[Federal Register Volume 69, Number 74 (Friday, April 16, 2004)]
[Proposed Rules]
[Pages 20724-20764]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-8414]



[[Page 20723]]

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Part III





Department of Agriculture





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Food and Nutrition Service



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7 CFR Parts 272 and 273



Food Stamp Program: Eligibility and Certification Provisions of the 
Farm Security and Rural Investment Act of 2002; Proposed Rule

  Federal Register / Vol. 69, No. 74 / Friday, April 16, 2004 / 
Proposed Rules  

[[Page 20724]]


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DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Parts 272 and 273

RIN 0584-AD30


Food Stamp Program: Eligibility and Certification Provisions of 
the Farm Security and Rural Investment Act of 2002

AGENCY: Food and Nutrition Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This rulemaking proposes to amend Food Stamp Program 
regulations to implement 11 provisions of the Farm Security and Rural 
Investment Act of 2002 that establish new eligibility and certification 
requirements for the receipt of food stamps. This rule would: Allow 
States, at their option, to treat legally obligated child support 
payments to a non-household member as an income exclusion rather than a 
deduction; allow a State option to exclude certain types of income that 
are not counted under the State's Temporary Assistance for Needy 
Families (TANF) cash assistance or Medicaid programs; replace the 
current, fixed standard deduction with a deduction that varies 
according to household size and is adjusted annually for cost-of-living 
increases; allow States to simplify the Standard Utility Allowance 
(SUA) if the State elects to use the SUA rather than actual utility 
costs for all households; allow States to use a standard deduction from 
income of $143 per month for homeless households with some shelter 
expenses; allow States to disregard reported changes in deductions 
during certification periods except for changes associated with a new 
residence or earned income until the next recertification; increase the 
resource limit for households with a disabled member from $2,000 to 
$3,000 consistent with the limit for households with an elderly member; 
allow States to exclude certain types of resources that the State does 
not count for TANF or Medicaid (section 1931); allow States to extend 
simplified reporting of changes to all households not exempt from 
periodic reporting; require State agencies that have a Web site to post 
applications on these sites in the same languages that the State uses 
for its written applications; allow States to extend from the current 3 
months up to 5 months the period of time households may receive 
transitional food stamp benefits when they lose TANF cash assistance; 
and restore food stamp eligibility to qualified aliens who are 
otherwise eligible and who are receiving disability benefits regardless 
of date of entry, are under 18 regardless of date of entry, or have 
lived in the United States for 5 years as a qualified alien beginning 
on date of entry.

DATES: Comments must be received on or before June 15, 2004, to be 
assured of consideration.

ADDRESSES: The Food and Nutrition Service invites interested persons to 
submit comments on this proposed rule. Comments may be submitted by any 
of the following methods:
     Mail: Send comments to: Matthew Crispino, 
Program Analyst, Certification Policy Branch, Program Development 
Division, Food and Nutrition Service, USDA, 3101 Park Center Drive, 
Room 800, Alexandria Virginia, 22302, (703) 305-2490.
     E-Mail: Send comments to [email protected].
     Fax: Submit comments by facsimile transmission 
to (703) 305-2486.
     Disk or CD-ROM: Submit comments on disk or CD-
ROM to Mr. Crispino at the above address.
     Hand Delivery or Courier: Deliver comments to 
Mr. Crispino at the above address.
     Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the online instructions for submitting 
comments.
    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 812.

FOR FURTHER INFORMATION CONTACT: Questions regarding the proposed 
rulemaking should be addressed to Mr. Crispino at the above address or 
by telephone at 703-305-2490.

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.

Regulatory Impact Analysis

Need for Action

    This action is required to implement provisions of the Farm 
Security and Rural Investment Act of 2002 (FSRIA) (Pub. L. 107-171), 
which was enacted on May 13, 2002. This rulemaking proposes to amend 
Food Stamp Program regulations to implement 11 provisions of FSRIA that 
establish new eligibility and certification requirements for the 
receipt of food stamps. We have estimated the total Food Stamp Program 
costs to the Government of the FSRIA provisions implemented in the 
proposed rule as $595 million in fiscal year (FY) 2004 and $4.504 
billion over the five years FY 2004 through FY 2008. The majority of 
the costs arise from Section 4103 of FSRIA, the standard deduction; 
Section 4104, the SUA; Section 4109, Reporting Requirements; Section 
4115, Transitional Benefits; and Section 4401, Restoration of Benefits 
to Legal Immigrants. The costs of the remaining provisions in the rule 
are minimal and, therefore, will not be discussed in this analysis.

Standard Deduction--Section 4103

    Discussion: This provision replaces a fixed standard deduction 
(used in calculating a household's benefit level) with one that is 
adjusted annually and that varies by household size. This rule provides 
that: (1) For the 48 contiguous States, the District of Columbia, 
Hawaii, Alaska, and the U.S. Virgin Islands, the standard deduction 
will be equal to 8.31 percent of the Food Stamp Program's monthly net 
income limit for household sizes up to six; (2) for Guam, the standard 
deduction will be equal to two times the monthly net income standard 
for household sizes up to six; (3) for the 48 contiguous States, the 
District of Columbia, Hawaii, Alaska, the U.S. Virgin Islands, and 
Guam, households with more than six members must receive the same 
standard deduction as a six-person household; and (4) the standard 
deduction for any household must not fall below the standard deduction 
in effect in FY 2002.
    Effect on Low-Income Families: This provision will affect some low-
income families not already receiving the maximum food stamp benefit by 
allowing them to claim a larger standard deduction and to obtain higher 
food stamp benefits. Larger households will be affected by the 
provision at implementation and smaller households will be affected 
over time as the new values of the standard deduction rise with 
inflation.
    Cost Impact: We estimate that the cost to the Government of this 
provision will be $99 million in FY 2004 and $624 million over the five 
years, FY 2004 through FY 2008. These impacts are already incorporated 
into the President's FY 2005 budget baseline.
    First, the new standard deduction values were projected for each 
household size (one-person through six or more-persons) for each year. 
The new standard deduction values were based on monthly poverty 
guideline values by household size, as calculated by the

[[Page 20725]]

U.S. Department of Health and Human Services (HHS) and used for food 
stamp eligibility standards. The guidelines are published in February 
or March of each year and are the Food Stamp Program net income limits 
in the following fiscal year. The poverty guidelines used for setting 
the FY 2004 food stamp net income limits were published on February 7, 
2003 and are the most current set available. The poverty threshold 
values for use in FY 2005 and beyond were calculated by inflating the 
FY 2004 values by the Consumer Price Index for All Urban Consumers from 
the Office of Management and Budget's economic assumptions for the 
President's FY 2005 budget. For each household size, these values were 
multiplied by 8.31 percent and the product was compared to the current 
standard deduction value of $134, the higher of which was adopted as 
the new standard deduction level. (For example, the monthly poverty 
threshold for a five-person household was $1,795 in FY 2004. 
Multiplying this value by 8.31 percent yields a product of $149, which 
is larger than the current standard deduction value of $134. The new 
standard deduction value would be $149.)
    Second, the number of households affected for each household size 
and in each year was estimated based on participation projections from 
the President's FY 2005 budget baseline of December 2003. The 
projections were adjusted based on data on the proportion of households 
of each size not receiving the maximum allotment, from the Food and 
Nutrition Service (FNS) report, Characteristics of Food Stamp 
Households: Fiscal Year 2002, the most recent data available. 
Households already receiving the maximum allotment are excluded because 
even though the larger standard deduction decreases their net income, 
their benefits cannot increase. [For example, according to the report, 
5.8 percent of all households were five-person households, 13.8 percent 
of which received the maximum benefit. The number of households was 
calculated as the total number of persons divided by the average 
household size of 2.32 persons per household, from the 2002 FNS report. 
The number of five-person households affected by the provision was 
calculated as 10,211,000 total households times 5.8 percent (in five-
person households) times 86.2 percent (not receiving the maximum 
benefit)--equal to 511,000 households affected.]
    The cost of this provision was then calculated for each household 
size in each year. The cost equaled the product of the change in the 
standard deduction value for the household size, times the number of 
households affected, times 12 months, times a benefit reduction rate of 
37.5 percent. This benefit reduction rate represents the average change 
in benefits for each dollar change in the standard deduction. Because 
the excess shelter deduction is calculated based on a household's gross 
income less all other deductions, a change in the standard deduction 
yields an interaction with the shelter deduction for some households. 
According to the 2002 Characteristics report, about half of food stamp 
households claim a shelter deduction that is expected to increase with 
an increase in the standard deduction. Among these households, the 
benefit reduction rate is 45 percent. The remaining half of food stamp 
households do not claim a shelter deduction or already receive the 
maximum shelter deduction allowable and will not experience the added 
impact of a shelter deduction change. Among these households, the 
benefit reduction rate is 30 percent. Taking the weighted average of 
these two groups yields a benefit reduction rate of 37.5 percent. (For 
five-person households in FY 2004, the cost of this provision was 
estimated as a $15 change in the standard deduction ($149-$134), times 
511,000 households, times 12 months, times 37.5 percent--equal to about 
$35 million.)
    The individual costs for each household size were summed in each 
year and rounded to the nearest million dollars.

Expected Dollar Increase in the Food Stamp Standard Deduction by 
Household Size and Fiscal Years 2004 Through 2013
[GRAPHIC] [TIFF OMITTED] TP16AP04.000

    Participation Impacts: While we do not expect this provision to 
significantly increase food stamp participation, we estimate that 
setting the standard deduction equal to 8.31 percent of poverty by 
household size will raise benefits among households currently 
participating. In FY 2004, households with five or more persons will be 
affected by this provision. Four-person households are expected to be 
affected beginning in FY 2008. Persons in smaller households will be 
affected in later years, as the indexed values of 8.31 percent of the 
poverty guidelines for their household size exceed $134. The number of 
persons affected was calculated from the number of household affected, 
times the number of persons per households, summed across household 
sizes. In FY 2004, we expect 4.9 million persons to receive an average 
of $1.70 more per month in food stamp benefits as a result of this 
provision.
    Uncertainty: Because these estimates are largely based on recent 
food stamp quality control data, they have a high level of certainty. 
To the extent that the distribution of food stamp households by 
household size and income changes over time, the cost to the Government 
could be larger or smaller. To the extent that actual poverty 
guidelines are higher or lower than projected, the cost to the 
Government could be larger or smaller.

Simplified Utility Allowance--Section 4104

    Discussion: This provision simplifies current rules relating to the 
standard utility allowance (SUA) when the State agency elects to make 
the SUA mandatory. The rule provides that State agencies which elect to 
make the SUA

[[Page 20726]]

mandatory: (1) May provide an SUA that includes heating or cooling 
costs to residents of public housing units which have central utility 
meters and which charge the households only for excess heating or 
cooling costs; and (2) must not prorate the SUA when a household shares 
living quarters with others. The rule also provides that in determining 
if a State agency's mandatory SUAs are cost neutral, the Department 
must not count any increase in cost that is due to providing an SUA 
that includes heating or cooling costs to residents of certain public 
housing units or to eliminating proration of the SUA for a household 
that shares living quarters and expenses with others.
    Effect on Low-Income Households: This provision will increase the 
shelter deduction and raise food stamp benefits among low-income 
households in shared living arrangements and certain public housing 
situations to the extent they reside in States with mandatory SUA 
policies. This provision will decrease the shelter deduction and lower 
food stamp benefits among low-income households with high utility 
expenses to the extent that they reside in States who will adopt 
mandatory SUA policies as a result of this provision.
    Cost Impact: We estimate that the cost to the Government of this 
provision will be $204 million in FY 2005, the first year it is 
expected to be fully implemented, and $980 million over the five years 
FY 2004 through FY 2008. These impacts are already incorporated into 
the President's FY 2005 budget baseline.
    According to individual State SUA plans, there were 11 States with 
mandatory SUA policies in FY 2002. Based on participant data from the 
National Data Bank, those mandatory SUA States served 25 percent of 
food stamp participants in FY 2002. Telephone conversations with State 
officials regarding their SUA policy intentions indicated that this 
provision is motivating a large number of States to move to mandatory 
SUAs. Based on those conversations, we assumed that by FY 2005, 75 
percent of the remaining States would adopt mandatory SUAs. The cost 
impact of this provision includes three components: (1) Increased costs 
due to ending the SUA proration requirements; (2) increased costs due 
to extending the full heating and cooling SUA to certain households in 
public housing with shared utility meters; and (3) savings from 
limiting households with high utility expenses to the SUA value among 
States adopting a mandatory SUA policy as a result of this provision.
    The estimate was based on food stamp cost projections from the 
President's FY 2005 budget baseline of December 2003. While we 
recognize that the President's FY 2005 budget baseline is an imperfect 
baseline for this analysis because it already incorporates the impacts 
of this provision, it is preferable to the alternatives because it 
reflects the most recent economic and participation trends. The 
national cost impact of ending the proration requirement of the heating 
and cooling SUA was estimated using food stamp quality control data 
from FY 2002, the most recent data available. QC data includes 
information on household circumstances, income and expenses and allows 
us to identify which households are currently prorating their SUA. 
Using this data, we were able to calculate the change in each 
household's benefit as a result of changing the SUA proration rules and 
estimate a national percentage increase in benefits (1.509 percent). 
This percentage increase was multiplied by the baseline cost 
projections from the President's FY 2005 budget baseline for each year. 
Since this provision is available only to those households in States 
with mandatory SUA policies, the costs were adjusted to account for the 
proportion of food stamp participants subject to mandatory SUA 
policies. As outlined above, we estimated that 25 percent of food stamp 
participants were subject to mandatory SUA policies prior to enactment 
and are therefore affected by this provision. Because of the large 
number of States expressing their desire to adopt mandatory SUA 
policies, we assumed that 25 percent of participants in the remaining 
States would adopt mandatory SUAs in FY 2003, growing to 50 percent in 
FY 2004, up to 75 percent in FY 2005 and beyond. This assumption was 
supported by current data showing that in FY 2003, 19 States had 
adopted mandatory SUA policies. These States account for about 42 
percent of participants in FY 2003.
    The national cost impact of extending the full heating and cooling 
SUA to certain households in public housing with shared utility meters 
was based on participation projections from the President's FY 2005 
budget baseline of December 2003. Participation figures were divided by 
the average household size of 2.32 persons to estimate the total number 
of food stamp households from the FNS report, Characteristics of Food 
Stamp Households: Fiscal Year 2002. Based on tabulations of 2002 
quality control data, 39.2 percent of households reported positive 
utility expenses lower than their State's SUA. These are generally 
households who are claiming actual utility expenses rather than the SUA 
when determining their excess shelter expense deduction and are likely 
to be affected by this provision. Their average utility expenses were 
estimated as $109 and the average SUA value was $244. Based on data 
from the U.S. Department of Housing and Urban Development (HUD), about 
8 percent of these households were assumed to live in public housing. 
Based on multiple conversations with officials from HUD, the U.S. 
Department of Energy, utility companies, and building associations, the 
proportion of those households with shared utility meters was assumed 
to be five percent. The national cost for the provision was then 
determined by multiplying the number of affected households (39.2 
percent of the baseline number of households in each fiscal year) times 
the average difference in the utility expenses used for the shelter 
deduction ($244 less $109 = $135) times 12 months times a benefit 
reduction rate of 30 percent. The benefit reduction rate represents how 
much benefits change for each dollar change in the excess shelter 
deduction. Again, the national cost was then adjusted to reflect the 
proportion of food stamp participants subject to mandatory SUA policies 
and therefore affected by the provision--25 percent of participants at 
enactment with a phase-in up to 75 percent of participants in remaining 
States in FY 2005 and beyond.
    The national savings impact of limiting households with high 
utility expenses to a mandatory SUA was simulated using the 1999 MATH 
SIPP simulation model, the most recent model available. This model was 
used because SIPP contains information on households characteristics, 
income and expenses, including the information about household utility 
expenses necessary to estimate changes in household benefits resulting 
from changes to their excess shelter expenses deduction value. The 
national impact of the provision was estimated as a percentage decrease 
(-0.836 percent). This percentage was multiplied by the baseline cost 
projections for each year and the product was adjusted to reflect the 
proportion of food stamp participants expected to be made newly subject 
to a mandatory SUA as a result of this provision (phased-in up to 75 
percent of the remaining participants in FY 2005 and beyond).
    The impacts of the three components were summed and rounded to the 
nearest million dollars.
    Participation Impact: In FY 2005, the first year fully implemented, 
2,145,000 persons are expected to gain an average of $12.72 per month 
in food stamp

[[Page 20727]]

benefits as a result of this provision. In addition, 2,178,000 persons 
are expected to lose an average of $4.71per month in food stamp 
benefits, including 11,000 persons who will lose eligibility and no 
longer participate in the Food Stamp Program. The number of persons 
made newly eligible by this provision is expected to be minimal.
    Participation effects were estimated using the same methodology as 
the cost estimate. The simulation results from quality control data and 
MATH SIPP produced participation impacts for those gaining benefits, 
losing benefits and losing eligibility for those affected by 
eliminating the SUA proration requirement and households with high 
utility expenses made newly subject to a mandatory SUA. The impacts, 
expressed as a percent change from the model's baselines, were 
multiplied by the participation projections in the President's FY 2005 
budget baseline of December 2003, and were adjusted according to the 
methodology outlined for the cost estimate. The number of persons in 
households affected by the public housing component of the provision 
was estimated by taking the number of households affected times the 
average number of persons per household. The estimates from the 
individual components were then summed.
    Uncertainty: The estimate of this provision has a moderate level of 
certainty. The analyses are largely based on the results of computer 
simulation models of large national datasets, which yield fairly 
precise estimates. Data on which States will choose to adopt this 
option is quite strong, as it is based on telephone conversations with 
every State and recent information about their policy choices. The 
weakest part of the estimate is assumption about the number of 
households in public housing with shared meters. Despite an extensive 
search, data on this subject were difficult to obtain. The assumption 
that 5 percent of families in public housing have shared meters is a 
best guess, but is fairly uncertain. To the extent that the actual 
number of households with shared meters is smaller or larger, costs to 
the Government of this provision would be lower or higher.

Simplified Determination of Deductions--Section 4106, and State Option 
To Reduce Reporting Requirements--Section 4109

    Discussion: The provision of the rule implementing Section 4106 
provides State agencies the option of disregarding until a household's 
next recertification any changes that affect the amount of deductions 
for which a household is eligible. However, the State agency must act 
on any change in a household's excess shelter cost stemming from a 
change in residence and any changes in the household's earned income. 
The rule provides: (1) The State agency has the option of ignoring 
changes (other than changes in earned income and changes in shelter 
costs related to a change in residence) for all deductions or for any 
particular deduction; (2) the State agency may ignore changes for 
deductions for certain categories of households while acting on changes 
for those same deductions for other types of households; and (3) the 
State agency may not act on changes in only one direction; i.e., if it 
chooses to act on changes that increase a household's deduction, it 
must also act on changes that would decrease the deduction.
    The provision of the rule implementing Section 4109 provides State 
agencies the option to extend simplified reporting procedures, which 
are restricted to households with earnings under current rules, to all 
food stamp households. The rule provides that (1) the State agency may 
include any household certified for at least 4 months within a 
simplified reporting system; (2) households exempt from periodic 
reporting, including homeless households and migrant and seasonal farm 
workers, may be subject to simplified reporting but may not be required 
to submit periodic reports; (3) the State agency may require other 
households subject to simplified reporting to submit periodic reports 
on their circumstances from once every 4 months up to once every 6 
months; and (4) households subject to simplified reporting must report 
when their monthly gross income exceeds the monthly gross income limit 
for their household size.
    Effect on Low-Income Families: Low-income families who reside in 
States who implement this option may be impacted by this provision. 
Changes in household circumstances may be disregarded for up to 6 
months, relieving a reporting burden on households.
    Cost impact: The cost to the Government of section 4106--simplified 
determination of deductions is included in the cost estimate of section 
4109--simplified reporting. The cost to the Government in FY 2004 is 
expected to be $60 million. The five-year total for FY 2004 through FY 
2008 is $447 million. These impacts are already incorporated into the 
President's FY 2005 budget baseline.
    Section 4106 allows States to disregard changes in deduction 
amounts. The impact of this provision is assumed to be included in the 
cost of simplified reporting. Section 4109 extends the State option of 
simplified reporting to all households. In addition, FNS implemented a 
universal quarterly reporting system prior to passage of FSRIA. The 
details of these systems are similar enough that we took the estimated 
cost of universal quarterly reporting and multiplied by 2 (from 3 
months to 6 months). We then subtracted out the cost to States already 
running a universal simplified reporting system by waiver and the 
States running a more limited simplified reporting system. Combined 
these States are Colorado, District of Columbia, Delaware, Georgia, 
Kentucky, Louisiana, Michigan, Maryland, Missouri, Montana, Nebraska, 
New Hampshire, New Jersey, Ohio, Oklahoma, Tennessee, West Virginia, 
and Wyoming (from Food Stamp Program State Operations Report, April 4, 
2002). Together they account for 31 percent of all benefit costs; we 
assumed by extension that they account for 31 percent of the cost of 
simplified reporting (based on FY 2003 issuance from the National Data 
Bank). We then applied a State phase-in assuming this proposal will be 
taken up quickly and by a majority of the States. We assumed 25 percent 
of States will implement in FY 2003, 50 percent in FY 2004, and 75 
percent in the remaining years. This provision benefits all households 
who are placed in this reporting system by reducing the frequency of 
reports they must submit. On average, the benefit impact per person is 
44 cents per person per month in fiscal year 2006 when fully effective.
    Participation Impact: This provision only affects current 
participants in the States that opt to implement. There are no new 
participants brought onto the program from this provision.
    Uncertainty: There is a moderate level of certainty associated with 
this estimate. This estimate is based on previous reporting estimates 
that use SIPP longitudinal data to track how much circumstances change 
because of the new reporting rules. Added to that data is other quality 
control data on how accurate reports are that has a high level of 
certainty as well. However, since two different data sources are used 
and other out-of-model adjustments are made (including how many States 
would implement this option), the uncertainty is raised some.

