnel by taking part in a military or 
rescue operation during the Vietnam era beginning August 5, 1964 and 
ending May 7, 1975;
    (ii) The spouse, or surviving spouse of such an individual who is 
deceased, or
    (iii) An unmarried dependent child of such Hmong or Highland 
Laotian who is under the age of 18 or if a full-time student under the 
age of 22; an unmarried child of such a deceased Hmong or Highland 
Laotian provided the child was dependent upon him or her at the time of 
his or her death; or an unmarried disabled child age 18 or older if the 
child was disabled and dependent on the person prior to the child's 
18th birthday; or
    (5) An individual who is both a qualified alien as defined in 
paragraph (a)(5)(i) of this section and an eligible alien as defined in 
paragraph (a)(5)(ii) of this section.
    (i) A qualified alien is:
    (A) An alien who is lawfully admitted for permanent residence under 
the Immigration and Nationality Act (INA);
    (B) An alien who is granted asylum under section 208 of the INA;
    (C) A refugee who is admitted to the United States under section 
207 of the INA;
    (D) An alien who is paroled into the United States under section 
212(d)(5) of the INA for a period of at least 1 year;
    (E) An alien whose deportation is being withheld under section 
243(h) of the INA as in effect prior to April 1, 1997, or whose removal 
is withheld under section 241(b)(3) of the INA;
    (F) An alien who is granted conditional entry pursuant to section 
203(a)(7) of the INA as in effect prior to April 1, 1980;
    (G) An alien who has been battered or subjected to extreme cruelty 
in the U.S. by a spouse or a parent or by a member of the spouse or 
parent's family residing in the same household as the alien at the time 
of the abuse, an alien whose child has been battered or subjected to 
battery or cruelty, or an alien child whose parent has been battered, 
provided the individual meets the requirements specified in Exhibit B 
to Attachment 5 of the DOJ Interim Guidance (or any provision of a DOJ 
final rule superseding Exhibit B to Attachment 5 of the Interim 
Guidance); or
    (H) An alien who is a Cuban or Haitian entrant, as defined in 
section 501(e) of the Refugee Education Assistance Act of 1980.
    (ii) A qualified alien, as defined in paragraph (a)(5)(i) of this 
section, must also be at least one of the following to be eligible to 
receive food stamps:
    (A) An alien lawfully admitted for permanent residence under the 
INA who has worked 40 qualifying quarters as determined under title II 
of the Social Security Act or can be credited with 40 quarters worked 
by a parent of the alien before the alien became 18 and/or quarters 
worked by a spouse of the alien during their marriage and they are 
still married or the spouse is deceased. After December 31, 1996, a 
quarter in which the alien actually received any Federal means-tested 
public benefit, as defined by the agency providing the benefit, or 
actually received food stamps is not creditable toward the 40-quarter 
total. Likewise, a parent or spouse's quarter is

[[Page 10904]]

not creditable if the parent or spouse actually received any Federal 
means-tested public benefit or actually received food stamps in that 
quarter.
    (B) An alien admitted as a refugee under section 207 of the INA. 
Eligibility is limited to 7 years from the date of the alien's entry 
into the United States.
    (C) An alien granted asylum under section 208 of the INA. 
Eligibility is limited to 7 years from the date asylum was granted.
    (D) An alien whose deportation is withheld under section 243(h) of 
the INA as in effect prior to April 1, 1997, or whose removal is 
withheld under section 241(b)(3) or the INA. Eligibility is limited to 
7 years from the date deportation or removal was withheld.
    (E) An alien granted status as a Cuban or Haitian entrant (as 
defined in section 501(e) of the Refugee Education Assistance Act of 
1980). Eligibility is limited to 7 years from the date the status as a 
Cuban or Haitian entrant was granted.
    (F) An Amerasian, admitted pursuant to section 584 of Public Law 
100-202, as amended by Public Law 100-461. Eligibility is limited to 7 
years from the date admitted as an Amerasian.
    (G) An alien with one of the following military connections:
    (1) A veteran who was honorably discharged for reasons other than 
alien status, who fulfills the minimum active-duty service requirements 
of 38 U.S.C. 5303A(d), including an individual who died in active 
military, naval or air service. The definition of veteran includes an 
individual who served before July 1, 1946, in the organized military 
forces of the Government of the Commonwealth of the Philippines while 
such forces were in the service of the Armed Forces of the United 
States or in the Philippine Scouts, as described in 38 U.S.C. 107;
    (2) An individual on active duty in the Armed Forces of the United 
States (other than for training); or
    (3) The spouse and unmarried dependent children of a person 
described in paragraphs (a)(5)(ii)(G) (1) or (G)(2) of this section, 
including the spouse of a deceased veteran, provided the marriage 
fulfilled the requirements of 38 U.S.C. 1304, and the spouse has not 
remarried. An unmarried dependent child for purposes of this provision 
is a child who is under the age of 18 or if a full-time student under 
the age of 22; an unmarried child of a deceased veteran provided the 
child was dependent upon the veteran at the time of the veteran's 
death; or an unmarried disabled child age 18 or older if the child was 
disabled and dependent on the veteran prior to the child's 18th 
birthday.
    (H) An individual who on August 22, 1996, was lawfully residing in 
the United States, and is now receiving benefits or assistance for 
blindness or disability (as specified in Sec. 271.2).
    (I) An individual who on August 22, 1996, was lawfully residing in 
the United States and was 65 years of age or older on that date; or
    (J) An individual who on August 22, 1996, was lawfully residing in 
the United States and is now under 18 years of age.
* * * * *
    (c) Households containing sponsored alien members.
    (1) Definition. A sponsored alien is an alien for whom a person 
(the sponsor) has executed an affidavit of support on behalf of the 
alien pursuant to section 213A of the INA.
    (2) Deeming. For purposes of determining the eligibility and 
benefit level of a household of which a sponsored alien is a member, 
all of the income and resources of the sponsor and the sponsor's 
spouse, if living with the sponsor, must be deemed to be the unearned 
income and resources of the sponsored alien. The income and resources 
must be deemed until the alien gains United States citizenship or has 
worked or can be credited with 40 qualifying quarters of work as 
determined under title II of the Social Security Act.
    (i) The monthly income of the sponsor and sponsor's spouse deemed 
to be that of the alien must be the total monthly earned and unearned 
income, as defined in Sec. 273.9(b) with the exclusions provided in 
Sec. 273.9(c), of the sponsor and sponsor's spouse at the time the 
household containing the sponsored alien member applies or is 
recertified for participation.
    (ii) Money paid to the alien by the sponsor or the sponsor's spouse 
will be considered as income to the alien only to the extent that it 
exceeds the amount deemed to the alien in accordance with paragraph 
(c)(2)(i) of this section.
    (iii) Resources of the sponsor and sponsor's spouse deemed to be 
that of the alien must be the total amount of their resources as 
determined in accordance with Sec. 273.8.
    (iv) If a sponsored alien can demonstrate to the State agency's 
satisfaction that his or her sponsor sponsors other aliens, the income 
and resources deemed under the provisions of paragraphs (c)(2)(i) and 
(c)(2)(iii) of this section must be divided by the number of such 
aliens that apply for or are participating in the program.
    (3) Exempt aliens. The provisions of paragraph (c)(2) of this 
section do not apply to:
    (i) An alien who is a member of his or her sponsor's food stamp 
household;
    (ii) An alien who is sponsored by an organization or group as 
opposed to an individual;
    (iii) An alien who is not required to have a sponsor under the 
Immigration and Nationality Act, such as a refugee, a parolee, an 
asylee, or a Cuban or Haitian entrant;
    (iv) An indigent alien that the State agency has determined is 
unable to obtain food and shelter taking into account the alien's own 
income plus any cash, food, housing, or other assistance provided by 
other individuals, including the sponsor(s). The only amount that will 
be deemed to such an alien will be the amount actually provided for a 
period beginning on the date of such determination and ending 12 months 
after such date. The State agency must notify the Attorney General of 
each such determination, including the names of the sponsor and the 
sponsored alien involved;
    (v) A battered alien spouse, alien parent of a battered child, or 
child of a battered alien, for 12 months after the State agency 
determines that the battering is substantially connected to the need 
for benefits, provided such individual meets the requirements specified 
in Exhibit B to Attachment 5 of the DOJ Interim Guidance (or any 
provision of a DOJ final rule superseding Exhibit B to Attachment 5 of 
the Interim Guidance) and the battered individual does not live with 
the batterer. After 12 months, the batterer's income and resources will 
not be deemed if the battery is recognized by a court or the INS and 
has a substantial connection to the need for benefits and the alien 
does not live with the batterer.
    (4) Sponsored alien's responsibilities. During the period the alien 
is subject to deeming, the alien is responsible for obtaining the 
cooperation of the sponsor and for providing the State agency at the 
time of application and at the time of recertification with the 
information and documentation necessary to calculate deemed income and 
resources in accordance with the paragraphs (c)(2)(i) through (c)(2) 
(iii) of this section. The alien is responsible for providing the names 
and other identifying factors of other aliens for whom the alien's 
sponsor has signed an affidavit of support. The entire amount of income 
and resources will be attributed to the applicant alien until this 
information is provided. The alien is also to be responsible for 
reporting the required