Transitional Food Stamps for Families Moving From Welfare--Section 4115

    Discussion: This provision expands the current option to provide

[[Page 20728]]

transitional benefits to households leaving the TANF program. The rule 
provides that State agencies: (1) May lengthen the maximum transitional 
period from up to three months to up to five months; (2) may extend the 
household's certification period beyond the limits established under 
current rules to provide the household with up to a full five months of 
transitional benefits; (3) must adjust the household's benefit in the 
transitional period to take into account the reduction in income due to 
the loss of TANF; (4) may further adjust the household's benefit in the 
transitional period to take into account changes in circumstances that 
it learns of from another program in which the household participates; 
(5) must permit the household to apply for recertification at any time 
during the transitional period; (6) may shorten the household's 
certification period in the final month of the transitional period and 
require the household to undergo recertification; and (7) must deny 
transitional benefits to households made ineligible for such benefits 
by law.
    Effect on Low-Income Families: This provision impacts low-income 
families who leave TANF. If their State opts to provide transitional 
benefits, these families receive up to 5 months of transitional food 
stamps after they exit from TANF.
    Cost Estimate: The cost to the Government of this provision in FY 
2004 is $78 million, and it costs $446 million over the five years FY 
2004 through FY 2008. These impacts are already incorporated into the 
President's FY 2005 budget baseline.
    This estimate uses TANF baseline participation figures from the 
U.S. Department of Health and Human Services. We assumed only non-
child-only cases would leave the TANF program and be eligible for a 
transitional food stamp benefit. Previous research found that about 65 
percent of the caseload is non-child-only. After adjusting TANF 
participation figures to those that are non-child only (1.386 million 
families in FY 2004), we then applied a leaver's rate. This rate is 
based on previous state evaluations and averaged about 7.5 percent in 
2001, which is lowered in each year by a constant rate of one third per 
year, because it was assumed that over time, fewer participants would 
leave either due to economic recession or due to severe personal 
difficulties making it very difficult to leave TANF. The leaver rate 
used in FY 2004 was 6.96 percent a month. We then adjusted for the 
percentage of TANF households who are not eligible for Food Stamp 
Program because of household definitional issues. For example, TANF 
excludes persons that are included by the Food Stamp Program, and their 
inclusion makes the household ineligible for food stamps. This has 
remained constant at about 20 percent for many years (from TANF Annual 
Report to Congress). We then adjusted for those cases sanctioned off of 
TANF or sanctioned in the Food Stamp Program. The statute states that 
these cases are ineligible for a transitional benefit. About 6.2 
percent of TANF cases are sanctioned each year (data from TANF National 
Report to Congress). Administrative data shows about 2 percent of Food 
Stamp Program cases are closed because of intentional program 
violations. We rounded this 8.2 percent to 10 percent to account for 
other program sanctions. Therefore, another 10 percent of TANF leavers 
are ineligible for the 5-month transitional benefit. Finally, we 
assumed that about half of the TANF leavers have no financial changes 
other than the loss of the TANF income and therefore their transitional 
Food Stamp benefit is not dramatically different from what they would 
have received under normal program rules. We scored the cost of the 
remaining 52 percent whose food stamp benefit is higher than what the 
household would have received otherwise. Based on the 2000 TANF report 
to Congress, we estimated that in FY 2004 there are 36,000 leavers 
eligible for the transitional benefit. The average food stamp benefit 
for TANF households in FY 2000 was about $234 a month. However, the 
statute states that the Food Stamp Program benefit shall be adjusted 
due to the loss of TANF cash. The average TANF benefit was $302 a month 
in FY 2000, which an HHS official suggested was a good estimate of the 
TANF benefit just prior to leaving TANF. A $302 decrease in cash 
assistance produces a $97 increase in Food Stamp Program benefits. 
Therefore, we assigned a monthly transitional benefit for each leaver 
household of $330 in 2000. Inflated using the change in the thrifty 
food plan equals a $368 monthly benefit in 2004. This amount times the 
number of leavers produces the gross cost per month. The cost of the 
transitional period is 4 times this monthly cost. The current process 
results in an extra month of benefits so the five-month traditional 
benefit period results in four extra months of benefits. The annual 
cost is the product times 12 months. However, we know that leavers tend 
to churn, that is, return to the program shortly after leaving. In 
these cases, the cost is reduced because they return to the Food Stamp 
Program even in the absence of a transitional benefit. If the case 
returns in the first month, there is no additional savings since it 
takes one month to close a food stamp case normally. Returners in the 
second through fifth month, however, do generate savings. Data from the 
Department of Health and Human Services show that 5 percent of leavers 
return to TANF in the second month, 4 percent return in the third 
month, 3 percent return in the fourth month, and 2 percent return in 
the 5th month. After weighting these by the number of months 
transitional benefits would not be paid, we multiplied the percentage 
returning times the cost for the year. We then adjusted for the fact 
that some portion of the first year benefits will be paid in the second 
year. That is, if someone's transitional benefit starts in July; only 2 
months of benefits will be paid in the first fiscal year. The remaining 
will be paid in the second fiscal year. We reduced the first year's 
cost by 17 percent to account for this. We then reduced the cost to 
avoid double counting what is already in the baseline (since States 
have been operating a 3 month transitional benefit).
    Prior to the passage of FSRIA, some States had been operating a 
three-month transitional benefit option that FNS allowed via 
regulation. We assumed these States would move to the five-month 
option. The full cost of the three-month option was subtracted from the 
full cost of the five-month option to get the additional, or new, 
spending due to the legislative change.
    Finally, we applied a State phase-in rate believing that this 
provision will be slowly implemented by States and that only a small 
portion of States will ever implement. Therefore, we took 10 percent of 
the cost in the first year, 20 percent in the second year, and 20 
percent in the remaining years.
    Participation Impact: We estimate that in FY 2004, an average of 
36,000 TANF-leavers will receive the food stamp transitional benefit 
per month.
    Uncertainty: There is a high level of uncertainty with this 
estimate. The estimate is based on projections of TANF participation 
over a ten-year period and studies done in only a few states about the 
behaviors of certain types of TANF leavers. In conjunction with OMB and 
HHS, these studies represented the best information available, although 
not necessarily nationally representative. Added to that is the state 
take-up rate, indicating how many States would take this option, which 
is highly uncertain and variable as time goes on.

[[Page 20729]]

Section 4401: Restoration of Benefits to Legal Immigrants

    Discussion: This provision substantially expands eligibility for 
the Food Stamp Program for legal immigrants. It restores eligibility to 
three groups of legal immigrants in three stages. Effective October 1, 
2002, legal immigrants who receive blindness or disability benefits 
became eligible to participate in the Food Stamp Program. Effective 
April 1, 2003, legal immigrants who have resided for at least five 
years in the United States as qualified aliens became eligible. 
Effective October 1, 2003, all legal immigrants under age 18 became 
eligible for benefits, regardless of when they first arrived in the 
United States. The statute and rule also remove sponsor deeming 
requirements for immigrant children.
    Effect on Low-Income Households: These three provisions will affect 
low-income families who have legal immigrant members who are currently 
ineligible for benefits but become eligible after the provisions take 
effect. Many of these households contain U.S. born children who are 
currently eligible for food stamps but may not be participating. Most 
households that contain participating U.S. born children will receive 
larger benefits if the adults become eligible for benefits. Other 
households will consist entirely of newly eligible persons.
    The people benefiting from the provision restoring eligibility to 
immigrants with five years legal residency are mostly living in 
households with children. About half of new participants live in 
households with earnings. Households with elderly and disabled are less 
likely to be affected, since elderly and disabled who were legally 
resident before August 22, 1996 are eligible under current law. In 
addition, a few legal immigrants receiving State-funded disability 
payments qualify for restored food stamp eligibility on the basis of 
receiving blindness or disability benefits; legal immigrants have not 
had eligibility for federal disability benefits restored. Lastly, 
foreign-born children who have legally resided in the United States for 
less than five years benefited from the provision restoring eligibility 
to children effective October 1, 2003.
    Cost Impact: We estimate that the cost to the Government of all 
three provisions will be $185 million in FY 2004 and $1.829 billion 
over the five-year period of 2004-2008. The cost to the Government of 
restoring eligibility to disabled immigrants is $3 million for FY 2004 
and $19 million over the five-year period of 2004-2008. The bulk of the 
cost is from restoring eligibility to those legally resident in the 
United States for five years; the FY 2004 cost to the Government is 
$160 million and $1.522 billion over five years. The cost to the 
Government for restoring eligibility to legal resident children 
regardless of date of arrival in the United States is $22 million for 
FY 2004 and $288 million over the five-year period.
    We estimated that a relatively small number of legal immigrants 
qualified for the October 1, 2002 restoration of benefits to the blind 
and disabled. This is because federal programs providing blindness or 
disability benefits to most legal immigrants are restricted to those 
who either were residing in the United States prior to August 22, 1996 
(Supplemental Security Income) or have a significant work history 
(Social Security benefits). Both groups are currently eligible for food 
stamps. Only those participating in State-funded disability programs 
qualified for the October 1, 2002 restoration of food stamps. Some data 
from an Urban Institute study on the impact and implementation of these 
provisions indicates that of the eight States studied (California, 
Florida, Illinois, Massachusetts, New Jersey, North Carolina, 
Tennessee, and Texas), three of these States provided State-funded 
disability programs for immigrants. These three States (California, 
Massachusetts, and Texas) estimated that they restored benefits to 
2,400 disabled immigrants. If one assumes that their average monthly 
benefit is similar to that of a person receiving General Assistance 
benefits, the cost for 2004 is $3 million. The five-year cost is $19 
million for 2004-2008. There is no phase-in, because States providing 
State-funded disability payments to disabled aliens converted these 
immigrants to food stamps immediately after they became eligible.
    The estimates for the other two provisions were based on food stamp 
cost projections from the President's FY 2005 budget baseline of 
December 2003.
    The estimate for restoring eligibility to those with five years 
legal residency in the United States is based on a model that uses a 
combination of quality control data on participating legal immigrants 
from 1996 (prior to their restricted eligibility) with data on current 
participants and program rules for 2000. Based on this model, 
restoration of food stamp eligibility to those with five years' legal 
residency will increase benefit costs by 1.23 percent, for a total cost 
of $299 million in 2004.
    However, because the estimate is based on 2000 data and program 
rules, we made the following adjustments:
     The model only restores eligibility to those in 
the United States prior to 1996, because in order to have five years 
legal residency in 2000, an immigrant will need to have arrived no 
later than 1995. However, by 2004, people with five years residency 
will include those arriving in 1996, 1997, 1998, and 1999. By 2006, 
people with five years residency will also include those arriving in 
2000, and 2001.
     Based on admissions data from the INS, we 
estimate that in 2004, 7.91 percent of noncitizens with five years 
legal residency will have arrived by 1996. Thus, the cost and number of 
new participants is adjusted upwards to account for the 1996 arrival 
cohort not captured under the model. With the adjustment, the cost is 
$323 million in 2004.
     Based on admissions data from the INS, we 
estimate that in 2004, 15 percent of noncitizens with five years legal 
residency will have arrived in 1997, 1998, and 1999. By 2007, the 
percentage of post August 22, 1996 arrivals with five years residency 
will rise to 25 percent. These percentages are for non-aged, non-
disabled adults; the model does not restore eligibility to any elderly, 
disabled, or children, since in 2000, all members from these groups who 
had five years residency would have been covered by the Agricultural 
Research, Extension and Education Reform Act of 1998 (AREERA) 
restorations. So we have to further adjust the percentage of post 1996 
arrivals to include elderly, children, and those adults who would have 
qualified for federal disability payments using the pre-August 22, 1996 
rules but are not currently eligible for those payments to become food 
stamp eligible on October 1, 2002. Since about 24 percent of all legal 
immigrants who received food stamps in 1996 were elderly, disabled, or 
children, the increase in costs accounting for post-1996 arrivals is 
estimated to be 18 percent in 2004 and 35 percent in 2008. With the 
adjustment, the cost is estimated to be $384 million in 2004.
     We also expect that more legal immigrants will 
naturalize over the next few years. Based on estimates provided by the 
INS, we estimate that in 2004, an additional 16 percent of immigrants 
will naturalize relative to 2000. The estimate for 2008 is 20 percent. 
This adjustment reduces the cost of the restoration because naturalized 
citizens are eligible for food stamps even without implementation of 
this provision. Thus,

[[Page 20730]]

the cost estimate is adjusted downwards, to $320 in 2004.
     We also phased in the impact over three years, 
because we expect it to take three years for the full participation 
impact to be realized. Finally, we halved the cost impact for 2003, 
since the provision takes effect on April 1, 2003, halfway through the 
Fiscal Year. After these adjustments, the expected benefit cost for FY 
2004 is $160 million.
    We also estimated the impact of restoring only those children who 
had been in the country less than five years, since children with more 
than five years legal residency would be covered by the previous 
provision. The model estimated that this restoration would increase 
annual food stamp costs by 0.22 percent. We then multiplied the impact 
by the expected annual food stamp costs for each year as projected in 
the President's FY 2005 budget baseline of December 2003. We then made 
the following adjustments:
     The model only restores eligibility to children 
arriving in 1997, 1998, and 1999, since it is based on FY 2000 data and 
children arriving prior to 1997 were made eligible under AREERA. 
Assuming that the number of children arriving legally in the United 
States in 2000 and 2001 is proportional to those arriving in the prior 
three years, we increased the impact by 67 percent (five years divided 
by three years = 1.67).
     We also assumed a lower participation rate among 
newly eligible children, since their immigrant parents would not be 
eligible to receive benefits for five years. We assumed the 
participation rate would be seventy-five percent.
     We made a further adjustment because California 
provides a State-funded benefit for ineligible immigrants. When 
calculating the Federal portion of the benefits issued by legal 
immigrants, California excludes the entire income of ineligible aliens, 
rather than pro-rating a portion to the eligible household members. 
This adjustment is a ten percent reduction in costs.
     The estimate for children does not include any 
children with more than five years' residency. However, five years' 
residency is required to become a United States citizen. Thus, the 
estimate for this provision does not contain any adjustment for 
naturalization.
     Finally, we assumed a three-year phase-in before 
the impact was fully realized. The expected cost to the Government for 
FY 2004 (the first year of implementation) is $22 million.
    The impacts of the three components were summed and rounded to the 
nearest million dollars.
    Participation Impact: We estimate that by 2006, when the provision 
will be in full effect, an additional 513,000 legal immigrants will be 
participating in the Food Stamp Program. Some will be people currently 
covered by State-funded food assistance benefits. Some others will be 
individuals who live in a household with participating citizen 
children. Others will live in households where no one currently 
participates in the program.
    We estimate that the provision that restores eligibility to those 
with five years legal residence in the United States will bring an 
estimated 437,000 legal immigrants on to the program by full 
implementation in fiscal year 2006. The average per-person monthly 
benefit in 2006 will be an estimated $66. We estimate that the 
provision that restores eligibility to legal resident children will 
bring an additional 63,000 persons onto the Food Stamp Program by 2006. 
The average per-person monthly benefit in 2006 will be $75. In 
addition, we estimate that about 3,000 legal immigrants will qualify 
for the restoration of benefits to the blind and disabled in FY 2006.
    Participation Impact: Participation effects were estimated using 
the same methodology as the cost estimate. The simulation results of 
the QC Minimodel produced participation impacts. The impacts were 
multiplied by the participation projections for the FY 2005 President's 
budget baseline and were adjusted according to the methodology outlined 
for the cost estimate.
    Uncertainty: The estimates for restoring eligibility to immigrants 
with five years legal residency and for restoring eligibility to legal 
non-citizen children both have a moderate degree of uncertainty. The 
primary source of uncertainty for the first provision is the percent of 
legal residents who meet the five-year residency test, since the QC 
data does not contain that information, and we have to impute it from 
other data sources. This issue also affects the estimate for children, 
since children meeting the five-year residency would become eligible 
under the five-year residency provision (which was implemented earlier) 
rather than the child provision. The other source of uncertainty, which 
applies to both groups, is the take-up rate among this group. The 
estimate for restoring eligibility to disabled people has a higher 
degree of uncertainty because data is based on a study of only eight 
States.

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). Eric M. Bost, 
the Under Secretary for Food, Nutrition and Consumer Services, has 
certified that this proposed rule will not have a significant economic 
impact on a substantial number of small entities. State and local human 
services agencies will be the most affected to the extent that they 
administer the Food Stamp Program.

Public Law 104-4

    Title II of the Unfunded Mandate Reform Act of 1995 (UMRA), Public 
Law 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, FNS 
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 FNS 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) for State, local, 
and tribal governments or the private sector of $100 million or more in 
any one year. This rule is, therefore, not subject to the requirements 
of sections 202 and 205 of the UMRA.

Executive Order 12372

    The Food Stamp Program is listed in the Catalog of Federal Domestic 
Assistance under No. 10.551. For the reasons set forth in the final 
rule in 7 CFR part 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.

Executive Order 13132, Federalism

    Executive Order 13132 requires Federal agencies to consider the 
impact of their regulatory actions on State and local governments. 
Where such actions have federalism implications, agencies are directed 
to provide a statement for inclusion in the preamble to the regulations 
describing the agency's considerations in terms of the three

[[Page 20731]]

categories called for under section (6)(b)(2)(B) of Executive Order 
13132.

Prior Consultation With State Officials

    Prior to drafting this proposed rule, we consulted with State and 
local agencies at various times. Because the Food Stamp Program is a 
State-administered, Federally-funded program, our regional offices have 
formal and informal discussions with State and local officials on an 
ongoing basis regarding program implementation and policy issues. This 
arrangement allows State and local agencies to provide comments that 
form the basis for many discretionary decisions in this and other Food 
Stamp rules. In addition, we held three conferences with 
representatives of the State agencies specifically to discuss the 
provisions of FSRIA being implemented through this rule. Dates and 
locations of the meetings were as follows: June 11, 2002, in 
Alexandria, Virginia; June 13-14, 2002, in Kennebunkport, Maine; and 
June 17-19, 2002, in Dallas, Texas. We have also received written 
requests for policy guidance on the implications of FSRIA from the 
State agencies that deliver food stamp services. These questions have 
helped us make the rule responsive to concerns presented by State 
agencies.

Nature of Concerns and the Need To Issue This Rule

    This rule implements changes required by the FSRIA. There are no 
purely discretionary provisions contained in this rule. State agencies 
generally want simplification of program eligibility and certification 
requirements. The proposed rule provides simplification by implementing 
statutory options which, among other things, reduce household reporting 
requirements, simplify the definition of income, and simplify the 
determination of deductions. Specific policy questions raised by State 
agencies after enactment of FSRIA, but prior to the promulgation of 
regulations, helped us identify issues that needed to be clarified in 
the proposed rule.

Extent to Which We Meet Those Concerns

    FNS has considered the impact of the proposed rule on State and 
local agencies. This rule makes changes that are required by law. All 
of the provisions of FSRIA addressed in this rule, except Section 4401, 
were effective on October 1, 2002. Section 4401 has 3 different 
implementation dates. The provision restoring food stamp eligibility to 
qualified aliens who are otherwise eligible and who are receiving 
disability benefits regardless of date of entry was effective on 
October 1, 2002. The provision restoring food stamp eligibility to 
qualified aliens who are otherwise eligible and who have lived in the 
United States for 5 years as qualified aliens beginning on date of 
entry was effective April 1, 2003. The provision restoring food stamp 
eligibility to qualified aliens who are otherwise eligible and who are 
under 18 regardless of date of entry and the provision eliminating the 
sponsor deeming requirements for immigrant children are both effective 
October 1, 2003.
    Some of the provisions of this rule are mandatory, but the effects 
of the mandatory provisions on State agencies are minimal. The rule 
changes the method used to calculate the program's standard deduction, 
but this change has had minimal effect on State agencies. To implement 
the provision, State agencies reprogrammed their computer systems to 
assign standard deduction amounts by household size and must update 
these amounts annually. FNS will annually calculate the deduction 
amounts and share them with States. The rule requires State agencies 
that maintain a Web site to make their State food stamp application 
available on that Web site in each language in which the State agency 
makes a printed application available. In posting applications on their 
Web pages, State agencies must comply with Section 504 of the 
Rehabilitation Act of 1973, Pub. L. 93-112, as amended by the 
Rehabilitation Act Amendments of 1974, Pub. L. 93-516, 29 U.S.C. 794, 
which requires State agencies to make their Web sites accessible to 
people with disabilities. However, since many States have already 
adopted standards that comply with the requirements of Section 504, 
they should not incur additional costs to put their food stamp 
application forms on their Web sites. The rule also restores food stamp 
eligibility to certain qualified aliens and eliminates the sponsor 
deeming requirements for immigrant children. The remaining provisions 
of this rule are optional and provide State agencies the flexibility to 
simplify some program eligibility and certification requirements.
    In the proposed rule, we have addressed questions submitted by 
State agencies regarding the provisions of FSRIA implemented in this 
rule. FNS is not aware of any case where the discretionary provisions 
of the rule would preempt State law. FNS has attempted to write this 
regulation to provide States with maximum flexibility in implementing 
the provisions.