[[Page 10905]]

information about the sponsor and sponsor's spouse should the alien 
obtain a different sponsor during the certification period and for 
reporting a change in income should the sponsor or the sponsor's spouse 
change or lose employment or die during the certification period. Such 
changes will be handled in accordance with the timeliness standards 
described in Sec. 273.12.
    (5) Awaiting verification. Until the alien provides information or 
verification necessary to carry out the provisions of paragraph (c)(2) 
of this section, the sponsored alien is ineligible. The eligibility of 
any remaining household members must be determined. The income and 
resources of the ineligible alien (excluding the deemed income and 
resources of the alien's sponsor and sponsor's spouse) must be 
considered available in determining the eligibility and benefit level 
of the remaining household members in accordance with paragraph (c) of 
this section. If the sponsored alien refuses to cooperate in providing 
information or verification, other adult members of the alien's 
household are responsible for providing the information or verification 
required in accordance with the provisions of Sec. 273.2(d). If the 
information or verification is subsequently received, the State agency 
must act on the information as a reported change in household 
membership in accordance with the timeliness standards in Sec. 273.12. 
If the same sponsor is responsible for the entire household, the entire 
household is ineligible until such time as needed sponsor information 
or verification is provided.
* * * * *
    11. In Sec. 273.8:
    a. Paragraphs (c)(3), (e)(18) introductory text and (h)(6) are 
revised.
    b. A new paragraph (h)(1)(vii) is added.
    The revisions and addition read as follows:


Sec. 273.8  Resource eligibility standards.

* * * * *
    (c) Definition of resources. * * *
    (3) For a household containing a sponsored alien, the resources of 
the sponsor and the sponsor's spouse shall be deemed in accordance with 
Sec. 273.4(c)(2).
* * * * *
    (e) Exclusions from resources. * * *
    (18) State agencies shall develop clear and uniform standards for 
identifying kinds of resources that, as a practical matter, the 
household is unable to sell for any significant return because the 
household's interest is relatively slight or the costs of selling the 
household's interest would be relatively great. A resource shall be so 
identified if its sale or other disposition is unlikely to produce any 
significant amount of funds for the support of the household or the 
cost of selling the resource would be relatively great. This provision 
does not apply to financial instruments such as stocks, bonds, and 
negotiable financial instruments. The determination of whether any part 
of the value of a vehicle is included as a resource shall be made in 
accordance with the provisions of paragraph (h) of this section. The 
State agency may require verification of the value of a resource to be 
excluded if the information provided by the household is questionable. 
The following definitions shall be used in developing these standards:
* * * * *
    (h) Handling of licensed vehicles. * * *
    (1) * * *
    (vii) the value of the vehicle is inaccessible, in accordance with 
paragraph (e)(18) of this section, because its sale would produce an 
estimated return of not more than one-half of the applicable resource 
limit for the household.
* * * * *
    (6) In summary, each licensed vehicle shall be handled as follows: 
First, the vehicle shall be evaluated under paragraph (h)(1) of this 
section to determine if it is excludable from resources as an income 
producer, a home, necessary to transport a disabled household member, 
necessary to carry fuel for heating or water for home use, or its value 
is inaccessible in accordance with paragraph (e)(18) of this section. 
Any vehicle excluded under paragraph (h)(1) of this section shall be 
deemed to have no countable value as a resource affecting eligibility; 
thus, such a vehicle need not be evaluated further under either 
paragraph (h)(3) or paragraph (h)(4) of this section. If not so 
excluded, however, a vehicle shall be evaluated under paragraph (h)(3) 
of this section to determine the amount, if any, by which fair market 
value exceeds $4,650 (``excess fair market value''). The vehicle shall 
also be evaluated under paragraph (h)(4) of this section to see if it 
is exempt from having its equity value assessed as the household's only 
vehicle or as a second vehicle necessary for employment reasons. If the 
vehicle is equity exempt, the excess fair market value shall be counted 
as a resource. If the vehicle is not equity exempt, the countable 
equity value shall be determined, and the greater of the excess fair 
market value and the countable equity value shall be counted as a 
resource.
* * * * *
    12. In Sec. 273.9:
    a. Paragraph (b)(1)(v) is revised.
    b. Paragraph (b)(4) is revised.
    c. Paragraph (c)(1)(i)(E) is removed and paragraph (c)(1)(i)(F) is 
redesignated as paragraph (c)(1)(i)(E).
    d. Paragraphs (c)(1)(ii)(A) and (c)(1)(ii)(E) are removed and 
paragraphs (c)(1)(ii)(B), (c)(1)(ii)(C), (c)(1)(ii)(D), (c)(1)(ii)(F) 
and (c)(91)(ii)(G) are redesignated as paragraphs (c)(1)(ii)(A), 
(c)(1)(ii)(B), (c)(1)(ii)(C), (c)(1)(ii)(D) and (c)(1)(ii)(E), 
respectively.
    e. The first sentence of paragraph (c)(7) is amended by removing 
the number ``22'' and adding the number ``18'' in its place.
    f. A new sentence is added before the last sentence in paragraph 
(c)(8).
    g. Paragraph (c)(11) is revised.
    h. Paragraphs (d)(6), (d)(8) and (d)(9) are removed.
    i. Paragraph (d)(5) is redesignated as paragraph (d)(6) and 
paragraph (d)(7) is redesignated as paragraph (d)(5).
    j. Newly redesignated paragraph (d)(6)(i) is revised in its 
entirety.
    k. The heading and introductory text of newly redesignated 
paragraph (d)(6)(ii) is revised.
    l. Newly redesignated paragraph (d)(6)(ii)(C) is revised.
    m. A new paragraph (d)(6)(iii) is added.
    The additions and revisions read as follows:


Sec. 273.9  Income and deductions.

* * * * *
    (b) Definition of income. * * *
    (1) * * *
    (v) Earnings to individuals who are participating in on-the-job 
training programs under section 204(b)(1)(C) or section 264(c)(1)(A) of 
the Workforce Investment Act. This provision does not apply to 
household members under 19 years of age who are under the parental 
control of another adult member, regardless of school attendance and/or 
enrollment as discussed in paragraph (c)(7) of this section. For the 
purpose of this provision, earnings include monies paid by the 
Workforce Investment Act and monies paid by the employer.
* * * * *
    (4) For a household containing a sponsored alien, the income of the 
sponsor and the sponsor's spouse shall be deemed in accordance with 
Sec. 273.4(c)(2).
* * * * *
    (c) Income exclusions. * * *
    (8) * * * TANF payments made to divert a family from becoming

[[Page 10906]]

dependent on welfare may be excluded as a nonrecurring lump-sum payment 
if no more than one payment is anticipated in any 12-month period to 
meet needs that do not extend beyond a 4-month period, the payment is 
designed to address barriers to achieving self-sufficiency rather than 
provide assistance for normal living expenses, and the household did 
not receive a regular monthly TANF payment in the prior month or the 
current month. * * *
* * * * *
    (11) Energy assistance as follows:
    (i) Any payments or allowances made for the purpose of providing 
energy assistance under any Federal law other than part A of Title IV 
of the Social Security Act (42 U.S.C. 601 et seq.) and
    (ii) A one-time payment or allowance applied for on an as-needed 
basis and made under a Federal or State law for the costs of 
weatherization or emergency repair or replacement of an unsafe or 
inoperative furnace or other heating or cooling device. A down-payment 
followed by a final payment upon completion of the work will be 
considered a one-time payment for purposes of this provision.
* * * * *
    (d) Income deductions. * * *
    (6) Shelter costs.
    (i) Homeless shelter deduction. A State agency may develop a 
standard homeless shelter deduction up to a maximum of $143 a month for 
shelter expenses specified in paragraphs (d)(6)(ii)(A), (d)(6)(ii)(B) 
and (d)(6)(ii)(C) of this section that may reasonably be expected to be 
incurred by households in which all members are homeless individuals 
but are not receiving free shelter throughout the month. The deduction 
must be subtracted from net income in determining eligibility and 
allotments for the households. The State agency may make a household 
with extremely low shelter costs ineligible for the deduction. A 
household receiving the homeless shelter deduction cannot have its 
shelter expenses considered under paragraphs (d)(6)(ii) or (d)(6)(iii) 
of this section. However, a homeless household may choose to claim 
actual costs under paragraph (d)(6)(ii) of this section instead of the 
homeless shelter deduction if actual costs are higher and verified.
    (ii) Excess shelter deduction. Monthly shelter expenses in excess 
of 50 percent of the household's income after all other deductions in 
paragraphs (d)(1) through (d)(5) of this section have been allowed. If 
the household does not contain an elderly or disabled member, as 
defined in Sec. 271.2 of this chapter, the shelter deduction cannot 
exceed the maximum shelter deduction limit established for the area. 
FNS will notify State agencies of the amount of the limit. Only the 
following expenses are allowable shelter expenses:
* * * * *
    (C) The cost of fuel for heating; cooling (i.e., the operation of 
air conditioning systems or room air conditioners); electricity or fuel 
used for purposes other than heating or cooling; water; sewerage; 
garbage and trash collection; the basic service fee for one telephone 
(including tax on the basic fee); and fees charged by the utility 
provider for initial installation of the utility. One-time deposits 
cannot be included.
* * * * *
    (iii) Standard utility allowances.
    (A) With FNS approval, a State agency may develop the following 
standard utility allowances (standards) to be used in place of actual 
costs in determining a household's excess shelter deduction: an 
individual standard for each type of utility expense; a standard 
utility allowance for all utilities that includes heating or cooling 
costs (HCSUA); and, a limited utility allowance (LUA) that includes 
electricity and fuel for purposes other than heating or cooling, water, 
sewerage, and garbage or trash collection. The LUA must include 
expenses for at least two utilities other than telephone. However, at 
its option, the State agency may include the excess heating and cooling 
costs of public housing residents in the LUA if it wishes to offer the 
lower standard to such households. The State agency may use different 
types of standards but cannot allow households the use of two standards 
that include the same expense. In States in which the cooling expense 
is minimal, the State agency may include the cooling expense in the 
electricity component. The State agency may vary the allowance by 
factors such as household size, geographical area, or season. Only 
utility costs identified in paragraph (d)(6)(ii)(C) of this section 
must be used in developing standards.
    (B) The State agency must review the standards periodically and 
make adjustments to reflect changes in costs. State agencies may opt to 
establish thresholds for making adjustments. State agencies must 
provide the amounts of standards to FNS when they are changed and 
submit methodologies used in developing and updating standards to FNS 
for approval when the methodologies are developed or changed.
    (C) A standard with a heating or cooling component must be made 
available to households that incur heating or cooling expenses 
separately from their rent or mortgage and to households that receive 
direct or indirect assistance under the Low Income Home Energy 
Assistance Act of 1981 (LIHEAA). A heating or cooling standard is 
available to households in private rental housing who are billed by 
their landlords on the basis of individual usage or who are charged a 
flat rate separately from their rent. However, households in public 
housing units which have central utility meters and which charge 
households only for excess heating or cooling costs are not entitled to 
a standard that includes heating or cooling costs based only on the 
charge for excess usage. Households that receive direct or indirect 
energy assistance that is excluded from income consideration (other 
than that provided under the LIHEAA) are entitled to a standard that 
includes heating or cooling only if the amount of the expense exceeds 
the amount of the assistance. Households that receive direct or 
indirect energy assistance that is counted as income and incur a 
heating or cooling expense are entitled to use a standard that includes 
heating or cooling costs. A household that has both an occupied home 
and an unoccupied home is only entitled to one standard.
    (D) At initial certification, recertification, and when a household 
moves, the household may choose between a standard or verified actual 
utility costs for any allowable expense identified in paragraph 
(d)(6)(ii)(C) of this section (except the telephone standard), unless 
the State agency has opted, with FNS approval, to mandate use of a 
standard. The State agency may require use of the telephone standard 
for the cost of basic telephone service even if actual costs are 
higher. Households certified for 24 months may also choose to switch 
between a standard and actual costs at the time of the mandatory 
interim contact required by Sec. 273.10(f)(1)(i), if the State agency 
has not mandated use of the standard.
    (E) A State agency may mandate use of standard utility allowances 
for all households with qualifying expenses if the State has developed 
one or more standards that include the costs of heating and cooling and 
one or more standards that do not include the costs of heating and 
cooling, the standards will not result in increased program costs, and 
FNS approves the standard. Under this option households entitled to the 
standard may not claim actual expenses, even if the expenses are