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 the final rule. 
Prior to any judicial challenge to the provisions of this rule or the 
application of its provisions, all applicable administrative procedures 
must be exhausted. In the Food Stamp Program, the administrative 
procedures are as follows: (1) For Program benefit recipients--State 
administrative procedures issued pursuant to 7 U.S.C. 2020(e)(1) of the 
Food Stamp Act and regulations at 7 CFR 273.15; (2) for State 
agencies--administrative procedures issued pursuant to 7 U.S.C. 2023 of 
the Food Stamp Act and regulations at 7 CFR 276.7 (for rules related to 
non-quality control (QC) liabilities) or 7 CFR Part 283 (for rules 
related to QC liabilities); (3) for Program retailers and wholesalers--
administrative procedures issued pursuant to Section 14 of the Food 
Stamp Act (7 U.S.C. 2023) and 7 CFR 278.8.

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 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 
food stamp households and individual participants, FNS has determined 
that there is no adverse 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.
    In general, 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 Food Stamp 
Program from engaging in actions that discriminate based on race, 
color, national origin, sex, religion, 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

[[Page 20732]]

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 of 1977 (the 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 accord 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.

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
3507), this proposed rule contains information collections that are 
subject to review and approval by the Office of Management and Budget; 
therefore, FNS is submitting for public comment the changes in the 
information collection burden that would result from adoption of the 
proposals in the rule. The information collections affected by this 
rule are (1) OMB Number 0584-0064: Application and Certification of 
Food Stamp Households; (2) OMB Number 0584-0496: State Agency Options; 
and (3) OMB Number 0584-0083: Operating Guidelines, Forms and Waivers.
    Comments on this information collection must be received by June 
15, 2004.
    Send comments to Office of Information and Regulatory Affairs, OMB, 
Attention: Katherine Astrich, Desk Officer for FNS, Washington, DC, 
20503. Comments may be e-mailed to Ms. Astrich at [email protected]. 
Please also send a copy of your comments to Matthew Crispino, Program 
Analyst, Certification Policy Branch, Program Development Division, 
Food and Nutrition Service, USDA, 3101 Park Center Drive, Room 800, 
Alexandria, Virginia 22302, (703) 305-2407, or by fax to (703) 305-
2486, or by e-mail at [email protected]. For further information, 
or for copies of the information collection, please contact Mr. 
Crispino at the above address.
    Comments are invited on: (a) Whether the proposed collection of 
information is necessary for the performance of the functions of the 
agency, including whether the information will have practical utility; 
(b) the accuracy of the agency's estimate of the burden of the proposed 
collection of information including the validity of the methodology and 
assumptions used; (c) ways to enhance the quality, utility and clarity 
of the information to be collected; and (d) ways to minimize the burden 
of the collection of information through the use of appropriate 
automated, electronic, mechanical, or other technological collection 
techniques or other forms of information technology.
    All responses to this notice will be summarized and included in the 
request for OMB approval. All comments will also become a matter of 
public record.

Request 1

    Title: Application and Certification of Food Stamp Households.
    OMB Number: 0584-0064.
    Expiration Date: January 31, 2006.
    Type of Request: Revision of a currently approved collection.
    Abstract: Title 7, Part 273 of the Code of Federal Regulations 
(CFR) sets forth the Food Stamp Program requirements for the 
application, certification and continued eligibility for food stamp 
benefits. This rulemaking revises the collection burden to account for 
changes required by FSRIA.
    Food Stamp applications on State Web sites. FSRIA requires every 
State agency that maintains a Web site to make its food stamp 
application available on the Web site in each language that a printed 
copy is available. State agencies are not required to accept 
applications on-line.
    State agency burden: Because States already have to develop 
applications, and all States already maintain Web sites, we anticipate 
that States will only incur a start-up burden to post their 
applications on the Web.
    Household burden: This requirement provides another manner in which 
households are able to obtain an application. There would be no 
additional burden for households.
    Start-up burden: We estimate a start-up burden for the requirement 
that State agencies place their food stamp applications on their Web 
sites in each language that paper applications are made available. We 
estimate a burden of 1.5 hours for a State agency to post its 
application(s) on the Web. States are required to have their 
applications posted by November 13, 2003. We estimate a total burden of 
80 hours (53 State agencies x 1.5 hours = 80 hours).
    Determination of child support payments. Households that pay 
legally owed child support are eligible for either an exclusion or 
deduction of those payments. FSRIA allows State agencies to rely solely 
on information from the State's Child Support Enforcement (CSE) agency 
in determining a household's obligation and actual child support 
payments. The household would not have further reporting and 
verification requirements.
    State agency burden: This provision was intended as a 
simplification for States to rely solely on information from the Child 
Support Enforcement (CSE) agency in determining the amount of child 
support payments made. While the State agency will use CSE data, it 
will not have to perform other verification activities for payments 
reported by the household. We expect that most States already have a 
link with the CSE agency. Therefore, there would be no additional 
burden to set up an interface with the CSE agency. However, we estimate 
that modifying instructions to workers regarding the new process to 
determine child support payments will result in a burden of 20 hours 
per State agency. We anticipate five State agencies in each of the next 
three years will choose this option, resulting in a total of 100 burden 
hours annually (5 States x 20 hours = 100 hours).
    Household burden: This provision may reduce the reporting burden 
for households, because the State agency will rely on the information 
from the CSE agency instead of requiring additional verification from 
the household. We estimate that households spend an average of 19 
minutes completing an application for initial certification or 
recertification. Given that only one percent of households received 
this deduction in fiscal year 2001 (and even fewer will be subject to 
the new requirement since it is a State option), the average time to 
complete an application will not be measurably affected. Therefore, we 
do not estimate a change in household burden from this provision.
    Notification on reporting forms if State chooses to disregard 
changes in deductions. States are given the option in FSRIA to postpone 
acting on changes that would change the amount of deductions, except 
for changes in shelter expenses due to a change in residence and 
changes in earned income. If the State chooses this option, it must 
include a notice on all report forms that any reported changes that 
affect deductions will not be acted on until the household's next 
recertification.
    State agency burden: The notification would be added to a State's 
existing reporting forms, so this option would not impose an additional 
burden for

[[Page 20733]]

creating or sending a new notice. However, States that choose this 
option would have to revise their reporting forms to include 
notification about postponing changes in deductions. We estimate that 
modifying existing report forms will result in a burden of 20 hours per 
State agency. We anticipate five States in each of the next three years 
will choose this option, creating a burden of 100 hours annually (5 
States x 20 hours = 100 hours).
    Household burden: FNS believes there is no burden to the household 
for this provision.
    Transition notice. FSRIA added an option for States to provide 
transitional benefits to families leaving the Temporary Assistance for 
Needy Families (TANF) program. This addition changed the transitional 
benefit alternative provided through the regulations under the final 
rule on Noncitizen Eligibility and Certification Provisions of Pub. L. 
104-193, as Amended by Public Laws 104-208, 105-33 and 105-185 (NCEP) 
(65 FR 70134 (November 21, 2000)). The proposed rule includes new 
requirements for the Transition Notice that States must provide to 
households receiving transitional benefits.
    Families leaving TANF receive a ``Transition Notice'' (TN) from the 
State agency advising the household that it will be receiving 
transitional benefits and the length of the transitional period. The TN 
must inform the household that it has the option to apply for 
recertification at any time during the transitional period; otherwise 
at the end of the transitional period, the household's circumstances 
will be reevaluated or the household will have to be recertified. The 
notice must also explain any changes in the household's benefit, and 
inform the household that if it returns to TANF during the period, the 
State agency will reevaluate the household's circumstances or require 
the household to undergo a recertification. Finally, the TN must inform 
the household that it does not have to report changes during the 
transitional period. If the State agency opts not to act on changes 
during the transitional period, the TN must tell households that if 
they experience a change that would increase benefits, the household 
should apply for recertification.
    State agency burden: Since there is no difference in how the Notice 
of Expiration (NOE) and the Transition Notice (TN) are handled, and the 
TN will replace the NOE in some cases, the burden for the TN will be 
considered minimal and therefore will be incorporated into the NOE 
burden calculations. We do anticipate a burden of 20 hours per State 
agency for developing the TN. This burden would include the States that 
currently provide transitional benefits, because the proposed rule 
would require substantial changes to the current TN. We anticipate 5 
State agencies will choose to implement the option in each of the next 
three years, therefore creating a burden of 100 hours each year (5 x 20 
hours = 100 hours).
    Household burden: FNS believes there is no burden to the household 
for this provision.
    Simplified reporting option. Since the NECP rule, State agencies 
have had the option to require households with earnings to submit 
reports of their circumstances every six months. In addition, a 
household must report when its gross income exceeds 130 percent of the 
poverty threshold. FSRIA extends this option to most households (a few 
categories of households are prohibited by law from being required to 
submit periodic reports). This change means more households will only 
have to submit one report every six months, as opposed to reporting 
every month, quarter, or whenever their circumstances change. The State 
agency would also have fewer reports to process, although we estimate 
that processing the semi-annual report is more time consuming than 
processing a change report. States may have fewer recertifications to 
process if they extend the certification period for households in semi-
annual reporting. Processing the six-month report is less time 
consuming than processing a complete recertification.
    State agency burden: Implementing simplified reporting reduces a 
State's burden in processing reports. Simplified reporting typically 
requires a household to report once every six months, and also when the 
household's gross income exceeds 130 percent of the poverty level (the 
gross income threshold). This means that States choosing this option 
will have fewer household reports to process.
    The NECP rule provided an option to provide simplified reporting to 
households with earnings. The proposed rule allows States to extend 
simplified reporting to most households, with an option to require 
reports once every four to six months. Based on a recent survey of 
State choices, we estimate that 1,703,806 households will be newly 
subject to the expanded simplified reporting option. Of these 
households, we assume 114,859 would otherwise have been subject to 
quarterly reporting, and 1,588,947 would have been subject to change 
reporting requirements. Under simplified reporting, all of these 
households will have to submit one report annually (these households 
will have to submit an application for recertification at least once 
every 12 months), and we estimate the State agency will spend 19 
minutes processing each report for a total of 539,539 burden hours 
(1,703,806 reports x 19 minutes/60 minutes per hour = 539,539 hours). 
Quarterly reporting households submit 3 reports annually and we 
estimate change reporting households submit an average of 3.5 reports 
annually. We estimate the State agency spends 19 minutes processing 
each quarterly report and 5 minutes processing each change report. So 
if these simplified reporting households were instead subject to change 
or quarterly reporting, the State agency would have a total burden of 
572,559 hours [(114,859 quarterly reporting households x 3 reports x 19 
minutes/60 minutes per hours = 109,116 hours) + (1,588,947 change 
reporting households x 3.5 reports x 5 minutes/60 minutes per hour = 
463,443 hours) = 572,559 hours]. This results in a net savings of 
33,020 burden hours (539,539 hours -572,559 hours = -33,020 hours) for 
implementing the expanded simplified reporting option in the proposed 
rule.
    Household burden: This provision will also reduce the burden on 
households, since certain households in States that choose this option 
will have fewer reports to file with the food stamp agency. As noted 
above, we estimate 1,703,806 households will be subject to simplified 
reporting due to the proposed rule. We estimate that households will 
spend 7 minutes completing a semi-annual or quarterly report and 5 
minutes completing a change report. Households subject to the new semi-
annual report will have a burden of 198,777 hours (1,703,806 reports x 
7 minutes/60 minutes per hour = 198,777 hours). We estimate these 
households would have a total burden of 503,644 hours under quarterly 
or change reporting [(114,859 quarterly reporting households x 3 
reports x 7 minutes/60 minutes per hour = 40,201 hours) + (1,588,947 
change reporting households x 3.5 reports x 5 minutes/60 minutes per 
hour = 463,443 hours) = 503,644 hours]. This results in a net savings 
of 304,866 burden hours (198,777 hours - 503,644 hours = -304,866 
hours).
    Record keeping burden only: Local agencies are required to maintain 
client case records for three years and to perform duplicate 
participation checks on individual household members to ensure the 
member is not participating in more than one household.

[[Page 20734]]

    Data are not available on the actual number of local food stamp 
offices in each State or the actual number of workers (recordkeepers) 
that would be maintaining case files and performing duplicate 
participation checks. For the purpose of this burden package, we are 
using the number of food stamp project areas, which equals 2,715.
    (A) Case Files: The caseload to be maintained is equal to the 
number of participating households and their subsequent files. The 
number of times recordkeepers must access these case files is equal to 
the number of documents expected to be filed or noted in the file 
annually. We anticipate minimal filing to involve a burden of 2 minutes 
per document. Including documentation (i.e. electronic files, 
caseworker written entry into the file, or hard copies of the document) 
for notices which were sent to the household and when, we anticipate a 
total of 109,883,314 documents/year. Annual record keeping burden 
associated with creating, filing, and maintaining household case files 
is estimated to be 3,662,777 burden hours (109,883,314 x 2/60 = 
3,662,777).
    This represents a decline in burden hours from the previous 
submission (113,319,113 records and 3,777,303 burden hours). Although 
the base assumptions of the number of applicants and recipients are 
higher than the previous submission, we were double counting records of 
the Notice of Expiration (NOE) and the Transition Notice (TN). As noted 
above, the TN will replace the NOE for certain households. However, our 
previous spreadsheet had an NOE and a TN for each household, resulting 
in an additional 243,015 burden hours.
    (B) Monitoring Duplicate Participation: The estimated annual record 
keeping burden for maintaining this system that is automated by most 
States is based on the number of total applications (all approved and 
denied initial and recertification applications) expected to be 
received (20,556,015) and the average number of persons (2.3) in each 
applicant household. Assuming that at least 80 percent of the 
applications will be subject to this check, the estimated number of 
duplicate participation checks (responses) that must be performed by 
State agencies is 37,823,068. Burden is estimated to be 15 seconds (or 
0.00416666 hour) per response, for a total burden of 157,596 burden 
hours annually (20,556,015 x 2.3 x .80 x .25/60). This is an increase 
of 6,498 burden hours from our previous submission of 151,098 burden 
hours.
    (C) Total record keeping burden would be 3,820,373 hours. Burden 
per recordkeeper would be 1,407 hours.
    Summary of burden hours for public--state and local governments, 
potential applicants, and current participants:
    Respondents: 20,556,015.
    Annual responses: 157,216,781.
    Total burden hours: 29,994,434.
BILLING CODE 3410-30-P

[[Page 20735]]

[GRAPHIC] [TIFF OMITTED] TP16AP04.001

BILLING CODE 3410-30-C

[[Page 20736]]

Request 2

    Title: State Agency Options.
    OMB Number: 0584-0496.
    Expiration Date: September 30, 2004.
    Type of Request: Revision of a currently approved collection.
    Abstract: Title 7, Part 273 of the Code of Federal Regulations 
(CFR) sets forth the Food Stamp Program requirements for the 
application, certification and continued eligibility for food stamp 
benefits. This rulemaking revises the collection burden to account for 
changes required by FSRIA.
    Homeless shelter estimate. Section 273.9(d)(6)(i) of the 
regulations, as proposed to be amended, allows State agencies to use a 
homeless shelter deduction. State agencies will no longer need to 
collect information on shelter costs for homeless households. The 
previous version of the regulation allowed State agencies to use a 
homeless shelter deduction of up to $143 a month. FSRIA requires that 
State agencies choosing to use the homeless shelter deduction must set 
the deduction at $143 monthly.
    Estimates of burden: The previous burden package estimated 1 hour 
per year for States that had chosen this option to conduct periodic 
reviews. Because the deduction is now set at a standard $143, there 
will be no burden for States that choose this option. This represents a 
change of 20 hours per year from what we anticipated in the previous 
information collection burden (ICB) calculations.
    Establishing and reviewing standard utility allowances. Section 
273.9(d)(6)(iii)(B) of the regulations allows State agencies to 
establish standard utility allowances (SUA) and once established 
requires State agencies to review and adjust SUAs annually to reflect 
changes in the cost of utilities. Many State agencies already have one 
or more approved standards, which they update annually. State agencies 
may use information already available from case files, quality control 
reviews or other sources and from utility companies. State agencies may 
make adjustments based on cost-of-living increases. The information 
will be used to establish standards to be used in place of actual 
utility costs in the computation of the excess shelter deduction. State 
agencies are required to submit the amounts of these standards and 
methodologies used in developing and updating the standards to FNS when 
they are developed or changed.
    Estimates of burden: Currently 52 State agencies have a standard 
that includes heating or cooling costs and 31 have a standard for 
utility costs other than heating or cooling. In addition, 44 State 
agencies have a telephone allowance standard. State agencies are 
required to review the standards yearly to determine if increases are 
needed due to the cost of living. We estimate a minimum of 2.5 hours 
annually to make this review and adjustment (2.5 hours x 52 State 
agencies = 130 hours). Total burden for this provision is estimated to 
be 130 hours per year.
    Mandatory utility standards. Section 273.9(d)(6)(iii) of the 
regulations, as proposed to be amended, allows State agencies to 
mandate use of standard utility allowances when the excess shelter cost 
deduction is computed instead of allowing households to claim actual 
utility costs provided the standards will not increase program costs. 
State agencies may establish additional standards to implement this 
provision. They must show that mandatory utility standards will not 
increase program costs. Request for FNS approval to use a standard for 
a single utility must include the cost figures upon which the standard 
is based. If the State wants to mandate use of utility standards but 
does not want individual standards for each utility, the State needs to 
submit information showing the approximate number of food stamp 
households that would be entitled to the nonheating and noncooling 
standard and the average cost of their actual utility costs now plus 
the standards that State proposes to use and an explanation of how they 
were computed. If the State does not have actual data, it will need to 
pull a sample of cases to obtain it.
    Estimates of burden: Currently, nineteen (19) State agencies 
selected to mandate the use of standard utility allowances. We do 
expect that additional states will decide to implement a mandatory SUA. 
There is not an additional burden in developing the standards since 
these agencies already calculate the standard utility allowance. 
Therefore, since there is no additional burden, the total annual burden 
associated with mandatory utility standards is zero.
    Self-employment costs. Section 273.11(b) of the regulations allows 
self-employment gross income to be reduced by the cost of producing 
such income. The regulations allow the State agencies, with approval 
from FNS, to establish the methodology for offsetting the costs of 
producing self-employment income, as long as the procedure does not 
increase Program costs. State agencies may submit a request to FNS to 
use a method of producing a reasonable estimate of the costs of 
producing self-employment income in lieu of calculating the actual 
costs for each household with such income. Different methods may be 
proposed for different types of self-employment. The proposal shall 
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. 
State agencies may collect this data from household case records or 
other sources that may be available.
    Estimates of burden: We estimate that 10 State agencies will submit 
a request of this type each year for the next three years. It is 
estimated that these States will incur a one-time burden of at least 10 
working hours gathering and analyzing data, developing the methodology, 
determining the cost implication, and submitting a request to FNS for a 
total burden of 100 hours annually. State agencies are not required to 
periodically review their approved methodologies. We do not anticipate 
that State agencies will voluntarily review their methodologies for 
change on a regular basis, thus burden is not being assessed for this 
purpose at this time.
    Record keeping burden only: Each State agency would be required to 
keep a record of the information gathered and submitted to FNS. We 
estimate this to be 7 minutes per year for the 53 State agencies to 
equal a total of 6 burden hours annually. (53 x 7 minutes/60 minutes 
per hour = 6 hours annual burden)
    Summary of burden hours for public--state and local governments, 
potential applicants, and current participants:
    Respondents: 53.
    Annual responses: 115.
    Total burden hours: 236.

[[Page 20737]]

[GRAPHIC] [TIFF OMITTED] TP16AP04.002

Request 3

    Title: Operating Guidelines, Forms and Waivers.
    OMB Number: 0584-0083.
    Expiration Date: September 2004.
    Type of Request: Revision of a currently approved collection.
    Abstract: The regulations at 7 CFR 272.2 require that State 
agencies plan and budget program operations and establish objectives 
for each year. State agencies submit these plans to the regional 
offices for review and approval. This rulemaking is proposing to amend 
7 CFR 272.2(d) of the Food Stamp Program Regulations to require State 
agencies that opt to implement certain provisions of FSRIA to include 
these options in the State Plan of Operation. The optional provisions 
that must be included in the State Plan of Operation are: simplified 
definition of resources, simplified definition of income, optional 
child support deduction, homeless household shelter deduction, 
simplified reporting, simplified determination of deductions, and 
transitional benefits. The regulations at 7 CFR 272.2(f) require that 
State agencies only have to provide FNS with changes to these plans as 
they occur. Since these options are newly provided for by FSRIA, State 
agencies that choose these options must include them in their State 
Plan of Operations this year, and any subsequent year only if there are 
changes.
    Estimates of burden: 35 States have adopted simplified reporting; 
10 states have adopted transitional benefits; 22 States have adopted 
simplified definition of income; 19 States have adopted simplified 
definition of resources; 25 States have adopted the homeless household 
deduction; 4 States have adopted the option to simplify determination 
of deductions; and 6 states have chosen to treat legally obligated 
child support payments made to non-household members as an income 
exclusion while the remaining 47 States will continue to count the 
payments as a deduction. We estimate an average burden of one response 
per State agency per option selected over three years. The additional 
public reporting burden for this proposed collection of information is 
estimated to average an additional .25 hours per response. The total 
burden for this proposed collection is 42 hours.
    Summary of burden hours for public--state and local governments, 
potential applicants, and current participants:
    Respondents: 53.
    Annual responses: 168.
    Total burden hours: 42.
    [GRAPHIC] [TIFF OMITTED] TP16AP04.003
    
Government Paperwork Elimination Act

    FNS is committed to compliance with the Government Paperwork 
Elimination Act, which requires government agencies to provide the 
public the option of submitting or transmitting business electronically 
to the maximum extent possible.

Background

    The Farm Security and Rural Investment Act of 2002 (FSRIA), Public 
Law 107-171, approved on May 13, 2002, amended the Food Stamp Act of 
1977, 7 U.S.C. 2011, et seq. (the Act), by establishing new eligibility 
and certification requirements for the receipt of food stamps. This 
rulemaking addresses 11 sections of FSRIA. State agencies were required 
to implement

[[Page 20738]]

most of these provisions on October 1, 2002. The requirements of each 
provision are discussed below.

Availability of Food Stamp Program Applications on the Internet--7 CFR 
273.2(c)

    Section 11(e)(2)(B)(ii) of the Act (7 U.S.C. 2020(e)(2)(B)(ii)) 
requires State agencies to develop a food stamp program application. 
Section 4114 of FSRIA amends Section 11(e)(2)(b)(ii) to require that 
State agencies which maintain a web site make their State food stamp 
application available on that web site in each language in which the 
State agency makes a printed application available. The Department is 
proposing to amend current regulations at 7 CFR 273.2(c)(3) to 
implement this provision.
    The Department believes that the purpose of this provision is to 
allow households to obtain a food stamp application without having to 
visit or contact their local food stamp office. Thus, the application 
posted on the web page must be a complete application; i.e., it must be 
the same application that the household would receive if it picked up 
the application at the local office or had the application mailed to 
it. The State agency must provide on the web page the addresses and 
phone numbers of all State food stamp offices and a statement that the 
household should return the application form to its nearest local 
office. Section 4114 does not require that State agencies accept 
applications through the Internet, only that applications be made 
available online.
    State agencies should format the application appearing on the web 
page so that the household can easily print and complete the 
application. In addition, in posting food stamp applications on their 
web pages, State agencies must comply with Section 504 of the 
Rehabilitation Act of 1973, Pub. L. 93-112, as amended by the 
Rehabilitation Act Amendments of 1974, Pub. L. 93-516, 29 U.S.C. 794. 
Section 504 eliminates discrimination on the basis of handicap in any 
program or activity receiving Federal financial assistance. To be in 
compliance with Section 504, State agencies must make their food stamp 
websites accessible to persons with disabilities. The Conference Report 
accompanying FSRIA, H.R. Conf. Rep. No. 107-424, at 541 (2002) (the 
Conference Report), refers to Section 504, noting that compliance with 
it requires that State agencies ensure that documents on a State's web 
page are in a format in which browsers for the visually impaired can 
read them, and that they can be converted to Braille documents; that 
graphic elements that convey meaning have text explanations available; 
and that English language text is also available in other languages, as 
appropriate. The Conference Report also notes that because many States 
have already adopted standards that comply with the requirements of 
Section 504, the requirement to comply with Section 504 when putting 
applications on their web sites should not impose additional costs on 
them. The Department is proposing to include a reference to Section 504 
of the Rehabilitation Act in revised 7 CFR 273.2(c)(3).

Partial Restoration of Benefits to Legal Immigrants-7 CFR 273.4

1. Expanded Eligibility for Certain Noncitizens.

    Section 4401 of FSRIA substantially expands eligibility for the 
Food Stamp Program for legal immigrants. Prior to the enactment of 
Section 4401, Section 402 of the Personal Responsibility and Work 
Opportunity Reconciliation Act of 1996 (PRWORA), as amended, limited 
eligibility for food stamps to United States citizens, non-citizen 
nationals, and certain alien groups. The requirements of Section 402 of 
PRWORA, as well as the alien eligibility requirements contained in 
Section 6(f) of the Act (7 U.S.C. 2015(f)), were implemented through 
current regulations at 7 CFR 273.4(a). Under those rules, the following 
groups are eligible for food stamps:
     United States citizens and non-citizen nationals 
(as defined in the DOJ Interim Guidance published November 17, 1997 (62 
FR 61344));
     Certain Hmong or Highland Laotians and their 
spouses and children;
     American Indians born in Canada to whom Section 
289 of the Immigration and Nationality Act (INA) (8 U.S.C. 1359) 
applies; and
     Members of Indian tribes as defined in section 
4(e) of the Indian Self-Determination and Education Assistance Act (25 
U.S.C. 450b(e)).
    In addition to the above-mentioned groups, other non-citizens may 
be eligible for food stamps if they satisfy two requirements. First, 
the individual must be a qualified alien as defined at 7 CFR 
273.4(a)(5)(i).
    Under that section, a qualified alien is:
     An alien who is lawfully admitted for permanent 
residence under the INA;
     An alien who is granted asylum under section 208 
of the INA;
     A refugee who is admitted to the United States 
under section 207 of the INA;
     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;
     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;
     An alien who is granted conditional entry 
pursuant to section 203(a)(7) of the INA as in effect prior to April 1, 
1980;
     An alien who has been battered or subjected to 
extreme cruelty in the United States 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; or
     An alien who is a Cuban or Haitian entrant, as 
defined in section 501(e) of the Refugee Education Assistance Act of 
1980.
    Second, pursuant to PRWORA, in addition to being a qualified alien 
under 7 CFR 273.4(a)(5)(i), the individual must meet at least one of 
the criteria specified at 7 CFR 273.4(a)(5)(ii). Some of the criteria 
specified at 7 CFR 273.4(a)(5)(ii) make a noncitizen eligible for the 
Food Stamp Program for only 7 years, while other criteria make the 
noncitizen permanently eligible for the program. A qualified alien who 
meets one of the following criteria specified at 7 CFR 
273.4(a)(5)(ii)(B) through (a)(5)(ii)(F) is eligible to participate in 
the Food Stamp Program for 7 years after receiving admitted or granted 
status:
     An alien admitted as a refugee under section 207 
of the INA.
     An alien granted asylum under section 208 of the 
INA.
     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.
     An alien granted status as a Cuban or Haitian 
entrant (as defined in section 501(e) of the Refugee Education 
Assistance Act of 1980).
     An Amerasian admitted pursuant to section 584 of 
Public Law 100-202, as amended by Public Law 100-461.
    A qualified alien who meets one of the following criteria specified 
at 7 CFR 273.4(a)(5)(ii)(A) and (a)(5)(ii)(G) through (a)(5)(ii)(J) is 
permanently eligible to participate in the Food Stamp Program:
     An alien lawfully admitted for permanent 
residence under the INA who has 40 qualifying quarters of work under 
Title II of the Social Security Act;

[[Page 20739]]

     An alien (or spouse or unmarried dependent child 
of an alien) with certain military connections;
     An alien who was lawfully residing in the United 
States on August 22, 1996 and is now receiving benefits or assistance 
for blindness or disability, as defined in 7 CFR 271.2;
     An alien who was lawfully residing in the United 
States on August 22, 1996 and was 65 years or older on or before that 
date;
     An alien who was lawfully residing in the United 
States on August 22, 1996 and is now under 18 years of age.
    Section 4401 of FSRIA amended Section 402 of PRWORA to expand food 
stamp eligibility for certain additional qualified aliens. First, 
Section 4401 extends eligibility for food stamps to any qualified alien 
who has resided in the United States for 5 years or more as a qualified 
alien. The law specifically provides eligibility to ``any qualified 
alien who has resided in the United States with a status within the 
meaning of the term `qualified alien' for a period of 5 years or more 
beginning on the date of the alien's entry into the United States.'' 
The Department interprets this provision to require that, to be 
eligible to participate in the Food Stamp Program, the alien must have 
been in a qualified alien status, as defined under PRWORA, for 5 years. 
Section 4401 could be read to require that the alien have been in a 
qualified status at the time he or she entered the United States in 
order to be eligible under this provision. However, the Department 
believes that such a reading of the law is too restrictive as it would 
deny the benefits of the provision to aliens who are not qualified when 
they enter the United States, but later attain qualified status. There 
is no indication that Congress intended to deny aliens who legally 
enter the United States and later attain qualified alien status from 
achieving eligibility for food stamps through the 5-year residency 
rule. In fact, the Committee report on FSRIA indicates that the Senate 
version of Section 4401 would have restricted application of the 5-year 
residence rule by denying it to aliens who enter the country illegally 
and remain illegally for a period of one year or more. However, the 
provision was eliminated in Conference. This supports the view that 
Congress intended the 5-year residency rule to apply to any alien who 
attains qualified alien status, regardless of their status when they 
arrived in the United States. The Department is proposing to amend 
current regulations at 7 CFR 273.4(a)(5)(ii) to make eligible for the 
Food Stamp Program any alien who has resided in the United States in a 
qualified alien status as defined in PRWORA for 5 years.
    Several groups interested in this provision have asked the 
Department if, after attaining qualified status, an alien can leave the 
country for periods of time but still become eligible for food stamps 5 
years from the date he or she attained qualified status. The Department 
interprets the 5-year residency rule as establishing eligibility for an 
alien who resides here in qualified alien status for a total of 5 
years. The 5 years do not need to be consecutive. Therefore, a 
qualified alien who resides in the United States for two years, leaves 
the country for a period of time long enough to lose his or her 
qualified status under INS rules, but then returns to the United States 
and resides here in a qualified status for another three years will 
attain eligibility for the program.
    The 5-year residency rule has a significant impact on existing 
regulations related to qualified aliens. First, it effectively 
eliminates the 7-year time limit on food stamp participation for 
qualified aliens who are eligible for the program because they meet the 
criteria set out in PRWORA and at 7 CFR 273.4(a)(5)(ii)(B) through 
(a)(5)(ii)(F). Aliens who meet the criteria at 7 CFR 273.4(a)(5)(ii)(B) 
through (a)(5)(ii)(E) are by definition qualified aliens, and 
Amerasians admitted pursuant to section 584 of Public Law 100-202, as 
amended by Public Law 100-461 are legal permanent residents. Thus, any 
alien who would be eligible for food stamps under 7 CFR 
273.4(a)(5)(ii)(B) through (a)(5)(ii)(F) will be eligible to receive 
food stamps for 7 years, but by the fifth year of participation will 
become permanently eligible for food stamps by virtue of the 5-year 
residency rule. Because the 5-year residency rule effectively 
eliminates the 7-year time limit on food stamp eligibility, the 
Department is proposing to amend current regulations at 7 CFR 
273.4(a)(5)(ii)(B) through (a)(5)(ii)(F) to remove reference to the 7-
year time limit. The 5-year residency rule also makes two additional 
categories of qualified aliens eligible for food stamps. Currently, 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 or who has been granted 
conditional entry pursuant to section 203(a)(7) of the INA as in effect 
prior to April 1, 1980, is a qualified alien. However, neither parolee 
status nor conditional entrant status in themselves are enough to make 
a qualified alien eligible for the program. To be eligible, the parolee 
or conditional entrant would have to satisfy one of the requirements at 
7 CFR 273.4(a)(5)(ii). However, now, under the 5-year residency rule, 
parolees and conditional entrants who retain qualified alien status for 
5 years are eligible for the program.
    Section 4401 also effectively reduces the applicability of the 40 
quarters of work requirement for aliens lawfully admitted for permanent 
residence under PRWORA and 7 CFR 273.4(a)(5)(ii)(A). Under current 
rules, to be eligible to participate in the Food Stamp Program, an 
alien who is a qualified alien because he or she was admitted for 
permanent residence must have or be credited with 40 qualifying 
quarters of work to qualify for this exception. Thus, generally, a 
lawful permanent resident must work for 10 years before becoming 
eligible to participate in the Food Stamp Program. However, as a result 
of Section 4401, a lawful permanent resident will now become eligible 
for food stamps after residing in the United States for five years, 
whether he or she has any qualifying quarters or not. The 40 quarters 
requirement is only applicable in cases of lawful permanent residents 
who have been in the United States less than five years but can still 
claim 40 qualifying quarters of work, such as in the case of an 
individual who claims quarters credited from the work of a parent 
earned before the applicant became 18. Such individuals may be eligible 
for the program under 7 CFR 273.4(a)(5)(ii)(A) even though they have 
not resided in the United States for five years.
    Although the 40 qualifying quarters requirement has been minimized 
as an eligibility requirement, it continues to play a role in the area 
of deeming of the income of a sponsor to a sponsored alien. As 
discussed below, current regulations at 7 CFR 273.4(c) require that 
when determining the eligibility and benefit levels of a household in 
which a sponsored alien is an eligible member, the State agency counts 
a portion of the income and resources of the sponsor as the unearned 
income and resources of the sponsored alien. Except for aliens exempt 
from the deeming requirement in accordance with 7 CFR 273.4(c)(3), the 
deeming requirement applies until the alien has worked or can receive 
credit for 40 qualifying quarters of work, gains United States 
citizenship, or his or her sponsor dies. Thus, even though a lawful 
permanent resident may be eligible for the Food Stamp Program after 5 
years without any qualifying quarters of work, the deeming requirement 
may apply to the individual until he or she works or can receive credit 
for 40 qualifying quarters.
    In addition to extending eligibility to aliens who satisfy the 5-
year residency

[[Page 20740]]

requirement, Section 4401 also extends eligibility to two other groups 
of qualified aliens. First, Section 4401 extends eligibility for the 
Food Stamp Program to all qualified aliens who meet the definition of 
disabled at Section 3(r) of the Act regardless of the date they began 
residing in the United States. As noted above, under current rules at 7 
CFR 273.4(a)(5)(ii)(H), only those qualified aliens meeting the 
program's definition of disabled who were lawfully residing in the 
United States on August 22, 1996, were eligible for food stamps. 
Beginning October 1, 2002, the effective date of the provision, all 
qualified aliens who meet the program's definition of disabled are 
eligible for the program, regardless of the day they began residing in 
the United States.
    Under Section 3(r) of the Act, persons are considered disabled for 
food stamp purposes if they are receiving or are certified to receive 
Supplemental Security Income (SSI), Social Security disability, federal 
or state disability retirement benefits for a permanent disability, 
veteran's disability benefits, or railroad retirement disability. In 
addition, persons receiving disability-related Medicaid, state-funded 
medical assistance benefits, and state General Assistance benefits may 
be considered disabled for food stamp purposes if they are determined 
disabled using criteria as stringent as federal SSI criteria. Several 
States have asked if receipt of benefits under a state Medicaid 
replacement program would make a qualified alien eligible for food 
stamps under Section 4401. State Medicaid replacement programs are 
State-funded programs that provided medical assistance to aliens 
ineligible for Medicaid. Qualified aliens receiving benefits under such 
programs would be eligible for food stamps if the programs are 
equivalent to the State's disability based general assistance programs 
that meet the Federal SSI disability or blindness criteria.
    Second, Section 4401 extends eligibility to all qualified aliens 
who are under the age of 18. As noted above, under current rules at 7 
CFR 273.4(a)(5)(ii)(J), only those qualified aliens under the age of 18 
who were lawfully residing in the United States on August 22, 1996, 
were eligible for food stamps. Beginning October 1, 2003, the effective 
date of the provision, all qualified aliens under the age of 18 are 
eligible for the program, regardless of the date they lawfully entered 
the United States.
    The Department is proposing to amend 7 CFR 273.4(a)(5)(ii) to 
incorporate the revised eligibility requirements for certain qualified 
aliens.
    In regard to the new eligibility requirements for legal immigrants, 
several states have asked the Department when it should add previously 
ineligible aliens who become eligible in the middle of a month to a 
food stamp household. For example, if an ineligible alien attains 5 
years of residence in a qualified alien status in the middle of the 
month, such as May 15, should the alien be added immediately to the 
household or added in the beginning of the next month? The Department 
believes that current regulations address this issue. Current rules at 
7 CFR 273.12(c)(1)(ii) provide that if the household reports a new 
member, and the change increases the household's benefit, the State 
must make the change effective not later than the first allotment 
issued 10 days after the change was reported. Thus, if the change was 
reported on May 15, the State agency would have to make the change 
effective for the June allotment. If the State agency could not make 
the change prior to issuing the June allotment, the regulations require 
that it issue the household a supplement for June. If the addition of 
the new household member would decrease the household's benefits, 
regulations at 7 CFR 273.12(c)(2) require that the State agency make 
the change effective for the allotment issued in the month following 
the month in which the adverse action notice period expires.

2. Elimination of the Deeming Requirement for Noncitizen Children

    In addition to expanding Food Stamp Program eligibility to certain 
noncitizens, Section 4401 of FSRIA also removed deeming requirements 
for immigrant children. Deeming is the process by which the State 
agency counts a portion of the income and resources of an alien's 
sponsor as income and resources belonging to the alien when determining 
the latter's eligibility for the Food Stamp Program and amount of 
benefits. Both Section 421(a) of PRWORA and Section 5(i) of the Act 
impose deeming requirements on the Food Stamp Program. The requirements 
of the two laws are not fully consistent, however. The Department 
addressed and resolved the inconsistencies in the final rule on 
Noncitizen Eligibility and Certification Provisions of Pub. L. 104-193, 
as amended by Public Laws 104-208, 105-33 and 105-185 (NCEP), published 
on November 21, 2000 at 65 FR 70134. Readers wishing a fuller 
understanding of the interaction of the two laws are referred to that 
rule.
    Current deeming requirements appear in food stamp regulations at 7 
CFR 273.4(c). The regulations define a sponsored alien as an alien for 
whom the sponsor has executed an affidavit of support (INS Form I-864 
or I-864A) on behalf of the alien pursuant to Section 213A of the INA. 
In determining the eligibility and benefit levels of a household in 
which the sponsored alien is an eligible household member, the State 
agency counts a portion of the income and resources of the sponsor as 
the unearned income and resources of the sponsored alien. The State 
agency must count the income and resources of the sponsor's spouse as 
income and resources of the sponsored alien if the spouse also executed 
an affidavit of support for the sponsored alien. The State agency may 
not count the income and resources of a sponsor when the sponsored 
alien in the applicant household is ineligible to participate in the 
Food Stamp Program. If an alien's sponsor is sponsoring more than one 
alien, and the sponsored alien can demonstrate this to the State 
agency's satisfaction, the State agency must divide the sponsor's 
deemable income and resources by the number of such sponsored aliens. 
Unless the sponsored alien is exempt from the deeming requirements, the 
State agency must deem the sponsor's income and resources to the 
sponsored alien until the alien gains U.S. citizenship, has worked or 
can receive credit for 40 qualifying quarters of work, or the sponsor 
dies.
    The amount of the sponsor's income deemed to the sponsored alien is 
the total monthly earned and unearned income of the sponsor (as 
determined in accordance with program regulations) at the time of 
certification minus 20 percent of the sponsor's earned income and minus 
an amount equal to the Food Stamp Program's monthly gross income limit 
for a household equal in size to the sponsor, the sponsor's spouse, and 
any other person who is claimed or could be claimed by the sponsor or 
the sponsor's spouse as a dependent for Federal income tax purposes.
    The amount of the sponsor's resources deemed to the sponsored alien 
is the sponsor's total resources (as determined in accordance with 
program regulations) reduced by $1,500. The State agency must not deem 
the sponsor's income and resources to a sponsored alien if the 
sponsored alien is any of the following:
     An alien who is a member of his or her sponsor's 
food stamp household;
     An alien who is sponsored by an organization or 
group as opposed to an individual;

[[Page 20741]]