[[Page 10907]]

higher than the standard. Households not entitled to the standard may 
claim actual allowable expenses. Households in public housing units 
that have central utility meters and charge households only for excess 
heating or cooling costs are not entitled to the HCSUA but, at State 
agency option, may claim the LUA. Requests for approval to use a 
standard for a single utility must include the cost figures upon which 
the standard is based. Requests to use an LUA should include the 
approximate number of food stamp households that would be entitled to 
the nonheating and noncooling standard, the average utility costs prior 
to use of the mandatory standard, the proposed standards, and an 
explanation of how the standards were computed.
    (F) If a household lives with and shares heating or cooling 
expenses with another individual, another household, or both, the State 
agency must prorate a standard that includes heating or cooling 
expenses among the household and the other individual, household, or 
both.
* * * * *
    13. In Sec. 273.10,
    a. The third and fourth sentences of paragraph (a)(1)(ii) are 
revised.
    b. Paragraph (a)(1)(iv) is removed.
    c. The third sentence of paragraph (a)(2) is amended by removing 
the words ``an application for recertification is submitted more than 
one month'' and adding in their place, ``a household, other than a 
migrant or seasonal farmworker household, submits an application''.
    d. Three sentences are added to the end of paragraph (d)(3).
    e. The second sentence of paragraph (e)(1)(i)(E) is removed.
    f. Paragraphs (e)(1)(i)(G) and (e)(1)(i)(H) are redesignated as 
paragraphs (e)(1)(i)(H) and (e)(1)(i)(I), respectively, and a new 
paragraph (e)(1)(i)(G) is added.
    g. Newly redesignated paragraph (e)(1)(i)(H) is revised.
    h. Paragraph (e)(2)(i)(E) is amended by removing the number ``22'' 
wherever it appears and adding in its place the number ``18''.
    i. Paragraph (f) is revised.
    The additions and revisions read as follows:


Sec. 273.10  Determining household eligibility and benefit levels.

    (a) Month of application.
    (1) Determination of eligibility and benefit levels. * * *
    (ii) * * * As used in this section, the term ``initial month'' 
means the first month for which the household is certified for 
participation in the Food Stamp Program following any period during 
which the household was not certified for participation, except for 
migrant and seasonal farmworker households. In the case of migrant and 
seasonal farmworker households, the term ``initial month'' means the 
first month for which the household is certified for participation in 
the Food Stamp Program following any period of more than 30 days during 
which the household was not certified for participation. * * *
* * * * *
    (d) Determining deductions. * * *
    (3) * * * For households certified for 24 months that have one-time 
medical expenses, the State agency must use the following procedure. In 
averaging any one-time medical expense incurred by a household during 
the first 12 months, the State agency must give the household the 
option of deducting the expense for one month, averaging the expense 
over the remainder of the first 12 months of the certification period, 
or averaging the expense over the remaining months in the certification 
period. One-time expenses reported after the 12th month of the 
certification period will be deducted in one month or averaged over the 
remaining months in the certification period, at the household's 
option.
* * * * *
    (e) Calculating net income and benefit levels.
    (1) Net monthly income.
    (i) * * *
    (G) Subtract the homeless shelter deduction, if any, up to the 
maximum of $143.
    (H) Total the allowable shelter expenses to determine shelter 
costs, a deduction has been subtracted in accordance with paragraph 
(e)(1)(i)(G) of this section. Subtract from total shelter costs 50 
percent of the household's monthly income after all the above 
deductions have been subtracted. The remaining amount, if any, is the 
excess shelter cost. If there is no excess shelter cost, the net 
monthly income has been determined. If there is excess shelter cost, 
compute the shelter deduction according to paragraph (e)(1)(i)(I) of 
this section.
* * * * *
    (f) Certification periods. The State agency must certify each 
eligible household for a definite period of time. The first month of 
the certification period will be the first month for which the 
household is eligible to participate. The certification period cannot 
exceed 12 months, except as specified in paragraphs (f)(1) and (f)(2) 
of this section:
    (1) Households in which all adult members are elderly or disabled. 
The State agency may certify for up to 24 months households in which 
all adult members are elderly or disabled. The State agency must have 
at least one contact with each household every 12 months. The State 
agency may use any method it chooses for this contact.
    (2) Households residing on a reservation. Households residing on a 
reservation that are required to submit monthly reports in accordance 
with Sec. 273.21 must be certified for 24 months unless the State 
agency obtains a waiver from FNS. Any request for a waiver shall 
include justification for the shorter period, quality control error 
rate information for the affected households, and input from the 
affected Indian tribal organization(s). When households move off the 
reservation, the State agency must either continue their certification 
periods until they would normally expire or shorten the certification 
periods in accordance with paragraph (f)(4) of this section.
    (3) Households eligible for a child support deduction. The State 
agency may certify for no longer than 3 months households eligible for 
a child support deduction which have no record of regular child support 
payments or of child support arrearages and which are not required to 
report child support payment information periodically (monthly or 
quarterly) during the certification. The State agency may certify for 
no longer than 6 months households with a record of regular child 
support and arrearage payments which are not required to report payment 
information periodically during the certification period. The State 
agency may certify for no longer than 12 months households required to 
report child support payment information monthly or quarterly.
    (4) Shortening certification periods. (i) The State agency may 
shorten the certification period with a notice of adverse action under 
the following conditions provided the State agency has afforded the 
household at least 10 days to respond to a previously issued written 
request for a contact with the State agency to clarify its 
circumstances:
    (A) The State agency has information indicating that a household is 
not reporting earned or unearned income properly;
    (B) The State agency has information indicating the household has 
become ineligible;
    (C) A household reports a change that indicates that the new 
circumstances are very unstable; or
    (D) The household fails to provide adequate information regarding a