     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;
     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); and
     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, and the battered individual does not live 
with the batterer. After 12 months, the State agency must not deem the 
batterer's income and resources 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.
    Section 4401 of FSRIA amends Section 421 of PRWORA and Section 5(i) 
of the Act (7 U.S.C. 2014(i)) to add aliens under the age of 18 to the 
list of sponsored aliens excluded from deeming requirements. Therefore, 
as of October 1, 2003, the effective date of the provision, the State 
agency may not count the income and resources of the sponsor of an 
alien under the age of 18 when determining the eligibility or benefit 
level of the sponsored alien's household. The Department is proposing 
to amend current regulations at 7 CFR 273.4(c)(3) to add sponsored 
aliens under the age of 18 to the list of aliens exempt from deeming 
requirements.
    In response to the Department's implementing memorandum on FSRIA, a 
State agency asked how the program's deeming requirements would apply 
when an adult and child in the same food stamp household have the same 
sponsor. As noted above, under current rules at 7 CFR 273.4(c)(2)(v), 
if an alien's sponsor sponsors more than one alien, the State agency 
will divide the sponsor's deemable income and resources by the number 
of sponsored aliens and deem to each alien his or her portion. For 
example, if a sponsor sponsors two aliens who reside in separate 
households, both of whom are applying for food stamps, the State agency 
will deem to both aliens (and thus both households) one-half of the 
sponsor's deemable income and resources. If a sponsor sponsors two 
aliens who reside in the same household, the State agency will in 
effect deem to the household 100 percent of the sponsor's deemable 
income and resources. However, because sponsored aliens under the age 
of 18 will now be exempt from deeming requirements, following current 
rules, the State agency must only deem one-half of the sponsor's income 
to the household. Even though the State agency will not deem any of the 
sponsor's income and resources to the alien child, the sponsor is still 
sponsoring the child and under 7 CFR 273.4(c)(2)(v), if a sponsor 
sponsors more than one alien, his or her deemable income and resources 
are divided amongst each alien he or she sponsors. Thus, if the sponsor 
sponsors two aliens, an adult and a child who reside in the same food 
stamp household, the State agency must divide the sponsor's deemable 
income and resources by two and deem one-half of such income and 
resources to the sponsored adult alien. The State agency would deem 
nothing to the child. The Department is proposing to amend current 
regulations at 7 CFR 273.4(c)(2)(v) to clarify this point.
    At informational meetings, several groups raised an issue about 
current deeming rules for indigent aliens. As noted above, regular 
deeming rules do not apply to aliens that have been determined indigent 
by the State agency. Current rules at 7 CFR 273.4(c)(3)(iv) define an 
indigent alien as one whose income, consisting of the alien's 
household's own income and any cash and in-kind assistance provided by 
the alien's sponsor and others, does not exceed 130 percent of the 
poverty line for the alien's household's size. If an alien is indigent, 
the State agency may only deem to the alien the amount of income and 
resources actually provided by the sponsor. Under current rules, the 
State agency makes the indigence determination at the time of 
application, and the determination is good for 12 months.
    Current rules also require that the State agency notify the 
Attorney General of any time a sponsored alien has been determined 
indigent, and include in the notification the names of the sponsor and 
sponsored aliens. Under Section 423(b) of PRWORA, upon notification 
that a sponsored alien has received any benefit under any means-tested 
public benefits program, the appropriate Federal, State, or political 
subdivision of a State must request reimbursement by the sponsor in the 
amount of such assistance.
    Immigrant advocacy organizations have raised concerns that some 
eligible aliens may be deterred from applying for food stamps because 
of the Attorney General notification requirement and sponsor liability, 
which could lead to reprisals from their sponsors. The groups have 
suggested that the Department allow alien applicants to opt out of the 
indigence determination and have their eligibility and benefit levels 
determined under regular deeming rules.
    The Department agrees that the mandatory notification requirement 
may be a deterrent to participation for some eligible aliens. We are 
proposing to amend current rules at 7 CFR 273.4(c)(3)(iv) to allow a 
household to opt out of the indigence determination and to be subject 
to regular sponsor deeming rules at 7 CFR 273.4(c)(2).
    The advocacy organizations have also asked the Department if State 
agencies may develop an administrative process which requires an 
eligible sponsored alien to provide consent before release of 
information to the Attorney General or the sponsor. These groups feel 
that many sponsored aliens will learn of the Attorney General 
notification and sponsor liability requirements only after they have 
disclosed their immigration status and SSN. Fearing adverse 
consequences as a result of the notification requirements, the 
sponsored aliens may withdraw the entire food stamp application, 
resulting in other household members, in many cases U.S. citizen 
children, losing the opportunity to receive benefits.
    We believe it is within the discretion of the State agencies to 
utilize a process under which information about the sponsored alien is 
not shared with the Attorney General or the sponsor without consent so 
long as the sponsored alien is made aware of the consequences of 
failure to grant consent or failure to provide any other information 
necessary for the purposes of deeming the sponsors income to the alien. 
Pursuant to 7 CFR 273.4(c)(5), until the alien provides information or 
verification necessary to carry out the deeming requirements the 
sponsored alien is ineligible. Failure to provide consent to disclose 
information to the Attorney General or the sponsor would be tantamount 
to failure to provide the information, thus rendering the sponsored 
alien ineligible.

Simplified Definition of Resources--7 CFR 273.8

    Current regulations at 7 CFR 273.8 reflect the pre-FSRIA 
requirement that State agencies apply the uniform national resource 
standards of eligibility to all applicant households, including those 
households in which members are recipients of federally aided public 
assistance, general assistance, or

[[Page 20742]]

supplemental security income. However, households which are 
categorically eligible for the Food Stamp Program, as reflected in 7 
CFR 273.2(j)(2) or (j)(4), do not have to meet the program's resource 
limits.
    Under current regulations at 7 CFR 273.8(b), to be eligible for the 
program, a household's allowable resources, including both liquid and 
non-liquid assets, cannot exceed $2,000. However, the resource limit is 
$3,000 for any household that includes at least one member who is 60 
years of age or older. Current regulations at 7 CFR 273.8(e) list 
resources that may be excluded from the resource test when determining 
a household's eligibility.
    Section 4107 of FSRIA amends Section 5(g) of the Act (7 U.S.C. 
2014(g)) to increase the resource limit for households with a disabled 
person from $2,000 to $3,000. It also amends the Act to provide State 
agencies the option to exclude from resource consideration any 
resources that the State agency excludes when determining eligibility 
for (1) cash assistance under a program funded under part A of title IV 
of the Social Security Act; or (2) medical assistance under Section 
1931 of the Social Security Act (SSA). However, State agencies that 
choose this option may not exclude cash; licensed vehicles; amounts in 
any account in a financial institution that are readily available to 
the household; or other resources the Department determines by 
regulation to be essential to equitable determinations of eligibility 
under the Food Stamp Program.
    For the purposes of this proposed regulation, ``cash assistance 
under a program funded under part A of title IV of the Social Security 
Act'' means assistance as defined in the Temporary Assistance for Needy 
Families (TANF) regulations at 45 CFR 260.31(a)(1) and (a)(2), except 
for programs grand-fathered under Section 404(a)(2) of the Social 
Security Act. Under 45 CFR 260.31(a)(1) and (a)(2), ``assistance'' 
includes ``cash, payments, vouchers, and other forms of benefits 
designed to meet a family's ongoing basic needs (i.e., for food, 
clothing, shelter, utilities, household goods, personal care items, and 
general incidental expenses) * * *. It includes such benefits even when 
they are provided in the form of payments by a TANF agency, or other 
agency on its behalf, to individual recipients, and conditioned on 
participation in work experience or community service (or any other 
work activity under Sec. 261.30 * * *).'' Programs grand-fathered under 
Section 404(a)(2) of the Social Security Act include emergency foster 
care, the Job Opportunities and Basic Skills program and juvenile 
justice. We do not believe that these grand-fathered programs are what 
the Congress meant when it used the term ``cash assistance'' in the 
statute, even though they may involve a cash payment to a family.
    ``Medical assistance under Section 1931 of the Social Security 
Act'' means Medicaid for low-income families with children. This 
section, which was added by the Personal Responsibility and Work 
Opportunity Reconciliation Act of 1996 (Welfare Reform), allows low-
income families with children to qualify for Medicaid. It requires that 
States use the AFDC income and resource standards that were in effect 
in July 1996, but it also provides options for States to use less 
restrictive income and resources tests for these families.
    For the purposes of this regulation, the Department further 
proposes that the TANF cash assistance and Medicaid programs from which 
State agencies can adopt resource exclusions for the Food Stamp Program 
exclude programs that do not evaluate the financial circumstances of 
adults in the household while determining eligibility and benefits. We 
believe that this proposal is in line with the types of State TANF and 
Medicaid programs Congress envisioned under this provision, and 
maintains state flexibility.
    The requirement at 7 CFR 273.8(c)(3) to deem the resources of 
sponsors of aliens continues to be in effect. However, if a State 
agency has chosen in accordance with proposed new paragraph 7 CFR 
273.8(e)(19) to exclude a type of resource excluded for TANF or 
Medicaid, and the alien's sponsor owns that resource, the State agency 
would not include that resource when determining which resources to 
deem to the sponsored alien's household.
    To ensure that determinations of eligibility under the Food Stamp 
Program remain equitable, the Department proposes that stocks, bonds, 
and savings certificates not be excluded from household resources under 
this rule.
    In order to implement section 4107, the Department is proposing to 
amend 7 CFR 273.8(b) to extend the $3,000 resource limit to households 
which contain a disabled member or members. (The food stamp definition 
of a disabled member is reflected at 7 CFR 271.2). The Department is 
also proposing to amend 7 CFR 273.8 to add a new paragraph (e)(19) 
which will provide State agencies the option to exclude from resource 
consideration for food stamp purposes any resources they exclude when 
determining eligibility for TANF cash assistance or medical assistance 
under Section 1931 of the SSA. However, a State agency that selects 
this option may not exclude the following:
    1. Licensed vehicles not excluded under Section 5(g)(2)(C) or (D) 
of the Act. (Section 5(g)(2)(D) allows State agencies to substitute the 
vehicle rules they use in their TANF programs for the food stamp 
vehicle rules when doing so results in a lower attribution of resources 
to the household.); and
    2. Cash on hand and amounts in any account in a financial 
institution that are readily available to the household, including 
money in checking or savings accounts, stocks, bonds, or savings 
certificates.
    The term `readily available' applies to resources, in financial 
institutions, that can be converted to cash in a single transaction 
without going to court to obtain access or incurring a financial 
penalty other than loss of interest. Under the proposed provision, 
State agencies could exclude deposits in individual development 
accounts (IDA's) made under written agreements that restrict the use of 
such deposits to home purchase, higher education, or starting a 
business. They could also exclude deposits in individual retirement 
accountants (IRA's) the terms of which enforce a penalty, other than 
forfeiture of interest, for early withdrawal.

Simplified Definition of Income--7 CFR 273.9(c)

    Section 5(d) of the Act (7 U.S.C. 2014(d)) specifies types of 
income that State agencies must exclude from a household's income when 
determining the household's eligibility for the program and benefit 
levels. Section 4102 of FSRIA amends Section 5(d) to add three new 
categories of income that, at the option of the State agency, may also 
be excluded from household income. Under the amendment, State agencies 
may, at their option, exclude the following types of income:
    1. Educational loans on which payment is deferred, grants, 
scholarships, fellowships, veteran's educational benefits and the like 
that are required to be excluded under a State's Medicaid rules;
    2. State complementary assistance program payments excluded for the 
purpose of determining eligibility for medical assistance under section 
1931 of the Social Security Act; and
    3. Any types of income that the State agency does not consider when 
determining eligibility or benefits for TANF cash assistance or 
eligibility for medical assistance under section 1931.

[[Page 20743]]

However, a State agency may not exclude the following:
     Wages or salaries;
     Benefits under Titles I (Grants to States for 
Old-Age Assistance for the Aged), II (Federal Old Age, Survivors, and 
Disability Insurance Benefits), IV (Grants to States for Aid and 
Services to Needy Families with Children and for Child-Welfare 
Services), XIV (Grants to States for Aid to the Permanently and Totally 
Disabled) or XVI (Grants To States For Aid To The Aged, Blind, Or 
Disabled and Supplemental Security Income) of the Social Security Act 
(SSA);
     Regular payments from a government source (such 
as unemployment benefits and general assistance);
     Worker's compensation;
     Legally obligated child support payments made to 
the household; or
     Other types of income that are determined by the 
Secretary through regulations to be essential to equitable 
determinations of eligibility and benefit levels.
    The Department is proposing to amend current regulations at 7 CFR 
273.9(c) to permit exclusion of the new types of income at State agency 
option. Current regulations at 7 CFR 273.9(c)(3) already provide an 
exclusion for educational assistance including grants, scholarships, 
fellowships, and work-study. That exclusion (based on an exclusion 
provided at Section 5(d)(3) of the Act) is limited to educational 
assistance provided to a household member who is enrolled at a 
recognized institution of post-secondary education and that is used or 
earmarked for tuition or other allowable expenses. To the extent that a 
State's Medicaid rules require exclusion of additional educational 
assistance, i.e., educational assistance that would not be excludable 
under the current rules at 7 CFR 273.9(c)(3), the State agency has the 
option of excluding that additional assistance from income for food 
stamp purposes. Thus, the Department is proposing to amend 7 CFR 
273.9(c)(3) to state that, at a minimum, the State agency must exclude 
educational assistance provided to a household member who is enrolled 
at a recognized institution of post-secondary education and that is 
used or earmarked for tuition or other allowable expenses, and that at 
its option it may exclude any educational assistance required to be 
excluded under its State Medicaid rules that would not already be 
excluded under food stamp rules. State agencies that opt to exclude 
educational assistance that is excluded under Medicaid under this 
provision must include a statement in their State Plan to that effect, 
including a statement of the types of educational assistance that are 
being excluded under the provision.
    The Department is also proposing to add a new paragraph, 7 CFR 
273.9(c)(18), to provide for the exclusion, at State agency option, of 
any State complementary assistance program payments excluded for the 
purpose of determining eligibility for medical assistance under section 
1931 of the Social Security Act. Section 1931 grants Medicaid 
eligibility to families who meet the eligibility standards for the Aid 
to Families with Dependent Children (AFDC) program in effect in their 
State on July 16, 1996. Complementary assistance relates to certain 
types of assistance provided under the old AFDC program. The Department 
asks that State agencies, in their comments to this proposed rule, 
include examples of the types of payments which fall under the category 
of State complementary assistance program payments. State agencies that 
opt to exclude State complementary assistance program payments under 
this provision must include a statement in their State Plan to that 
effect, including a description of the types of payments that are being 
excluded under the provision.
    The Department is also proposing to add a new paragraph, 7 CFR 
273.9(c)(19), to allow the State agency at its option to exclude from 
income any types of income that the State agency does not consider when 
determining eligibility or benefits for TANF cash assistance or 
eligibility for medical assistance under section 1931. For the purposes 
of this proposed regulation, ``cash assistance under a program funded 
under part A of title IV of the Social Security Act'' means assistance 
as defined in the Temporary Assistance for Needy Families (TANF) 
regulations at 45 CFR 260.31(a)(1) and (2), except for programs grand-
fathered under Section 404(a)(2) of the Social Security Act. Under 45 
CFR 260.31(a)(1) and (2), ``assistance'' includes ``cash, payments, 
vouchers, and other forms of benefits designed to meet a family's 
ongoing basic needs (i.e., for food, clothing, shelter, utilities, 
household goods, personal care items, and general incidental expenses) 
* * * It includes such benefits even when they are provided in the form 
of payments by a TANF agency, or other agency on its behalf, to 
individual recipients, and conditioned on participation in work 
experience or community service (or any other work activity under Sec. 
261.30 * * *).'' Programs grand-fathered under Section 404(a)(2) of the 
Social Security Act include emergency foster care, the Job 
Opportunities and Basic Skills program and juvenile justice. We do not 
believe that these grand-fathered programs are what the Congress meant 
when it used the term ``cash assistance'' in the statute, even though 
they may involve a cash payment to a family.
    ``Medical assistance under Section 1931 of the Social Security 
Act'' means Medicaid for low-income families with children. This 
section, which was added by the Personal Responsibility and Work 
Opportunity Reconciliation Act of 1996 (Welfare Reform), allows low-
income families with children to qualify for Medicaid. It requires that 
States use the AFDC income and resource standards that were in effect 
in July 1996, but it also provides options for States to use less 
restrictive income and resources tests for these families.
    For the purposes of this regulation, the Department further 
proposes that the TANF cash assistance and Medicaid programs from which 
State agencies can adopt income exclusions for the Food Stamp Program 
exclude programs that do not evaluate the financial circumstances of 
adults in the household while determining eligibility and benefits. We 
believe that this proposal is in line with the types of State TANF and 
Medicaid programs Congress envisioned under this provision, and 
maintains state flexibility.
    Consistent with the requirements of Section 4102 of FSRIA, the 
State agency may not exclude wages or salaries, benefits under Titles 
I, II, IV, XIV or XVI of the SSA, regular payments from a government 
source, worker's compensation, or legally obligated child support 
payments made to the household. State agencies that opt to exclude any 
types of income under this provision must include a statement in their 
State Plan to that effect and describe the types of income being 
excluded.
    States have asked the Department for clarification on some of the 
types of income that must be counted under Section 4102. First, States 
have asked whether adoption or foster care payments made to a household 
must be counted as income if they are excluded for TANF or Medicaid 
purposes. Section 4102 specifically requires that benefits paid under 
Title IV of the SSA be counted as income for food stamp purposes. Title 
IV-E of the SSA authorizes federal payments for foster care and 
adoption assistance. Therefore, any benefits received by a food stamp 
household pursuant to a program

[[Page 20744]]

operated under Title IV-E must be counted as income to the household.
    Second, States have asked for additional examples of what 
constitutes regular payments from a government source. Section 4102 
offers two examples, unemployment and general assistance. The 
Department would also include in this category payments such as the 
Alaska Permanent Fund Dividend (PFD). The Alaska PFD is an annual 
payment to all Alaska residents based on oil revenues. The State has 
been making the payments since 1982. Because the State has been making 
the payments every year for the last 20 years, the Department believes 
that they must be considered as regular government payments under 
Section 4102 and, therefore, countable as household income for the Food 
Stamp Program. Another example of a regular payment from a government 
source that must be counted as income for food stamps even if excluded 
for TANF or Medicaid are VISTA payments made under Title I of the 
Domestic Volunteer Service Act of 1973. Finally, payments or allowances 
a household receives from an intermediary that are funded from a 
government source should also be counted as regular payments from a 
government source. For example, if a household is participating in an 
on-the-job training program and is being paid by an employer with funds 
provided by a Federal, State or local government, the State agency must 
count those payments as income for food stamp purposes even if they 
would be excluded under TANF or Medicaid. This requirement does not 
apply to payments which are excluded from income for the purposes of 
determining food stamp eligibility under another provision of law.
    Finally, several State agencies have asked the Department to define 
more fully the types of child support payments that must be counted as 
income under Section 4102. Section 4102 explicitly requires that 
legally obligated child support payments made to the households be 
counted as income. This requirement includes any portion of a 
household's child support payments that are passed-through to the 
household under the State's TANF program. State agencies have also 
asked whether voluntary child support payments, or payments that are 
not legally obligated, must be counted as income. In regard to 
voluntary child support payments, the Department does not believe that 
such payments should be treated more favorably than payments that are 
legally obligated. Therefore, the Department is proposing that all 
child support payments made to a household be counted as income for 
food stamp purposes. However, the Department notes that there may be 
circumstances in which voluntary child support payments are made 
infrequently or irregularly to the household, and reminds States 
agencies that infrequent and irregular income can be excludable under 
current regulations at 7 CFR 273.9(c)(2) if not in excess of $30 a 
quarter.
    Section 4102 also prohibits State agencies from excluding types of 
income determined by the Department through regulations to be essential 
to equitable determinations of eligibility and benefit levels. Using 
this authority, the Department is proposing to add several types of 
income to the list of non-excludable income. First, the Department is 
proposing to require State agencies to count gross income from a self-
employment enterprise. As noted above, Section 4102 requires State 
agencies to count wages or salaries for food stamp purpose even if 
these are excluded under TANF or Medicaid. The Department believes that 
self-employment income falls into the same category as wages or 
salaries. For the purposes of this provision, self-employment income 
includes the types of income described at 7 CFR 273.9(b)(ii), such as 
gain from the sale of any capital goods or equipment related to a 
business, income derived from a rental property when a household member 
is actively engaged in the management of the property for at least an 
average of 20 hours a week, and payments from a roomer or boarder. The 
Department is interested in hearing from States that exempt self-
employment income for TANF or Medicaid purposes on the standards they 
use in determining the types and amounts of self-employment income to 
disregard.
    Second, the Department is proposing to require State agencies to 
count annuities, pensions, retirement benefits, disability benefits, 
and old age or survivor benefits. These types of income, because they 
are regular payments, must be counted as income to the household under 
Section 4102 if they are paid by a government source. The Department 
does not believe that it is equitable to require that such income be 
counted when it is paid by a government source but excluded when paid 
by a private source.
    Third, the Department is also proposing that State agencies be 
required to count monies withdrawn or dividends received by a household 
from trust funds considered to be excludable resources under 7 CFR 
273.8(e)(8). The Department believes that trust fund disbursements may 
be of a significant amount and may be made on a regular basis to the 
household.
    Finally, the Department is proposing that State agencies be 
required to count support or alimony payments made directly to a 
household from nonhousehold members as income to the household. The 
Department believes that such payments should be treated similarly to 
child support payments which, as explained above, must be counted as 
income for food stamp purposes even if excluded for TANF or Medicaid 
purposes.
    This proposal affords State agencies flexibility to simplify and 
conform administration of the Food Stamp Program to TANF and Medicaid, 
while ensuring equitable determinations of eligibility and benefit 
levels within Food Stamps. The proposal identifies those types of 
income that we believe should be counted because they are likely to be 
a regular and significant source of income to the household. If a State 
agency wishes to comment in this area, please be specific about how 
including or excluding such income would affect the State in its 
administration of the multiple programs.
    The Department has received questions as to whether State agencies 
may use the authority provided under Sections 4109 of FSRIA to 
eliminate the requirement at 7 CFR 273.9(b)(3) to count the income of 
ineligible household members and the requirement at 7 CFR 273.9(b)(4) 
to deem sponsor income. State agencies must continue to follow these 
requirements. However, in determining the income of an ineligible 
household member or sponsor that should be counted as available to the 
household, State agencies must apply the income exclusion rules at 7 
CFR 273.9 which, as proposed in this rule, provide State agencies the 
option to exclude some types of income that are excluded for TANF or 
Medicaid. For example, if a household contains a sponsored alien, the 
State agency must deem the income and resources of the sponsor to the 
household in accordance with 7 CFR 273.4(c)(2) and 273.9(b)(4). 
However, if the State agency has chosen in accordance with proposed new 
paragraph 7 CFR 273.9(c)(19) to exclude for food stamp purposes a type 
of income excluded for TANF or Medicaid, and the alien's sponsor 
receives that income, the State agency would not include that income 
when determining what income to deem to the sponsored alien's 
household.

[[Page 20745]]

Child Support Payments--7 CFR 273.9(c) and (d)

1. State Option To Treat Child Support Payments as an Income Exclusion 
or Deduction

    To be eligible to participate in the Food Stamp Program, an 
applicant household that does not contain an elderly or disabled member 
must have a gross monthly income that is equal to or below the 
program's monthly gross income limit for the household's size. A 
household's gross monthly income for food stamp purposes is all income 
received by the household for the month from whatever source except 
certain types of income that are excluded under food stamp regulations 
at 7 CFR 273.9(c). Excluded income is subtracted from the household's 
monthly gross income before that income is compared against the 
program's gross income limit.
    In addition to meeting the monthly gross income limit, all 
applicant households must also satisfy a monthly net income limit. An 
applicant household must have a net income that is equal to or below 
the program's monthly net income limit for the household's size. A 
household's monthly net income is its monthly gross income (i.e., 
income after exclusions) minus any of the program's income deductions 
for which the household is eligible. The Food Stamp Program currently 
provides households with seven income deductions: (1) A standard 
deduction (which is provided to all food stamp households); (2) an 
earned income deduction equal to 20 percent of the household's gross 
earned income; (3) a medical deduction for expenses over $35 a month 
for elderly or disabled household members; (4) up to a certain limit, a 
dependent care deduction for the actual costs the household must pay 
for the care of children or other dependents while household members 
are seeking or maintaining employment or while they are participating 
in education or training programs; (5) the costs for shelter which 
exceed 50 percent of income after other deductions (limited for 
households without an elderly or disabled member); (6) an optional 
shelter deduction for homeless households; and (7) a deduction for 
legally owed child support payments.
    Current rules at 7 CFR 273.9(d)(5) provide households with a 
deduction from income for legally obligated child support payments paid 
by a household member to or for a nonhousehold member, including vendor 
payments made on behalf of the nonhousehold member. Section 4101 of 
FSRIA amended the Act regarding child support payments by treating 
legally obligated child support payments made to nonhousehold members 
as excluded income but offering State agencies the option to continue 
to treat the payments as an income deduction rather than an exclusion. 
Section 4101 amends Section 5(d) of the Act (7 U.S.C. 2014(d)) to add 
legally obligated child support payments made by a household member to 
a nonhousehold member to the list of income exclusions. It also amends 
Section 5(e) by removing existing paragraph (4), which established the 
child support deduction, and inserting a new paragraph (4) giving State 
agencies the option of treating child support payments as an income 
deduction rather than as an exclusion.
    In order to implement Section 4101 of FSRIA, the Department is 
proposing to amend 7 CFR 273.9 to add a new paragraph (c)(17) which 
will provide that legally obligated child support payments are excluded 
from household income. The paragraph will also provide that State 
agencies have the option of treating child support payments as an 
income deduction rather than an income exclusion, and will include a 
reference to 7 CFR 273.9(d)(5), which contains existing requirements 
for the child support deduction. That section will be amended to 
reference new 7 CFR 273.9(c)(17), and will provide that if the State 
agency chooses not to exclude legally obligated child support payments 
from household income, then it must provide eligible households with an 
income deduction for those payments. Section 273.9(d)(5) will be 
further amended to require States agencies that choose to provide a 
deduction rather than an exclusion to include a statement to that 
effect in their State plan of operation.
    Child support payments that qualify under existing regulations for 
the income deduction will also qualify for the income exclusion. Under 
current regulations at 7 CFR 273.9(d)(5), a household can receive a 
deduction only for legally obligated child support payments paid by a 
household member to or for a nonhousehold member, including payments 
made to a third party on behalf of the nonhousehold member (vendor 
payments). No deduction is allowed for any amounts the household member 
is not legally obligated to pay. State agencies, in consultation with 
the State IV-D agency, may determine what constitutes a legal 
obligation to pay child support under State law. A deduction is also 
allowed for amounts paid toward child support arrearages. For more 
information on what qualifies as a child support payment for purposes 
of the income deduction (and now exclusion), interested parties should 
refer to the final rule implementing the child support deduction, 
published on October 17, 1996, at 61 FR 54282.
    State agencies should note that if they provide households an 
exclusion for legally obligated child support payments rather than a 
deduction, households reap the benefit of both. The exclusion would 
cause the household to have a lower gross income, making it more likely 
that the household would meet the program's monthly gross income limit 
and, therefore, making it more likely that the household would be 
eligible for the program. In addition, the excluded payments would not 
be counted as part of the household's net income, in effect deducting 
the payments from income.

2. Order of Determining Deductions

    Current rules at 7 CFR 273.10(e)(1) specify the order in which 
State agencies must subtract deductions from income when calculating a 
household's net income. Under the rules, the order of subtraction is as 
follows: First, the 20 percent earned income deduction; second, the 
standard deduction; third, the excess medical deduction; fourth, 
dependent care deductions; fifth, the child support deduction; and 
finally the excess shelter deduction (or homeless shelter deduction for 
homeless households). The excess shelter deduction is subtracted last 
because, pursuant to Section 5(e)(6) of the Act (7 U.S.C. 2014(e)(6)), 
households are entitled to a deduction for monthly shelter costs that 
exceed 50 percent of their monthly income after all other program 
deductions have been allowed.
    Section 4101 of FSRIA requires that if the State agency opts to 
provide households a deduction for legally obligated child support 
payments rather than an exclusion, the deduction be determined before 
computation of the excess shelter deduction. As noted in the previous 
paragraph, current rules already require that the child support 
deduction be subtracted from a household's income before the excess 
shelter deduction is computed. The Department is proposing to make only 
a minor change to current rules at 7 CFR 273.10(e)(1)(i)(F) to indicate 
that treating legally obligated child support payments as a deduction 
is a State option.
    Several State agencies have asked the Department how a household's 
earned income deduction should be computed if the State agency grants 
an income exclusion for child support payments rather than a deduction. 
Under current

[[Page 20746]]

rules at 7 CFR 273.9(d)(2), the earned income deduction is equal to 20 
percent of the household's gross earned income. Child support payments 
that are excluded from income are subtracted from the household's gross 
income. Thus, under current rules, if the State agency provides the 
household an income exclusion for child support payments, earned income 
used to make child support payments will not be part of the household's 
gross income when the State agency calculates the earned income 
deduction.
    The Department believes the simplest way to address this problem is 
to amend current rules at 7 CFR 273.9(d)(2) and 273.10(e)(1)(i)(B) to 
specify that in determining the earned income deduction, the State 
agency must count any earnings used to pay child support that were 
excluded from the household's income in accordance with the child 
support exclusion at 7 CFR 273.9(c)(17). The Department welcomes 
suggestions from interested parties as to other methods for ensuring 
that households receive the full earned income deduction when they 
receive an income exclusion for child support payments.

3. State Option To Simplify Determination of Child Support Payments

    Current rules at 7 CFR 273.2(f)(1)(xii) require the State agency to 
verify, prior to a household's initial certification, the household's 
legal obligation to pay child support, the amount of the obligation, 
and the monthly amount of child support the household actually pays. 
The rules strongly encourage the State agency to obtain information 
regarding a household member's child support obligation and payments 
from Child Support Enforcement (CSE) agency automated data files.
    Section 4101 of FSRIA amended Section 5 of the Act (7 U.S.C. 2014) 
to add a new paragraph (n) that directs the Department to establish 
simplified procedures that State agencies, at their option, can use to 
determine the amount of child support paid by a household, including 
procedures to allow the State agency to rely on information collected 
by the State's CSE agency concerning payments made in prior months in 
lieu of obtaining current information from the household.
    To implement Section 4101, the Department is proposing to amend 
current rules at 7 CFR 273.2(f)(1)(xii) to permit State agencies, in 
determining a household's legal obligation to pay child support, the 
amount of its obligation, and amounts the household has actually paid, 
to rely solely on information provided through its State's CSE agency 
and not require further reporting or verification by the household. 
This option would only be available in the cases of households that pay 
their child support through their state CSE agency. In order to allow 
the State's CSE agency to share information with the Food Stamp 
Program, State agencies following this procedure must require 
households eligible for the exclusion or deduction to sign a statement 
authorizing release of the household's child support payment records to 
the State agency. State agencies that chose this option must include a 
statement indicating that they have implemented the option in their 
state plan of operation.
    The Department is also proposing to make conforming amendments to 7 
CFR 273.2(f)(8)(i)(A), 7 CFR 273.12(a)(1)(vi) and (a)(4). The 
Department is not proposing any changes to the monthly reporting and 
retrospective budgeting rules at 7 CFR 273.21 because under 7 CFR 
273.21(h) and (i) the State agency may determine what information must 
be reported on the monthly report and what information must be 
verified.
    The Department would like to hear from State agencies interested in 
implementing this proposal whether there are any additional issues that 
the Department needs to address by regulation in order to make this an 
effective option for States. The Department also welcomes suggestions 
from interested parties as to other simplified methods State agencies 
could employ to determine the amount of legally obligated child support 
payments made by households.

Standard Deduction--7 CFR 273.9(d)(1)

    As noted above, a household's net income for food stamp purposes is 
its nonexcluded gross income minus any deductions for which the 
household is eligible. Section 5(e) of the Act (7 U.S.C. 2014(e)) lists 
the six allowable deductions. Section 5(e)(1) requires that the 
Department provide all households with a standard deduction. Formerly, 
Section 5(e)(1) set the standard deduction for the 48 contiguous States 
and the District of Columbia, Alaska, Hawaii, Guam, and the Virgin 
Islands of the United States at $134, $229, $189, $269, and $118, 
respectively. All households residing in one of the five geographic 
areas received the same standard deduction, regardless of household 
size. The standard deduction amounts were fixed and were not subject to 
any cost-of-living adjustment. Current rules at 7 CFR 273.9(d)(1) 
reflect these requirements.
    Section 4103 of FSRIA amended section 5(e)(1) of the Act to replace 
the fixed standard deduction with one that is adjusted annually and 
that also varies by household size. Under the new provision, each 
household applying for or receiving food stamps in the 48 contiguous 
States, the District of Columbia, Hawaii, Alaska, and the U.S. Virgin 
Islands will receive a standard deduction that is equal to 8.31 percent 
of the Food Stamp Program's monthly net income limit for its household 
size, except for household sizes greater than six, which will receive 
the same standard deduction as a six person household. Section 4103 
also requires that the standard deduction for any household not fall 
below the standard deduction in effect in FY 2002. As noted previously, 
the standard deductions in effect for FY 2002 for the 48 contiguous 
States and the District of Columbia, Alaska, Hawaii, Guam, and the 
Virgin Islands of the United States were $134, $229, $189, $269, and 
$118, respectively.
    To implement Section 4103, the Department will adjust the standard 
deduction every October 1 by multiplying the Food Stamp Program's 
monthly net income limits for household sizes one through six for the 
48 contiguous States and the District of Columbia, Alaska, Hawaii, and 
the U.S. Virgin Islands by .0831, and rounding the result to the 
nearest whole dollar (i.e., if .5 or higher, round up; if .49 or lower, 
round down). If the result is less than the FY 2002 standard deduction 
for any household size, that household size will receive the standard 
deduction in effect in FY 2002 for its geographic area.
    The following chart illustrates how the standard deduction for FY 
2003 was calculated for the 48 States and the District of Columbia. The 
same procedure was used to calculate the standard deductions for 
Hawaii, Alaska and the U.S. Virgin Islands.

[[Page 20747]]

[GRAPHIC] [TIFF OMITTED] TP16AP04.004

    Section 4103 requires that for Guam, the standard deduction for 
household sizes one to six be equal to two times the monthly net income 
standard times 8.31 percent. Households with more than six members must 
receive the same standard deduction as a six-person household. Section 
4103 also requires that the standard deduction for any household in 
Guam not fall below the standard deduction in effect in FY 2002. The 
following chart illustrates how the standard deductions for Guam for FY 
2003 were calculated:

[[Page 20748]]

[GRAPHIC] [TIFF OMITTED] TP16AP04.005

    The Department is proposing to amend current regulations at 7 CFR 
273.9(d)(1) to reflect the new statutory requirements relating to the 
standard deduction discussed above. The Department will announce the 
adjusted standard deduction amounts annually, at the same time it 
announces the annual adjustments to the program's monthly gross and net 
income eligibility standards and the maximum allotments. Currently, the 
Department transmits the annual adjustments by memorandum to State 
agencies--customarily in August. The Department also posts the new 
numbers on the FNS Web site at www.fns.usda.gov/fsp shortly after 
officially notifying State agencies.
    Because the standard deduction received by food stamp households 
now varies by household size, State agencies have asked the Department 
whether, in establishing a household's size, it should count ineligible 
and disqualified members as members of the household. Under current 
rules at 7 CFR 273.11(c), ineligible and disqualified members are not 
included when determining the household's size for the purpose of 
assigning a benefit level to the household, comparing the household's 
monthly income with the income eligibility standards, or comparing the 
household's resources with the resource eligibility limits. The 
Department proposes that ineligible and disqualified members also not 
be included when determining the household's size for the purpose of 
assigning a standard deduction to the household. The Department 
proposes to amend current rules at 7 CFR 273.11(c)(1)(ii) and 
(c)(2)(iv) to reflect this new requirement.

Simplified Determination of Housing Costs--7 CFR 273.9(d)(6)(i)

    Current rules at 7 CFR 273.9(d)(6)(i) provide that State agencies 
may develop a homeless household shelter deduction to be used in place 
of the excess shelter deduction in determining the net income of 
homeless households. Under the rules, State agencies may set the 
homeless household shelter deduction at any amount up to a maximum of 
$143 a month. State agencies may provide the deduction to a household 
in which all members are homeless and which is not receiving free 
shelter throughout the month. However, State agencies may make 
households with extremely low shelter costs ineligible for the 
deduction. Households receiving the homeless household shelter 
deduction cannot also receive an excess shelter expense deduction; 
however, homeless households with actual shelter expenses that exceed 
their State's homeless household shelter deduction can opt to receive 
the excess shelter deduction instead of the homeless household shelter 
deduction if their actual shelter costs are verified.
    Section 4105 of FSRIA amended Section 5(e) of the Act (7 U.S.C. 
2014(e)) to grant State agencies the option of providing homeless 
households with a monthly shelter deduction of $143 in lieu of 
providing them an excess shelter deduction. State agencies may provide 
the deduction to a household in which all members are homeless and 
which is not receiving free shelter throughout the month. However, 
State agencies may make households with extremely low shelter costs 
ineligible for the deduction.

[[Page 20749]]

    Current regulations at 7 CFR 273.9(d)(6)(i) already reflect most of 
the requirements of Section 4105 of FSRIA. The only difference between 
the current rules and the requirements of Section 4105 is that current 
rules permit State agencies to develop their own homeless household 
shelter deduction up to a maximum of $143 a month, whereas Section 4105 
mandates that the homeless household shelter deduction be $143 a month. 
The Department is proposing to amend regulations at 7 CFR 
273.9(d)(6)(i) to require State agencies that choose to provide a 
homeless household shelter deduction to set the deduction at $143 a 
month. The Department is also proposing to amend those regulations to 
require State agencies that implement the homeless household shelter 
deduction to include a statement indicating that they have implemented 
the option in their state plan of operation. The Department is also 
proposing to make a conforming amendment to regulations at 7 CFR 
273.10(e)(1)(i)(G).
    Although Section 4105 only addresses the homeless household shelter 
deduction, the Conference Report, in its discussion of Section 4105, 
directs the Department to ``review current rules governing allowable 
shelter costs and their implementation and identify any means, within 
existing authority, to modify or communicate these rules in a manner 
that makes the determination of eligible shelter costs less complicated 
and error prone for food stamp participants and eligibility workers.'' 
H.R. Conf. Rep. No. 107-424, at 537-538 (2002).
    The Department routinely reviews the program's policy and 
regulations in an effort to simplify procedures for State agencies and 
recipients. In recent years, the Department has issued several policy 
changes relating to shelter costs, including reinterpreting 7 CFR 
273.9(d)(6)(ii) to allow condominium fees to be counted as deductible 
shelter costs, and rescinding a longstanding policy memo to eliminate 
reporting of changes in rent that are caused by changes in vendor 
payments.
    In order that we may better respond to the directive contained in 
the Conference Report, the Department is asking for assistance from 
State agencies and other interested parties in identifying ways to 
further simplify existing procedures for determining allowable shelter 
expenses. Interested persons should send their comments to the address 
noted at the beginning of this document. Suggestions will be addressed 
in the final version of this rule.

Simplified Standard Utility Allowance--7 CFR 273.9(d)(6)(iii)

    Current rules at 7 CFR 273.9(d)(6)(iii) provide State agencies the 
option of developing standard utility allowances (SUA) to be used in 
place of a household's actual utility costs when determining the 
household's excess shelter expenses deduction. State agencies may 
develop an SUA for any allowable utility expense listed in the 
regulations at 7 CFR 273.9(d)(6)(ii)(C). Allowable utility expenses 
listed in that section include the costs of heating and cooling; 
electricity or fuel used for purposes other than heating or cooling; 
water; sewerage; well and septic tank installation and maintenance; 
garbage collection; and telephone. State agencies may establish 
separate SUAs for each utility, an SUA that includes expenses for all 
allowable utilities including heating or cooling costs, and a limited 
utility allowance (LUA) which includes expenses for at least two 
allowable utility costs. The LUA may not include heating or cooling 
costs, except that if the State agency is offering the LUA to public 
housing residents it may include excess heating or cooling costs 
incurred by such residents.
    The current rules at 7 CFR 273.9(d)(6)(iii) implement Section 
5(e)(7)(C) of the Act (7 U.S.C. 2014(e)(7)(c)), which generally leaves 
it to the Department to develop regulations relating to SUAs. Section 
5(e)(7)(c), however, does impose certain requirements on the use of 
SUAs. Among those requirements, the Act prohibits State agencies from 
providing an SUA that includes heating or cooling costs to households 
residing in public housing units which have central utility meters and 
which charge the households only for excess heating or cooling costs. 
The Act also requires that an SUA which includes heating or cooling 
costs be prorated if the household eligible for the SUA lives with and 
shares heating or cooling expenses with an individual not participating 
in the Food Stamp Program, or a household that is participating in the 
Program, or both. The Act also permits the State agency to mandate use 
of an SUA for households that incur the expenses included in the SUA if 
the State agency has developed one or more SUAs which include the costs 
of heating and cooling and one or more SUAs which do not include either 
cost, and the SUAs do not increase program costs. The Department has 
incorporated all of these requirements into current regulations. The 
prohibition on providing SUAs which include heating or cooling costs to 
residents of certain public housing units is at 7 CFR 
273.9(d)(6)(iii)(C) and (d)(6)(iii)(E); the requirement to prorate an 
SUA which includes heating or cooling costs when the eligible household 
lives and shares heating or cooling expenses with others is at 7 CFR 
273. 9(d)(6)(iii)(F); and the rules for mandating use of an SUA are at 
7 CFR 273.9(d)(6)(iii)(E).
    Section 4104 of FSRIA amends Section 5(e)(7)(C) of the Act to 
simplify current rules relating to the SUA when the State agency elects 
to make the SUA mandatory. First, Section 4104 allows State agencies 
that elect to make the SUA mandatory to provide an SUA that includes 
heating or cooling costs to residents of public housing units which 
have central utility meters and which charge the households only for 
excess heating or cooling costs. Second, it eliminates the current 
requirement to prorate the SUA when a household shares living quarters 
with others. Therefore, if the State agency mandates use of SUAs, a 
household eligible for an SUA that includes heating or cooling costs 
and lives and shares heating or cooling expenses with others must 
receive the full SUA.
    As noted above, Section 5(e)(7)(C)(iii) requires that mandatory 
SUAs not increase the cost of the Food Stamp Program. Section 4104 of 
FSRIA further amends Section 5(e)(7)(C) to provide that in determining 
if a State agency's mandatory SUAs are cost neutral, the Department not 
count any increase in cost that is due to providing an SUA that 
includes heating or cooling costs to residents of certain public 
housing units or to eliminating proration of the SUA for a household 
that shares living quarters and expenses with others.
    The Department is proposing to amend current regulations at 7 CFR 
273.9(d)(6)(iii) to incorporate the new requirements. The Department is 
further amending the regulations to require State agencies that opt to 
implement a mandatory SUA to include a statement to that effect in 
their state plan of operation.
    The Department is taking the opportunity to address two SUA-related 
issues in this proposed rule. First, the Department is proposing a 
technical correction to the title of 7 CFR 273.9(d)(6). The title to 
the section was inadvertently changed in the NCEP final rule from 
``shelter costs'' to ``standard utility allowance.'' The Department is 
proposing to amend 7 CFR 273.9(d)(6) to restore the proper title.
    Second, the Department wishes to resolve a confusion relating to 
prorating the SUA when ineligible members are present in the household. 
Under current regulations at 7 CFR 273.9(d)(6)(iii)(F),

[[Page 20750]]

the State agency may not prorate the SUA if all the individuals who 
share utility expenses but are not in the food stamp household are 
excluded from the household only because they are ineligible. The 
Department's intent under this regulation was that households with 
ineligible members always receive the full SUA.
    Current regulations at 7 CFR 273.11(c)(2)(iii) also contain 
requirements for prorating deductible expenses in households that 
contain certain types of ineligible members. Under those regulations, 
the State agency must prorate a household's allowable child support 
payment, shelter and dependent care expenses if they are paid by or 
billed to an ineligible member.
    Because the SUA is a component of shelter costs, State agencies 
have interpreted both sets of regulations as applying to the SUA. 
However, on their face, the regulations appear to conflict. The 
regulations at 7 CFR 273.9(d)(6)(iii)(F) prohibit proration of the SUA 
when the household shares the expenses with an ineligible household 
member. However, the regulations at 7 CFR 273.11(c)(2)(iii) require 
proration of shelter expenses if the ineligible member is billed for or 
pays the expense. As a result, State agencies have been following 
different procedures in regard to prorating the SUA when the household 
includes an ineligible member, some prorating the SUA and some not.
    The Department's intent is that when eligible household members 
share utility costs with ineligible members, and the household elects 
to use the SUA, the eligible household must receive the entire (as 
opposed to a prorated) SUA, regardless of who pays or is billed for the 
expenses included in the SUA. The Department understands, however, that 
states have adopted different policies and, therefore, we are not 
proposing any particular procedure in this rule but are suggesting two 
alternative procedures and asking interested parties to comment on 
which procedure they prefer. The Department intends to incorporate into 
the final rule the procedure that gets the most support from 
commenters. First, State agencies would implement the Department's 
original intention and not prorate the SUA when a household contains an 
ineligible member. Alternatively, State agencies would be required to 
prorate the SUA when the ineligible member pays either part or all of 
the expenses included in the SUA. Under this latter option, the 
household would be entitled to the full SUA if the expenses were paid 
in their entirety by eligible household members, even if they were 
billed to the ineligible member.