[[Page 10908]]

change in household circumstances other than income.
    (ii) If the household does not respond, does not provide sufficient 
information to clarify its circumstances, or agrees that changes in its 
circumstances warrant filing a new application, the State agency may 
issue a notice of adverse action as described in 273.13 which shortens 
the certification period and explains the reasons for the action.
    (5) Lengthening certification periods. State agencies are 
prohibited from lengthening a household's current certification period 
once it is established. FNS will consider waiver requests from State 
agencies to lengthen certification periods pursuant to Sec. 272.3(c) of 
this chapter for up to 24 months for households in which all adult 
members are elderly or disabled and up to 12 months for other 
households.
* * * * *
    14. In Sec. 273.11,
    a. Paragraphs (a) and (b) are revised.
    b. The heading and introductory text of paragraph (c)(2) are 
revised, paragraph (c)(3) is redesignated as paragraph (c)(4) and a new 
paragraph (c)(3) is added.
    c. The heading of paragraph (e) and paragraphs (e)(1) through 
(e)(5) are revised.
    d. Paragraphs (f)(1) and (f)(7) are revised.
    e. Paragraph (g)(5) is revised.
    f. Paragraph (j) is removed and paragraph (k) is redesignated as 
paragraph (j).
    The revisions and additions read as follows:


Sec. 273.11  Action on households with special circumstances.

    (a) Self-employment income. The State agency must calculate a 
household's self-employment income as follows:
    (1) Averaging self-employment income.
    (i) Self-employment income must be averaged over the period the 
income is intended to cover, even if the household receives income from 
other sources. If the averaged amount does not accurately reflect the 
household's actual circumstances because the household has experienced 
a substantial increase or decrease in business, the State agency must 
calculate the self-employment income on the basis of anticipated, not 
prior, earnings.
    (ii) If a household's self-employment enterprise has been in 
existence for less than a year, the income from that self-employment 
enterprise must be averaged over the period of time the business has 
been in operation and the monthly amount projected for the coming year.
    (iii) Notwithstanding the provisions of paragraphs (a)(1)(i) and 
(a)(1)(ii) of this section, households subject to monthly reporting and 
retrospective budgeting who derive their self-employment income from a 
farming operation and who incur irregular expenses to produce such 
income have the option to annualize the allowable costs of producing 
self-employment income from farming when the self-employment farm 
income is annualized.
    (2) Determining monthly income from self-employment.
    (i) For the period of time over which self-employment income is 
determined, the State agency must add all gross self-employment income 
(either actual or anticipated, as provided in paragraph (a)(1)(i) of 
this section) and capital gains (according to paragraph (a)(3) of this 
section), exclude the costs of producing the self-employment income (as 
determined in paragraph (a)(4) of this section), and divide the 
remaining amount of self-employment income by the number of months over 
which the income will be averaged. This amount is the monthly net self-
employment income. The monthly net self-employment income must be added 
to any other earned income received by the household to determine total 
monthly earned income.
    (ii) If the cost of producing self-employment income exceeds the 
income derived from self-employment as a farmer (defined for the 
purposes of this paragraph (a)(2)(ii) as a self-employed farmer who 
receives or anticipates receiving annual gross proceeds of $1,000 or 
more from the farming enterprise), such losses must be prorated in 
accordance with paragraph (a)(1) of this section, and then offset 
against countable income to the household as follows:
    (A) Offset farm self-employment losses first against other self-
employment income.
    (B) Offset any remaining farm self-employment losses against the 
total amount of earned and unearned income after the earned income 
deduction has been applied.
    (iii) If a State agency determines that a household is eligible 
based on its monthly net income, the State may elect to offer the 
household an option to determine the benefit level by using either the 
same net income which was used to determine eligibility, or by unevenly 
prorating the household's total net income over the period for which 
the household's self-employment income was averaged to more closely 
approximate the time when the income is actually received. If income is 
prorated, the net income assigned in any month cannot exceed the 
maximum monthly income eligibility standards for the household's size.
    (3) Capital gains. The proceeds from the sale of capital goods or 
equipment must be calculated in the same manner as a capital gain for 
Federal income tax purposes. Even if only 50 percent of the proceeds 
from the sale of capital goods or equipment is taxed for Federal income 
tax purposes, the State agency must count the full amount of the 
capital gain as income for food stamp purposes. For households whose 
self-employment income is calculated on an anticipated (rather than 
averaged) basis in accordance with paragraph (a)(1) of this section, 
the State agency must count the amount of capital gains the household 
anticipates receiving during the months over which the income is being 
averaged.
    (b) Allowable costs of producing self-employment income.
    (1) Allowable costs of producing self-employment income include, 
but are not limited to, the identifiable costs of labor, stock, raw 
material, seed and fertilizer, interest paid to purchase income-
producing property, insurance premiums, and taxes paid on income-
producing property.
    (2) In determining net self-employment income, the following items 
are not allowable costs of doing business:
    (i) Payments on the principal of the purchase price of income-
producing real estate and capital assets, equipment, machinery, and 
other durable goods;
    (ii) Net losses from previous periods;
    (iii) Federal, State, and local income taxes, money set aside for 
retirement purposes, and other work-related personal expenses (such as 
transportation to and from work), as these expenses are accounted for 
by the 20 percent earned income deduction specified in 
Sec. 273.9(d)(2);
    (iv) Depreciation; and
    (v) Any amount that exceeds the payment a household receives from a 
boarder for lodging and meals.
    (3) When calculating the costs of producing self-employment income, 
State agencies may elect to use actual costs for allowable expenses in 
accordance with paragraphs (b)(1) and (b)(2) of this section or 
determine self-employment expenses as follows:
    (i) For income from day care, use the current reimbursement amounts 
used in the Child and Adult Care Food Program or a standard amount 
based on estimated per-meal costs.

[[Page 10909]]

    (ii) For income from boarders, other than those in commercial 
boarding houses or from foster care boarders, use:
    (A) The maximum food stamp allotment for a household size that is 
equal to the number of boarders; or
    (B) A flat amount or fixed percentage of the gross income, provided 
that the method used to determine the flat amount or fixed percentage 
is objective and justifiable and is stated in the State's food stamp 
manual.
    (iii) For income from foster care boarders, refer to 
Sec. 273.1(c)(6).
    (iv) Use the standard amount the State uses for its TANF program.
    (v) Use an amount approved by FNS. State agencies may submit a 
proposal to FNS for approval to use a simplified self-employment 
expense calculation method that does not result in increased Program 
costs. Different methods may be proposed for different types of self-
employment. The proposal must include a description of the proposed 
method, the number and type of households and percent of the caseload 
affected, and documentation indicating that the proposed procedure will 
not increase Program costs.
    (c) Treatment of income and resources of certain nonhousehold 
members. * * *
    (2) SSN disqualification. The eligibility and benefit level of any 
remaining household members of a household containing individuals who 
are disqualified for refusal to obtain or provide an SSN must be 
determined as follows:
* * * * *
    (3) Ineligible alien. The eligibility and benefit level of any 
remaining household members of a household containing an ineligible 
alien must be determined as follows:
    (i) The State agency must count all or, at the discretion of the 
State agency, all but a pro rata share, of the ineligible alien's 
income and deductible expenses and all of the ineligible alien's 
resources in accordance with paragraphs (c)(1) or (c)(2) of this 
section. In exercising its discretion under this paragraph (c)(3)(i), 
the State agency may count all of the alien's income for purposes of 
applying the gross income test for eligibility purposes while only 
counting all but a pro rata share to apply the net income test and 
determine level of benefits. This paragraph (c)(3)(i) shall not apply 
to an alien:
    (A) Who is lawfully admitted for permanent residence under the INA;
    (B) Who is granted asylum under section 208 of the INA;
    (C) Who is admitted as a refugee under section 207 of the INA;
    (D) Who is paroled in accordance with section 212(d)(5) of the INA; 
or
    (E) Whose deportation or removal has been withheld in accordance 
with section 243 of the INA.
    (ii) For an ineligible alien within a category described in 
paragraphs (c)(3)(i)(A) through (c)(3)(i)(E) of this section, State 
agencies may either:
    (A) Count all of the ineligible alien's resources and all but a pro 
rata share of the ineligible alien's income and deductible expenses; or
    (B) Count all of the ineligible alien's resources, count none of 
the ineligible alien's income and deductible expenses, count any money 
payment (including payments in currency, by check, or electronic 
transfer) made by the ineligible alien to at least one eligible 
household member, not deduct as a household expense any otherwise 
deductible expenses paid by the ineligible alien, but cap the resulting 
benefit amount for the eligible members at the allotment amount the 
household would receive if the household member within the one of the 
categories described in paragraphs (c)(3)(i)(A) through (c)(3)(i)(E) of 
this section were still an eligible alien. The State agency must elect 
one State-wide option for determining the eligibility and benefit level 
of households with members who are aliens within the categories 
described in paragraphs (c)(3)(i)(A) through (c)(3)(i)(E) of this 
section.
    (iii) For an alien who is ineligible under Sec. 273.4(b) because 
the alien's household indicates inability or unwillingness to provide 
documentation of the alien's alien status, the State agency must count 
all or, at the discretion of the State agency, all but a pro rata share 
of the ineligible alien's income and deductible expenses and all of the 
ineligible alien's resources in accordance with paragraph (c)(1) or 
(c)(2) of this section. In exercising its discretion under this 
paragraph (c)(3)(iii), the State agency may count all of the alien's 
income for purposes of applying the gross income test for eligibility 
purposes while only counting all but a pro rata to apply the net income 
test and determine level of benefits.
    (iv) The income of the ineligible aliens must be computed using the 
income definition in Sec. 273.9(b) and the income exclusions in 
Sec. 273.9(c).
    (v) The resources and income of an ineligible sponsored alien must 
include the resources and income of the sponsor and the sponsor's 
spouse.
* * * * *
    (e) Residents of drug addict and alcoholic treatment and 
rehabilitation programs.
    (1) Narcotic addicts or alcoholics who regularly participate in 
publicly operated or private non-profit drug addict or alcoholic (DAA) 
treatment and rehabilitation programs on a resident basis may 
voluntarily apply for the Food Stamp Program. Applications must be made 
through an authorized representative who is employed by the DAA center 
and designated by the center for that purpose. The State agency may 
require the household to designate the DAA center as its authorized 
representative for the purpose of receiving and using an allotment on 
behalf of the household. Residents must be certified as one-person 
households unless their children are living with them, in which case 
their children must be included in the household with the parent.
    (2)(i) Prior to certifying any residents for food stamps, the State 
agency must verify that the DAA center is authorized by FNS as a 
retailer in accordance with Sec. 278.1(e) of this chapter or that it 
comes under part B of title XIX of the Public Health Service Act, 42 
U.S.C. 300x et seq., (as defined in ``Drug addiction or alcoholic 
treatment and rehabilitation program'' in Sec. 271.2).
    (ii) Except as otherwise provided in this paragraph (e)(2), the 
State agency must certify residents of DAA centers by using the same 
provisions that apply to all other households, including, but not 
limited to, the same rights to notices of adverse action and fair 
hearings.
    (iii) DAA centers in areas without EBT systems may redeem the 
households' paper coupons through authorized food stores. DAA centers 
in areas with EBT systems may redeem benefits in various ways depending 
on the State's EBT system design. The designs may include DAA use of 
individual household EBT cards at authorized stores, authorization of 
DAA centers as retailers with EBT access via POS at the center, DAA use 
of a center EBT card that is an aggregate of individual household 
benefits, and other designs. Guidelines for approval of EBT systems are 
contained in Sec. 274.12 of this chapter.
    (iv) The treatment center must notify the State agency of changes 
in the household's circumstances as provided in Sec. 273.12(a).
    (3) The DAA center must provide the State agency a list of 
currently participating residents that includes a statement signed by a 
responsible center official attesting to the validity of the list. The 
State agency must require submission of the list on either a monthly or 
semimonthly basis. In addition, the State agency must conduct periodic 
random on-site visits to the