State Option To Reduce Reporting Requirements--7 CFR 273.12(a)(1)(vii)

1. Current Rules on Reporting Requirements

    The Act requires households certified for food stamps to report 
certain changes in their circumstances that occur during their 
certification periods. Section 6(c)(1)(A) of the Act (7 U.S.C. 
2015(c)(1)(A)) permits State agencies to require households to report 
their income and circumstances on a periodic basis. The Act prohibits 
periodic reporting by (1) migrant or seasonal farmworker households, 
(2) households in which all members are homeless individuals, or (3) 
households that have no earned income and in which all adult members 
are elderly or disabled. It also prohibits periodic reporting on a 
monthly basis by households residing on Indian reservations if there 
was no monthly reporting system in operation on the Indian reservation 
on March 25, 1994. Section 6(c)(1)(B) of the Act provides that 
households not required to file periodic reports on a monthly basis 
must report changes in income or household circumstances in accordance 
with regulations issued by the Department.
    Current regulations at 7 CFR 273.12(a)(1) require certified 
households which are not required to file monthly or quarterly reports 
to report the following changes in circumstances:
     Changes of more than $50 in the amount of 
unearned income, except changes related to public assistance or general 
assistance in project areas in which GA and food stamp cases are 
jointly processed;
     Changes in the source of income, including 
starting or stopping a job or changing jobs, if the change in 
employment is accompanied by a change in income;
     Change in either the wage rate or salary or a 
change in full-time or part-time employment status, or a change in the 
amount earned of more than $100;
     Changes in household composition, such as the 
addition or loss of a household member;
     Changes in residence and the resulting change in 
shelter costs;
     The acquisition of a licensed vehicle not fully 
excludable as a resource;
     When cash on hand, stocks, bonds, and money in a 
bank account or savings institution reach or exceed a total of $2,000 
($3,000 if the household contains at least one person who is 60 years 
of age or older or disabled);
     Changes in the legal obligation to pay child 
support; and
     For able-bodied adults subject to the food stamp 
time limit, changes in work hours that bring an individual below 20 
hours per week, averaged monthly.
    Current regulations at 7 CFR 273.12(a)(1)(vii) permit State 
agencies to simplify reporting requirements for households with earned 
income who are assigned certification periods of 6 months or longer. 
State agencies may require such households to report only changes in 
income that result in their gross monthly income exceeding 130 percent 
of the monthly poverty income guideline (i.e., the program's monthly 
gross income limit) for their household size. If the State agency 
selects this option, it cannot require households certified for 6 
months to report changes in circumstances in accordance with 7 CFR 
273.12(a)(1) (except in the case of individuals subject to the food 
stamp time limit under 7 CFR 273.24, who must continue to report 
changes in work hours that bring them below 20 hours per week, averaged 
monthly). Households with earned income certified for longer than 6 
months must submit an interim report at 6 months that includes all of 
the items subject to reporting under paragraph (a)(1)(i) through 
(a)(1)(vi). During the six-month reporting period, the State agency 
must act on changes reported by the household that increase benefits in 
accordance with 7 CFR 273.12(c) and on changes in public assistance 
(PA) and general assistance (GA) grants and other sources that are 
considered verified upon receipt by the State agency.
    Current regulations at 7 CFR 273.12(a)(2) require that certified 
households report changes within 10 days of the date the changes become 
known to the household. For reportable changes of income, the State 
agency may require that change to be reported as early as within 10 
days of the date that the household becomes aware of the change or as 
late as within 10 days of the date that the household receives the 
first payment attributable to the change. For households subject to 
simplified reporting, the household must report changes no later than 
10 days from the end of the calendar month in which the change 
occurred, provided that the household has at least 10 days within which 
to report the change.

2. FSRIA Changes

    Section 4109 of FSRIA amends Section 6(c)(1) of the Act to provide 
State agencies the option to extend simplified reporting procedures 
from just households with earnings to all

[[Page 20751]]

food stamp households. In addition, Section 4109 amends Section 6(c)(1) 
to provide that State agencies may require households that submit 
periodic reports in lieu of change reporting to submit such reports 
once every month up to once every six months. Households which are 
required to report less often than quarterly (i.e., those required to 
report at 4-month, 5-month, or 6-month intervals) must report, in a 
manner prescribed by the Department, when their income for any month 
exceeds the program's monthly gross income limit for their household 
size.

3. Proposed Revisions to Reporting Requirements

    The Department is proposing to move current regulations on 
simplified reporting from 7 CFR 273.12(a)(1)(vii) to 7 CFR 
273.12(a)(5). The Department is proposing to amend current rules to 
include the following requirements:
     The State agency may include any household 
certified for at least 4 months within a simplified reporting system 
except households subject to monthly reporting under 7 CFR 273.21 or 
quarterly reporting under 7 CFR 273.12(a)(4). The statute does not 
provide the Department authority to apply simplified reporting to 
households certified for less than 4 months.
     Households exempt from periodic reporting under 
Section 6(c)(1)(A), which includes homeless households and migrant and 
seasonal farm workers, may be subject to simplified reporting but may 
not be required to submit periodic reports. The certification periods 
of such households must be at least 4 months but not more than 6 
months. While it is technically possible for State agencies to use 
simplified reporting for elderly and disabled households with no earned 
income, the Department strongly discourages this practice. Under 
current regulations, these households are eligible for certification 
periods up to 24 months long. Under simplified reporting, they would 
have to be recertified at least every six months because these 
households cannot be required to submit periodic reports. Because these 
households rarely experience changes in their circumstances, imposing 
more frequent recertifications would increase their burden while 
providing little, if any, benefit to the States or the Federal 
government. The State agency may require other households subject to 
simplified reporting to submit periodic reports on their circumstances 
from once every 4 months up to once every 6 months.
     The State agency does not have to require 
periodic reporting by any household certified for 6 months or less. 
However, households certified for more than 6 months must submit a 
periodic report at least every 6 months.
     Households subject to simplified reporting must 
report when their monthly gross income exceeds the monthly gross income 
limit for their household size.
     Households will be required to report only if 
their income exceeds the monthly gross income limit for the household 
size that existed at the time of the household's most recent 
certification or recertification. The Department recognizes that a 
household's size may change during the certification period, but we 
believe it will be simpler for households to follow the reporting 
requirement if they make their decision whether or not to report based 
on the household size and income threshold provided to them at their 
most recent certification or recertification. Requiring the household 
to independently determine household size and the corresponding income 
threshold will likely be confusing for the household and error prone 
for the State agency.
     The periodic report form must request from the 
household information on any of the changes in circumstances listed at 
7 CFR 273.12(a)(1)(i) through (a)(1)(vii).
     The periodic report form must be the sole 
reporting requirement for any information that is required to be 
reported on the form, except that households must report when their 
monthly gross income exceeds the monthly gross income limit for its 
household size and able-bodied adults subject to the time limit of 
Sec.  273.24 must report whenever their work hours fall below 20 hours 
per week, averaged monthly.
     The State agency has two options for acting on 
changes in household circumstances reported outside the periodic report 
(other than changes in monthly gross income that exceed the monthly 
gross income limit for the household's size). First, the State agency 
may follow current procedures at 7 CFR 273.12(a)(1)(vii)(A). Those 
rules generally require that the State agency only act on changes that 
a household reports outside its periodic report if the changes would 
increase the household's benefits. Other than increases in income that 
result in income exceeding the monthly gross income limit, the State 
agency may only act on changes that would decrease benefits if the 
change, reported by the household or by another source, is verified 
upon receipt or is a change in the household's PA or GA grant. Second, 
the State agency may act on all reported client changes, regardless of 
whether such changes increase or decrease the household's benefits. 
Following implementation of simplified reporting in the NCEP final 
rule, the Department approved a number of waivers requesting this later 
procedure. To eliminate the need to approve future waivers, the 
Department is proposing to incorporate the procedure as an option in 
the regulations.
     The Department is also proposing that State 
agencies that choose to act on all reported changes not be required to 
act on changes a household reports for another public assistance 
program when the change does not trigger action in that other program 
but would decrease the household's food stamp benefit. For example, if 
a household receiving Medicaid as well as food stamps reports an 
increase in income to its Medicaid office that it is not required to 
report for food stamp purposes (i.e., the income does not push the 
household over the monthly gross income limit for its household size), 
the State agency would not have to reduce the household's food stamp 
benefit if the income change would not trigger a change in the 
household's Medicaid eligibility or benefits. This provision is 
intended to relieve State agencies that choose to act on all reported 
changes from the burden of acting on reports required by another public 
assistance program that do not trigger action in that other program and 
would not increase the household's food stamp benefit.
     A State agency that opts to utilize simplified 
reporting procedures must include in its state plan of operation a 
statement that it has implemented the option and a description of the 
types of households to whom the option applies.
    Current rules at 7 CFR 273.12(a)(1)(vii) do not address the 
procedures the State agency should follow if the household fails to 
submit a complete periodic report or if it submits a complete report 
that results in a reduction or termination of benefits. The Department 
is proposing that under such circumstances the State agency follow the 
same procedures used for quarterly reporting at 7 CFR 
273.12(a)(4)(iii). Under the quarterly reporting requirements, if a 
household fails to file a complete report by the specified filing date, 
the State agency sends a notice to the household advising it of the 
missing or incomplete report no later than 10 days from the date the 
report should have been submitted. If the household does not respond to 
the notice, the household's participation is

[[Page 20752]]

terminated. If the household files a complete report resulting in 
reduction or termination of benefits, the State agency shall send an 
adequate notice, as defined in 7 CFR 271.2. The notice must be issued 
so that the household will receive it no later than the time that its 
benefits are normally received. If the household fails to provide 
sufficient information or verification regarding a deductible expense, 
the State agency will not terminate the household, but will instead 
determine the household's benefits without regard to the deduction.
    The Department is also proposing that periodic reports be subject 
to the requirements at 7 CFR 273.12(b)(2), which currently apply only 
to quarterly reports. Section 273.12(b)(2) requires that quarterly 
reports be written in clear, simple language, and meet the program's 
bilingual requirements described in 7 CFR 272.4(b). It also requires 
that the quarterly report form specify the date by which the State 
agency must receive the form and the consequences of submitting a late 
or incomplete form; the verification the household must submit with the 
form; where the household can call for help in completing the form; and 
that it include a statement to be signed by a member of the household 
indicating his or her understanding that the information provided may 
result in reduction or termination of benefits.

Simplified Determination of Deductions--7 CFR 273.12(c)

    Current rules at 7 CFR 273.9(d) provide households with seven 
income deductions: (1) A standard deduction (which is provided to all 
food stamp households); (2) an earned income deduction equal to 20 
percent of the household's gross earned income; (3) a medical deduction 
for expenses over $35 a month for elderly or disabled household 
members; (4) up to a certain limit, a dependent care deduction for the 
actual costs the household must pay for the care of children or other 
dependents while household members are seeking or maintaining 
employment or while they are participating in education or training 
programs; (5) the costs for shelter which exceed 50 percent of income 
after other deductions (limited for households without an elderly or 
disabled member); (6) an optional shelter deduction for homeless 
households; and (7) a deduction for legally owed child support 
payments. As explained above, deductions are subtracted from a 
household's nonexcluded monthly gross income to determine its monthly 
net income.
    A household's eligibility for and amount of a deduction are 
established at the household's certification. As previously discussed 
in the Department's proposals amending 7 CFR 273.12(a), food stamp 
rules currently require a participating household to report certain 
changes in circumstances that occur during the certification period. 
Some of the changes that must be reported may affect a household's 
deductions.
    Under change reporting rules at 7 CFR 273.12(a)(1)(i), households 
may be required to report when their earned income changes by more than 
$100 in a given month. A change in the household's earned income can 
affect several deductions. It will have a direct effect on the 
household's earned income deduction. It may also affect the computation 
of a household's excess shelter deduction because the amount of the 
deduction is dependent on the household's gross income. Under 7 CFR 
273.12(a)(1)(ii), households must report changes in composition which 
can affect the dependent care deduction and, as discussed in a previous 
section of this rule, may now affect the household's standard 
deduction. Under 7 CFR 273.12(a)(1)(iii), households must report 
changes in residence and the resulting changes in shelter costs, which 
may affect a household's excess shelter deduction. Finally, under 7 CFR 
273.12(a)(1)(vi), households must report changes in the legal 
obligation to pay child support, which may affect the household's child 
support deduction. In accordance with rules at 7 CFR 273.10(d)(4), 
households eligible for the medical expense deduction are not required 
to file reports about their medical expenses during the certification 
period.
    Under current rules on quarterly reporting at 7 CFR 273.12(a)(4) 
and simplified reporting at 7 CFR 273.12(a)(1)(vi), households must 
report on the items specified in 7 CFR 273.12(a)(1) through periodic 
reports. Under Monthly Reporting and Retrospective Budgeting (MRRB) 
rules at 7 CFR 273.21, the State agency may specify the household 
circumstances to be reported monthly. The State agency can require 
households subject to MRRB to report information over and above what is 
required under 7 CFR 273.12(a)(1). For example, a State agency could 
require monthly reporting of changes in alien status, shelter and 
utility expenses, and the actual amount of child support payments. In 
addition to mandatory reporting requirements under the regulations, 
recipient households may voluntarily report changes in the amount of 
deductible expenses during the certification period.
    Current rules at 7 CFR 273.12(c) specify the action that the State 
agency must take on changes in household circumstances reported during 
the certification period. The rules require the State agency to take 
prompt action on all reported changes to determine if they affect the 
household's eligibility or allotment. If a reported change increases 
the household's benefits, the State agency must make the change 
effective no later than the first allotment issued 10 days after the 
date the change was reported to the State agency. If the change 
decreases the household's benefit, or makes it ineligible for the 
program, the State agency must issue a notice of adverse action within 
10 days of the date the change was reported and decrease the 
household's benefit effective no later than the allotment for the month 
following the month in which the notice of adverse action period has 
expired, provided a fair hearing and continuation of benefits have not 
been requested. If a notice of adverse action is not used due to one of 
the exemptions in 7 CFR 273.13(a)(3) or (b), the decrease must be made 
effective no later than the month following the change. For households 
eligible for the medical expense deduction, the State agency may only 
act on changes not voluntarily reported by the household if they are 
verified upon receipt and do not necessitate contact with the 
household.
    Section 4106 of FSRIA amends Section 5(f)(1) of the Act (7 U.S.C. 
2014(f)(1)) to provide State agencies the option of disregarding until 
a household's next recertification any changes that affect the amount 
of deductions for which a household is eligible. In other words, if a 
household reports a change in circumstance that would change a 
deduction amount or the household's eligibility for the deduction, the 
State agency may disregard the change and continue to provide the 
household the deduction amount that was established at certification 
until the household's next recertification, when it would have to amend 
the deduction to reflect the household's then current circumstances. 
However, section 4106 does require the State agency to act on two types 
of reported changes that affect deductions. First, the State agency 
must act on any change in a household's excess shelter cost stemming 
from a change in residence. Second, the State agency must act on 
changes in earned income in accordance with regulations established by 
the Department.

[[Page 20753]]

    The Department is proposing to amend current regulations at 7 CFR 
273.12(c) to provide State agencies the option of disregarding any 
changes that would affect the amount of a deduction or the household's 
eligibility for it until the household's next recertification. Under 
the proposed regulations, the State agency must act on changes in a 
household's excess shelter cost stemming from a change in residence and 
on changes in earned income. In addition, a State agency that 
implements the option must include a statement to that effect in its 
state plan of operation and it must specify the deductions affected.
    Section 4106 provides that the State agency must act on changes in 
earned income in accordance with standards developed by the Department. 
The Department is proposing no change to current regulations in regard 
to the State agency's responsibility to act on reported changes in 
earned income. Current rules require the State agency to make 
appropriate changes to the household's deductions when there is a 
reported change in earned income. The Department believes that 
retaining current rules in this area imposes no additional 
administrative burden on State agencies and reflects the intent of the 
statute.
    To provide State agencies with maximum flexibility, the Department 
is proposing that State agencies be permitted to ignore not only 
changes that affect deductions that are reported by the household, but 
also changes that the State agency learns from a source other than the 
household. For example, the State agency would not be required to act 
during the certification period on changes in a household's child 
support payments it discovers through a data match with the State's 
Title IV-D agency but could disregard such changes until the 
household's next recertification. The State agency, however, would 
continue to be required to change deductions as a result of changes in 
earned income and shelter costs arising from a change in residence 
which it learns from another source which are verified upon receipt.
    Under the proposed regulations, the State agency has the option of 
ignoring changes (other than changes in earned income and changes in 
shelter costs related to a change in residence) for all deductions or 
for any particular deduction. The State agency may also ignore changes 
for deductions for certain categories of households while acting on 
changes for those same deductions for other types of households. The 
Department is proposing, however, that the State agency not act on 
changes in only one direction. If the State agency chooses to act on 
changes that affect a deduction, then it must act on both changes that 
increase the deduction and changes that decrease the deduction. Acting 
only on changes that would decrease a household's deductions would 
unfairly harm households, while acting only on changes that would 
increase a household's deductions would increase program costs beyond 
what was anticipated when the provision was enacted.
    The Department is concerned that this provision could harm 
households that experience significant increases in their expenses 
during their certification periods. The Department is considering 
including in the final regulation one of two limitations on the 
provision that would protect households: (1) Requiring State agencies 
that take this option to act on reported changes in expenses that 
exceed a certain dollar threshold; or (2) requiring state agencies that 
take this option to act on changes that affect deductions after the 
sixth month for households that are certified for 12 months. We are 
interested in hearing commenters' opinions about these restrictions as 
well as hearing other suggestions for reducing the potential harmful 
effect of the provision on households.
    The Department is proposing a limitation on the State agency option 
to disregard acting on reported changes that affect deductions for 
households assigned 24-month certification periods. Under current rules 
at 7 CFR 273.10(f)(1), State agencies may assign certification periods 
of up to 24 months for households in which all adult members are 
elderly or disabled. Section 3(c) of the Act (7 U.S.C. 2012(c)) and the 
regulations at 7 CFR 273.10(f)(1) require the State agency to have a 
contact with elderly and disabled household certified for 24 months at 
least once every 12 months. The Department is proposing that the State 
agency act on changes affecting deductions that are reported by these 
households during the first 12 months of their certification period at 
the required 12-month contact. Changes reported during the second 12 
months could be disregarded until the household's next recertification.
    Current rules at 7 CFR 273.10(f)(2) require that State agencies 
certify for 24 months households residing on a reservation who are 
subject to monthly reporting. The Department is proposing that if the 
State agency chooses to disregard acting on changes that affect 
deductions for these households, the State agency act on changes 
reported by these households during the first 12 months of their 
certification period in the thirteenth month of the household's 
certification period. Changes reported during the second 12 months 
could be disregarded until the household's next recertification.
    In addition to amending current rules at 7 CFR 273.12(c), the 
Department is also proposing to amend current regulations at 7 CFR 
273.21 to allow for the disregarding of changes that affect deductions 
for households subject to monthly reporting and retrospective 
budgeting. As with prospectively budgeted households, the State agency 
may not disregard the effect on household deductions of reported 
changes in earned income and changes in shelter costs related to a 
change in residence.
    The Department is proposing to modify current rules at 7 CFR 
273.12(b)(1) and (b)(2) and 273.21(h)(2) to require the State agency to 
give notice in all change report, periodic report, and monthly report 
forms if it intends to postpone changing deductions based on reported 
information until the household's next recertification.