[[Page 10910]]

center to assure the accuracy of the list and that the State agency's 
records are consistent and up to date.
    (4) The State agency may issue allotments on a semimonthly basis to 
households in DAA centers.
    (5) When a household leaves the center, the center must notify the 
State agency and the center must provide the household with its ID 
card. If possible, the center must provide the household with a change 
report form to report to the State agency the household's new address 
and other circumstances after leaving the center and must advise the 
household to return the form to the appropriate office of the State 
agency within 10 days. After the household leaves the center, the 
center can no longer act as the household's authorized representative 
for certification purposes or for obtaining or using benefits.
    (i) The center must provide the household with its EBT card if it 
was in the possession of the center, any untransacted ATP, or the 
household's full allotment if already issued and if no coupons have 
been spent on behalf of that individual household. If the household has 
already left the center, the center must return them to the State 
agency. These procedures are applicable at any time during the month.
    (ii) If the coupons have already been issued and any portion spent 
on behalf of the household, the following procedures must be followed.
    (A) If the household leaves prior to the 16th of the month and 
benefits are not issued under an EBT system, the center must provide 
the household with one-half of its monthly coupon allotment unless the 
State agency issues semi-monthly allotments and the second half has not 
been turned over to the center. If benefits are issued under an EBT 
system, the State must ensure that the EBT design or procedures for 
DAAs prohibit the DAA from obtaining more than one-half of the 
household's allotment prior to the 16th of the month or permit the 
return of one-half of the allotment to the household's EBT account 
through a refund, transfer, or other means if the household leaves 
prior to the 16th of the month.
    (B) If the household leaves on or after the 16th day of the month, 
the State agency, at its option, may require the center to give the 
household a portion of its allotment. Under an EBT system where the 
center has an aggregate EBT card, the State agency may, but is not 
required to transfer a portion of the household's monthly allotment 
from a center's EBT account back to the household's EBT account. 
However, the household, not the center, must be allowed to receive any 
remaining benefits authorized by the household's HIR or ATP or posted 
to the EBT account at the time the household leaves the center.
    (iii) The center must return to the State agency any EBT card or 
coupons not provided to departing residents by the end of each month. 
These coupons include those not provided to departing residents because 
they left either prior to the 16th and the center was unable to provide 
the household with the coupons or the household left on or after the 
16th of the month and the coupons were not returned to the household.
* * * * *
    (f) Residents of a group living arrangement.
    (1) Disabled or blind residents of a group living arrangement (GLA) 
(as defined in Sec. 271.2) may apply either through use of an 
authorized representative employed and designated by the group living 
arrangement or on their own behalf or through an authorized 
representative of their choice. The GLA must determine if a resident 
may apply on his or her own behalf based on the resident's physical and 
mental ability to handle his or her own affairs. Some residents of the 
GLA may apply on their own behalf while other residents of the same GLA 
may apply through the GLA's representative. Prior to certifying any 
residents, the State agency must verify that the GLA is authorized by 
FNS or is certified by the appropriate agency of the State (as defined 
in Sec. 271.2) including the agency's determination that the center is 
a nonprofit organization.
    (i) If the residents apply on their own behalf, the household size 
must be in accordance with the definition in Sec. 273.1. The State 
agency must certify these residents using the same provisions that 
apply to all other households. If FNS disqualifies the GLA as an 
authorized retail food store, the State agency must suspend its 
authorized representative status for the same time; but residents 
applying on their own behalf will still be able to participate if 
otherwise eligible.
    (ii) If the residents apply through the use of the GLA's authorized 
representative, their eligibility must be determined as a one-person 
household.
* * * * *
    (7) If the residents are certified on their own behalf, the coupon 
allotment may either be returned to the GLA to be used to purchase 
meals served either communally or individually to eligible residents or 
retained and used to purchase and prepare food for their own 
consumption. The GLA may purchase and prepare food to be consumed by 
eligible residents on a group basis if residents normally obtain their 
meals at a central location as part of the GLA's service or if meals 
are prepared at a central location for delivery to the individual 
residents. If personalized meals are prepared and paid for with food 
stamps, the GLA must ensure that the resident's food stamps are used 
for meals intended for that resident.
    (g) Shelters for battered women and children.
* * * * *
    (5) State agencies shall take prompt action to ensure that the 
former household's eligibility or allotment reflects the change in the 
household's composition. Such action shall include acting on the 
reported change in accordance with Sec. 273.12 by issuing a notice of 
adverse action in accordance with Sec. 273.13.
* * * * *
    15. In Sec. 273.12, paragraph (f)(5) is revised as follows:


Sec. 273.12  Reporting Changes.

* * * * *
    (f) PA and GA households.
* * * * *
    (5) Whenever a change results in the termination of a household's 
PA benefits within its food stamp certification period, and the State 
agency does not have sufficient information to determine how the change 
affects the household's food stamp eligibility and benefit level (such 
as when an absent parent returns to a household, and the State agency 
does not have any information on the income of the new household 
member), the State agency shall take the following action:
    (i) Where a PA notice of adverse action has been sent, the State 
agency shall wait until the household's notice of adverse action period 
expires or until the household requests a fair hearing, whichever 
occurs first. If the household requests a fair hearing and its PA 
benefits are continued pending the appeal, the household's food stamp 
benefits shall be continued at the same basis.
    (ii) If a PA notice of adverse action is not required, or the 
household decides not to request a fair hearing and continuation of its 
PA benefits, the State agency shall send the household a notice of 
expiration which informs the household that its certification period 
will expire at the end of the month following the month the notice of 
expiration is sent and that it must reapply if it wishes to continue to 
participate. The notice of expiration

[[Page 10911]]

shall also explain to the household that its certification period is 
expiring because of changes in its circumstances which may affect its 
food stamp eligibility and benefit level. At its option, the State 
agency may follow the procedure set forth at Sec. 273.10(f)(4) to 
shorten certification periods.
    16. In Sec. 273.13, the first sentence of paragraph (a)(1) is 
revised to read as follows:


Sec. 273.13  Notice of adverse action.

    (a) Use of notice. * * *
    (1) The notice of adverse action is considered timely if the 
advance notice period conforms with that period of time defined by the 
State agency as an adequate notice for its public assistance caseload, 
provided that the period is no less than 10 days and no more than 18 
days from the date the notice is mailed to the date the notice expires. 
* * *
* * * * *
    17. In Sec. 273.14:
    a. Paragraph (b)(1) is amended by removing the second sentence of 
the introductory text of paragraph (b)(1)(ii) and removing paragraph 
(b)(1)(iii).
    b. Paragraph (b)(2) is revised.
    c. Paragraph (b)(3) is amended by revising paragraph (b)(3)(i), 
removing the second sentence of paragraph (b)(3)(ii), and removing the 
first two sentences of paragraph (b)(3)(iii).
    d. Paragraph (b)(4) is amended by removing the second sentence and 
adding the words ``and benefits cannot be prorated'' at the end of the 
paragraph.
    e. Paragraph (e) is revised.
    The addition and revisions read as follows:


Sec. 273.14  Recertification.

* * * * *
    (b) Recertification process. * * *
    (2) Application. The State agency must develop an application to be 
used by households when applying for recertification. It may be the 
same as the initial application, a simplified version, a monthly 
reporting form, or other method such as annotating changes on the 
initial application form. A new household signature and date is 
required at the time of application for recertification. The 
recertification process can only be used for those households which 
apply for recertification prior to the end of their current 
certification period. The process, at a minimum, must elicit from the 
household sufficient information that, when added to information 
already contained in the casefile, will ensure an accurate 
determination of eligibility and benefits. The State agency must notify 
the applicant of information which is specified in Sec. 273.2(b)(2), 
and provide the household with a notice of required verification as 
specified in Sec. 273.2(c)(4).
    (3) Interview.
    (i) As part of the recertification process, the State agency must 
conduct an interview with a member of the household or its authorized 
representative. At least one face-to-face interview is required every 
12 months unless the State agency grants a waiver in accordance with 
Sec. 273.2(e)(2). If a telephone interview is conducted the State 
agency must mail the application to the household to obtain the 
household's signature.
* * * * *
    (e) Delayed processing.
    (1) If an eligible household files an application before the end of 
the certification period but the recertification process cannot be 
completed within 30 days after the date of application because of State 
agency fault, the State agency must continue to process the case and 
provide a full month's allotment for the first month of the new 
certification period.
    (2) If a household files an application before the end of the 
certification period, but fails to take a required action, the State 
agency may deny the case at that time, at the end of the certification 
period, or at the end of 30 days. If the household takes the required 
action before the end of the certification period, the State agency 
must reopen the case. If the household takes the required action after 
the end of the certification period, the State agency may reopen the 
case and provide benefits retroactive to the date the household takes 
the required action or it may require the household to reapply.
    (3) If a household files an application after the end of the 
certification period, benefits must be prorated in accordance with 
Sec. 273.10(a).
* * * * *
    18. In Sec. 273.15, paragraph (j) is revised to read as follows:


Sec. 273.15  Fair hearings.

* * * * *
    (j) Denial or dismissal of request for hearing.
    (1) The State agency must not deny or dismiss a request for a 
hearing unless:
    (i) The request is not received within the appropriate time frame;
    (ii) The household or its representative fails, without good cause, 
to appear at the scheduled hearing;
    (iii) The request is withdrawn in writing by the household or its 
representative; or
    (iv) The request is withdrawn orally by the household or its 
representative and the State agency has elected to allow such oral 
requests.
    (2) A State agency electing to accept an oral expression from the 
household or its representative to withdraw a fair hearing must provide 
a written notice to the household confirming the withdrawal request and 
providing the household with an opportunity to request a hearing.
* * * * *


Sec. 273.21  [Amended]

    19. In Sec. 273.21:
    a. Paragraph (a)(3) is removed and paragraph (a)(4) is redesignated 
as paragraph (a)(3).
    b. Paragraph (j)(1)(vii)(A) is amended by removing the number 
``22'' at the end of the second sentence and adding in its place the 
number ``18''.
    c. Paragraph (t)(2) is removed and paragraphs (t)(3) through (t)(6) 
are redesignated as (t)(2) through (t)(5).
    20. Sec. 273.25 is added to read as follows:


Sec. 273.25  Simplified Food Stamp Program.

    (a) Definitions. For purposes of this section:
    (1) Simplified Food Stamp Program (SFSP) means a program authorized 
under 7 U.S.C. 2035.
    (2) Temporary Assistance for Needy Families (TANF) means assistance 
from a State program funded under part A of title IV of the Social 
Security Act (42 U.S.C. 601 et seq.).
    (3) Pure-TANF household means a household in which all members 
receive assistance under a State program funded under part A of title 
IV of the Social Security Act (42 U.S.C. 601 et seq.).
    (4) Mixed-TANF household means a household in which 1 or more 
members, but not all members, receive assistance under a State program 
funded under part A of title IV of the Social Security Act (42 U.S.C. 
601 et seq.).
    (b) Limit on Benefit Reduction for Mixed-TANF Households under the 
SFSP. If a State agency chooses to operate an SFSP and includes mixed-
TANF households in its program, the following requirements apply in 
addition to the statutory requirements governing the SFSP.
    (1) If a State's SFSP reduces benefits for mixed-TANF households, 
then no more than 5 percent of these participating households can have 
benefits reduced by 10 percent of the amount they are eligible to 
receive under the regular FSP and no mixed-TANF household can have 
benefits reduced by 25 percent or more of the amount it is eligible to 
receive under the regular FSP. Reductions of $10 or less will be 
disregarded when applying this requirement.
    (2) The State must include in its State SFSP plan an analysis 
showing the

[[Page 10912]]

impact its program has on benefit levels for mixed-TANF households by 
comparing the allotment amount such households would receive using the 
rules and procedures of the State's SFSP with the allotment amount 
these households would receive if certified under regular Food Stamp 
Program rules and showing the number of households whose allotment 
amount would be reduced by 9.99 percent or less, by 10 to 24.99 
percent, and by 25 percent or more, excluding those households with 
reductions of $10 or less. In order for FNS to accurately evaluate the 
program's impact, States must describe in detail the methodology used 
as the basis for this analysis.
    (3) To ensure compliance with the benefit reduction requirement 
once an SFSP is operational, States must describe in their plan and 
have approved by FNS a methodology for measuring benefit reductions for 
mixed-TANF households on an on-going basis throughout the duration of 
the SFSP. In addition, States must report to FNS on a periodic basis 
the amount of benefit loss experienced by mixed-TANF households 
participating in the State's SFSP. The frequency of such reports will 
be determined by FNS taking into consideration such factors as the 
number of mixed-TANF households participating in the SFSP and the 
amount of benefit loss attributed to these households through initial 
or on-going analyses.

PART 274--ISSUANCE AND USE OF COUPONS

    21. In Sec. 274.2:
    a. The last sentence in paragraph (a) is removed; and
    b. Paragraph (g) is revised to read as follows:


Sec. 274.2  Providing benefits to participants.

* * * * *
    (g) Issuance in rural areas. Unless the area is served by an 
electronic benefit transfer system, State agencies shall use direct-
mail issuance in any rural areas where the State agency determines that 
recipients face substantial difficulties in obtaining transportation in 
order to obtain their food stamp benefits by methods other than direct-
mail issuance. State agencies shall report any exceptions to direct-
mail issuance as specified under Secs. 272.3(a)(2) and (b)(2) of this 
chapter.


Sec. 274.5  [Removed]

    22. Section 274.5 is removed and reserved.

PART 277--PAYMENTS OF CERTAIN ADMINISTRATIVE COSTS OF STATE 
AGENCIES

    23. In Sec. 277.4, paragraph (b) is amended by adding a new 
sentence to the end of the introductory text to read as follows:


Sec. 277.4  Funding.

* * * * *
    (b) Federal reimbursement rate. * * * This rate includes 
reimbursement for food stamp informational activities but not for 
recruitment activities.
* * * * *

    Dated: February 18, 2000.
Julie Paradis,
Deputy Under Secretary, Food, Nutrition and Consumer Services.
[FR Doc. 00-4369 Filed 2-23-00; 8:45 am]
BILLING CODE 3410-30-U