Transitional Food Stamps for Families Moving From Welfare--7 CFR 
273.12(f)(4)

    Current regulations at 7 CFR 273.12(f)(4) provide State agencies 
the option to offer transitional food stamp benefits to households 
leaving the Temporary Assistance for Needy Families (TANF) program. 
Transitional benefits ensure that such households can continue to meet 
their nutritional needs as they adjust to the loss of cash assistance. 
The Department adopted the transitional benefit option in the NCEP 
final rule at 65 FR 70134. The option was not specifically authorized 
by statute, but was developed in response to comments received on the 
earlier proposed rule. For more information about the development of 
the transitional food stamp benefits policy, please refer to the NCEP 
final rule.
    State agencies that elect the transitional benefit option freeze 
the food stamp benefits of a household leaving TANF for a period of up 
to 3 months (the transitional period). Thus, for up to 3 months, the 
household continues to receive the food stamp benefit it was receiving 
in the month that it exited TANF. However, if the household experiences 
a decrease in net income because of the loss of TANF, then the State 
agency may not continue the same food stamp benefit but must adjust the 
benefit for the transitional period to reflect the loss in net income. 
State agencies may extend the

[[Page 20754]]

certification period of households leaving TANF for up to three months 
in order to provide transitional benefits except that the State agency 
may not extend a household's certification period beyond the maximum 
allowable for a household of its circumstances in accordance with 7 CFR 
273.10(f).
    During the transitional period, the household has no reporting 
requirement. If it chooses to report a change in circumstances, the 
State agency must act during the transitional period on changes that 
increase the household's benefit amount. For changes that would lower 
the household's benefit, the State agency must make those changes 
effective the month after the transitional period ends.
    The State agency must issue food stamp households leaving TANF a 
``Transition Notice'' (TN) that advises the household of the following:
     Because of the closure of cash assistance, the 
State agency must reevaluate the household's food stamp case no more 
than 3 months from the effective date of the TANF case closing;
     The household's food stamp benefit amount will 
remain the same as when it was receiving cash assistance for up to 
three months (or that the State agency has adjusted the food stamp 
benefit amount if the household's income is decreasing as the result of 
leaving cash assistance);
     The household is not required to report or 
provide verification for changes in household circumstances during the 
transitional period. The TN will specify the date on which the 
household must resume reporting.
    Before the end of the transitional period, the State agency must 
issue the household a written request for contact (RFC) in accordance 
with 7 CFR 273.12(c)(3). The RFC advises the household of the 
verification it must provide or the actions it must take to clarify its 
circumstances.
    At the end of the transitional period, the State agency performs 
one of the following actions:
     Closes the household's food stamp case if the 
household is no longer eligible for the program;
     Adjusts the household's benefit level if the 
household remains eligible. The State agency may also extend the 
household's certification period in accordance with 7 CFR 273.10(f)(5);
     Recertifies the household in accordance with 7 
CFR 273.14 if the household has reached the maximum number of months in 
its certification period during the transition period; or
     Closes the case if the household has not 
provided sufficient information to determine its continuing 
eligibility.
    A State agency electing to provide transitional benefits must 
provide such benefits, at a minimum, to all households with earnings 
who leave TANF. The State agency may not provide transitional benefits 
to a household which is leaving TANF when:
     The State agency has determined that the 
household is noncompliant with TANF requirements and the State agency 
is imposing a comparable food stamp sanction in accordance with 7 CFR 
273.11;
     The State agency has determined that the 
household has violated a food stamp work requirement in accordance with 
7 CFR 273.7;
     The State agency has determined that a household 
member has committed an intentional Program violation in accordance 
with 7 CFR 273.16, or the State agency is closing the household's TANF 
case in response to information indicating the household failed to 
comply with food stamp reporting requirements.
    Section 4115 of FSRIA amends Section 11 of the Act to add a 
transitional benefits provision (7 U.S.C. 2020(5)). This new statutory 
provision incorporates the current regulatory option but expands its 
scope in significant ways.
    First, Section 4115 lengthens the transitional period from up to 
three months to up to five months. In addition, the new provision 
permits State agencies to extend the household's certification period 
beyond the limits established in 7 CFR 273.10(f) to provide the 
household with up to a full five months of transitional benefits. For 
example, under current regulations a household in a 12-month 
certification period that leaves TANF in the tenth month of its food 
stamp certification period may only receive two months of transitional 
benefits; i.e., until the end of its food stamp certification period. 
Under the expanded Section 4115 provision, the State agency may extend 
the household's food stamp certification period an additional three 
months in order to provide the household with up to a full five months 
of transitional benefits.
    Second, during the transitional period households will receive the 
same benefit that they received in the month prior to loss of TANF, 
adjusted for any reduction in income due to the loss of TANF. However, 
Section 4115 also grants State agencies the option of adjusting the 
household's benefit in the transitional period to take into account 
changes in circumstances that it learns of from another program in 
which the household participates.
    Third, the household has the option of applying for recertification 
at any time during the transitional period. Thus, if a household 
applies for recertification during the first month of its transitional 
period and is determined eligible, the State agency must terminate 
transitional benefits, assign the household a new certification period, 
and begin issuing new benefits.
    Fourth, if the household does not apply for recertification during 
the transitional period, Section 4115 provides the State agency the 
option in the final month of the transitional period to shorten the 
household's certification period and require the household to undergo 
recertification.
    Finally, Section 4115 modifies the types of households who are 
ineligible for transitional benefits. Under Section 4115, the following 
households are ineligible to receive transitional benefits:
     Households leaving TANF due to a TANF sanction;
     Households who are members of any category of 
households designated by the State agency as ineligible for 
transitional benefits; or
     Households in which all members are ineligible 
to receive food stamps under Section 6 (7 U.S.C. 2015) of the Act. A 
household may be ineligible under section 6 for any of the following 
reasons:

--Disqualified for intentional program violation;
--Ineligible for failure to comply with a work requirement;
--An SSI recipient in a cash out state;
--An ineligible student;
--An ineligible alien;
--Fails to provide information necessary for making determination of 
eligibility or for completing any subsequent review of its eligibility;
--Ineligible because it knowingly transferred resources for the purpose 
of qualifying or attempting to qualify for the program;
--Has been sanctioned in accordance with 7 CFR 273.11(k) for failure to 
perform an action under Federal, State or local law relating to a 
means-tested public assistance program;
--Disqualified for receipt of multiple food stamps;
--Disqualified for being a fleeing felon;
--At State option, ineligible for failing to cooperate with child 
support agencies;
--At State option, ineligible for being delinquent in court ordered 
child support; or
--Able-bodied adults without dependents (ABAWDs) who fail to comply 
with the program's ABAWD work requirement.


[[Page 20755]]


    The Department is proposing to amend current regulations at 7 CFR 
273.12(f)(4) to implement the new requirements.
    The Department is proposing to amend the introductory paragraph at 
7 CFR 273.12(f)(4) by designating it as 7 CFR 273.12(f)(4)(i). We 
propose to further amend the paragraph by eliminating the requirement 
that transitional benefits be provided, at a minimum, to all households 
with earnings who leave TANF. Beyond those households disqualified by 
statute, State agencies have unqualified authority under Section 4115 
to designate the categories of households eligible for transitional 
benefits. We are also proposing to amend the paragraph to require State 
agencies that choose to provide transitional benefits to indicate in 
their state plan that they are providing such benefits and to specify 
the categories of households eligible for such benefits and the maximum 
number of months for which transitional benefits will be provided.
    We are also proposing to amend the paragraph to update the list of 
households that are ineligible for transitional benefits to reflect the 
requirements of Section 4115. As noted above, Section 4115 makes 
households ineligible for transitional benefits if they are ineligible 
to receive food stamps under Section 6 of the Act. Because Section 4115 
refers to ineligible households rather than ineligible household 
members, the Department interprets this provision as applying only when 
the entire household is ineligible under Section 6. A household with an 
ineligible member is still eligible for transitional benefits if the 
remaining members of the household are eligible for food stamps. State 
agencies must follow the normal procedures in 7 CFR 273.11(c) to 
exclude ineligible members from the calculation of transitional 
benefits.
    Some State agencies have inquired whether the transitional benefit 
option is limited to formerly ``pure'' TANF households, i.e., 
households in which all members received TANF. Neither Section 4115 nor 
current regulations specify whether the transitional benefit option is 
only available to formerly pure TANF households or whether State 
agencies may also provide transitional benefits to mixed households, 
i.e., households in which only some members were receiving TANF. The 
Department believes that since Section 4115 does not limit the 
transitional benefit option to only formerly pure TANF households, 
State agencies should have the option to provide such benefits to 
formerly mixed TANF households as well. The Department is proposing to 
specify in revised 7 CFR 273.12(f)(4)(i) that the State agency has the 
option of providing transitional benefits to mixed TANF households.
    The Department is proposing to add a new 7 CFR 273.12(f)(4)(ii) 
which will remind State agencies that they must follow the procedures 
at 7 CFR 273.12(f)(3) to determine the continued eligibility and 
benefit levels of households leaving TANF who are denied transitional 
benefits. Current rules at 7 CFR 273.12(f)(3) prohibit the State agency 
from terminating a household's food stamp benefit when the household 
loses TANF eligibility without a separate determination that the 
household fails to meet the Food Stamp Program's eligibility 
requirements.
    The Department is proposing to renumber current paragraph 7 CFR 
273.12(f)(4)(i) as (f)(4)(iii). The Department is also proposing to 
make several amendments to the requirements of the paragraph. First, we 
are amending the paragraph to change the length of the transitional 
period from up to 3 months to up to 5 months. Second, we are amending 
the paragraph to note that in addition to adjusting the household's 
food stamp benefit amount before initiating the transition period to 
account for decreases in income due to the loss of TANF, the State 
agency may also adjust the benefit to account for changes in household 
circumstances that it learns from another program in which the 
household participates. Section 4115 does not address whether the 
benefit can be adjusted to account for changes learned from another 
program only at the beginning of the transitional period or if the 
benefit can be adjusted at any time during the period. To provide 
maximum flexibility to State agencies, the Department is proposing that 
the State agency be permitted to adjust the household's transitional 
benefit at any time during the transitional period to account for 
changes in household circumstances that it learns from another program 
in which the household participates. Finally, the Department is 
removing the prohibition on extending the household's certification 
period beyond the maximum periods specified in 7 CFR 273.10(f)(1) and 
(f)(2) so that the State agency may extend the household's 
certification period up to five months in order to provide the 
household with up to a full five months of transitional benefits.
    The Department is proposing to add a new 7 CFR 273.12(f)(4)(iv) to 
address a question raised by a State agency. The State agency asked 
whether, in providing transitional benefits to a household, it could 
shorten the household's food stamp certification period when the 
household leaves TANF and assign the household a new certification 
period that conforms with the transitional period. We do not find any 
bar to such a procedure in Section 4115, which allows State agencies to 
require households to undergo a recertification at the end of their 
transitional period. In fact, such a procedure could simplify 
implementation of transitional benefits, thus encouraging more State 
agencies to provide the benefits to households. However, the procedure 
would have to be seamless to households to avoid compromising the very 
purpose of the transitional benefit option, which is to allow the 
household to continue receiving food stamp benefits for several months 
after leaving TANF without having to undergo a recertification. 
Therefore, the Department is proposing to include in 7 CFR 273.12(f)(4) 
a provision allowing the State agency, when the household becomes 
eligible for transitional benefits, to shorten the household's 
certification period and assign the household a new certification 
period that corresponds with the transitional period. All 
recertification requirements that would normally apply when the 
household's certification period is ended, such as the requirement to 
submit a new application and undergo an interview, would be postponed 
to the end of the new certification period. The State agency would not 
have to issue a notice of adverse action when the household's 
certification period is shortened, but would have to specify in the 
transitional notice that the household must be recertified at the end 
of the transitional benefit period or if it returns to TANF during the 
transitional period. All of the requirements governing transitional 
benefits laid out in this section would continue to apply to the State 
agency and to the household.
    The Department is proposing to add a new 7 CFR 273.12(f)(4)(v). In 
this paragraph, the Department would include the provision that a 
household may apply for recertification at any time during the 
transitional period. The Department is proposing that the State agency 
observe the following procedures when a household submits a request for 
recertification prior to the last month of its transitional benefit 
period:
     The State agency must schedule an interview in 
accordance with 7 CFR 273.2(e);
     The State agency must provide the household with 
a notice of required

[[Page 20756]]

verification in accordance with 7 CFR 273.2(c)(5) and provide the 
household a minimum of 10 days to provide the required verification.
     If the household fails to undergo an interview 
or submit required verification within the timeframes established by 
the State in accordance with the previous two sentences, or the 
household is determined to be ineligible for the program, the State 
agency will deny the household's application for recertification and 
continue the household's transitional benefits to the end of the 
transitional benefit period, at which time the State agency will either 
recertify the household or send an RFC, as discussed below;
     If the household is determined eligible for the 
program, its new certification period will begin with the first day of 
the month following the month in which the household submitted the 
application for recertification, and the State agency would issue the 
household full benefits for that month. For example, if the household 
applied for recertification on the 25th day of the third month of a 
five-month transitional period, and the household is determined 
eligible for the regular Food Stamp Program, the State agency would 
begin the household's new certification period on the first day of what 
would have been the fourth month of the transitional period.
     If the household is determined eligible for the 
regular Food Stamp Program but is entitled to a benefit lower than its 
transitional benefit, the State agency must encourage the household to 
withdraw its application for recertification and continue to receive 
transitional benefits for the full transitional period. If the 
household chooses not to withdraw its application, the State agency 
must complete the recertification process and issue the household the 
lower benefit effective with the first month of the new certification 
period.
     Applications for recertification submitted in 
the final month of the transitional period would be processed in 
accordance with current regulations at 7 CFR 273.14.
    The Department is proposing to renumber 7 CFR 273.12(f)(4)(ii) as 
(f)(4)(vi). The Department proposes to maintain the existing 
requirement that the State agency issue a transition notice to 
households that are receiving transitional benefits. However, the 
Department is proposing to modify the contents of the notice. First, 
the notice must inform the household of its eligibility for 
transitional benefits and the length of its transitional period.
    Second, the notice must inform the household that it has a right to 
apply for recertification at any time during the transitional period. 
The Department suggests, but will not require, that the State agency 
send the household an application for recertification along with the 
transition notice or print on the notice the Internet address for the 
application if the State agency maintains a web page. The notice must 
also explain that if the household does not apply for recertification 
during the transitional period, at the end of the transitional period 
the State agency must either reevaluate the household's food stamp case 
or require the household to undergo a recertification. Third, the 
notice must explain any changes in the household's benefit due to the 
loss of TANF income and/or changes in household circumstances learned 
of from another State or Federal means-tested assistance program. 
Fourth, the notice must explain that the household is not required to 
report or verify changes in household circumstances until the deadline 
established in a written RFC sent by the State agency to the household 
pursuant to 7 CFR 273.12(c)(3), or the household's recertification 
interview.
    The Department is proposing to renumber current paragraph 7 CFR 
273.12(f)(4)(iii) as (f)(4)(vii). Section 273.12(f)(4)(iii) currently 
addresses the State agency's requirement to act on changes in 
circumstances that the household reports during its transitional 
period. Current rules at 7 CFR 273.12(f)(4)(ii) require the State 
agency to notify the household through the transition notice that it 
may report during the transition period if its income decreases or its 
expenses or household size increases. Section 273.12(f)(4)(iii) 
requires that if a household reports a change during the transitional 
period that would increase its benefit, the State agency must act on 
the change during the transitional period. However, if the household 
reports a change that would decrease its benefit, the State agency must 
not act on the change until after the transitional period has ended.
    Section 4115 requires that the household's benefit during the 
transitional period be equal to the benefit it was receiving in the 
month preceding termination of TANF, adjusted for the loss of TANF 
income and, at the State agency's option, changes in household 
circumstances that the State agency learned of from another program in 
which the household participates. The Conference Report states that the 
household's benefit in the transitional period shall not be adjusted 
``for any other changes in circumstances that could increase household 
benefits and which the household may report.'' H.R. Conf. Rep. No. 107-
424, at 526 (2002). The Conference Report's language on increasing a 
household's benefit during the transitional period due to reported 
changes in circumstances is consistent with Section 4115's provision 
permitting a household to apply for recertification at any time during 
the transitional period. Thus, if a household experiences a change 
during the transitional period that would increase its benefit, Section 
4115 allows the household to apply for recertification rather than 
report the change.
    The Department believes that requiring the State agency to act on 
any reported changes in circumstances during a household's transitional 
period defeats the intent of the transitional benefit, which is to 
provide the household for a fixed number of months with the same 
benefit it received prior to termination of TANF, with the benefit 
adjusted only for the loss of TANF income and, at State agency option, 
other changes that the State agency learns of from the household's 
participation in another program. In addition, the household is 
protected from being denied increased benefits by having the option of 
applying for recertification at any time during the transitional 
period. Therefore the Department is proposing to remove the requirement 
at 7 CFR 273.12(f)(4)(ii) that the State agency notify the household 
through the transition notice that it may report during the transition 
period if its income decreases or its expenses or household size 
increases, and the requirement at 7 CFR 273.12(f)(4)(iii) that the 
State agency act on changes during the transitional period that would 
increase household benefits.
    Because participating food stamp households are not accustomed to 
applying for recertification prior to the end of their certification 
period, the Department is concerned that many households, unless 
clearly informed otherwise, will report a change in circumstances 
during the transitional period instead of applying for recertification, 
thus possibly losing the opportunity to get an immediate increase in 
benefits. Therefore, the Department is proposing to further amend the 
transition notice requirements at 7 CFR 273.12(f)(4)(ii) (now 
(f)(4)(vi)) to require that the notice clearly inform households that 
if they experience a decrease in income or an increase in expenses or 
household size

[[Page 20757]]

during the transition period, they should apply for recertification.
    The Department is proposing that the State agency be required to 
act on one change in a household's circumstances if it occurs during 
the transitional period. If a member of a household receiving 
transitional benefits moves out of the household during the 
transitional period and either reapplies as a new household or is 
reported as a new member of another household, the Department is 
proposing that the State agency be required to remove that member from 
the original household and adjust the household's benefit to reflect 
the new household size. This action is necessary to prevent duplicate 
participation by the member that has left the household receiving 
transitional benefits, and is the same procedure that the State 
agencies follow in the regular program when a household member moves 
from one participating household to another.
    Finally, the Department is proposing to renumber current paragraph 
7 CFR 273.12(f)(4)(iv) as (f)(4)(viii). The new paragraph will provide 
the State agency two options for moving the household out of the 
transitional period. First, in accordance with current rules at 7 CFR 
273.12(f)(4)(iv), the State agency may issue the household an RFC and 
act on any information it has about the household's new circumstances 
in accordance with 7 CFR 273.12(c)(3). Under this option, the State 
agency may extend the household's certification period in accordance 
with 7 CFR 273.10(f)(5) unless the household's certification period has 
already been extended passed the maximum period specified in 7 CFR 
273.10(f) in order to provide the household the full transitional 
benefit for which it is eligible. Alternatively, in accordance with 
Section 4115, the State agency may recertify the household in 
accordance with 7 CFR 273.14. If the household has not reached the 
maximum number of months in its certification period during the 
transitional period, the State agency may shorten the household's prior 
certification period in order to recertify the household. In shortening 
the household's certification period, the State agency must send the 
household a notice of expiration in accordance with 7 CFR 273.14(b). 
The Department does not believe that a notice of adverse action is 
necessary to shorten the household's certification period under these 
circumstances. Section 11(e)(10) of the Act (7 U.S.C. 2020(e)(10)) 
requires that the State agency provide a notice of adverse action to 
the household before taking action to reduce or terminate the 
household's benefits during the household's certification period. The 
notice of adverse action provides the household with time to file a 
fair hearing request to challenge the State agency's action. However, 
because Section 4115 authorizes State agencies to shorten a household's 
certification period in the final month of its transitional benefit 
period, the household could not effectively challenge the State 
agency's decision to shorten its certification period. The Department 
is proposing to amend current regulations at 7 CFR 273.10(f)(4) to 
indicate that when shortening a household's certification period in 
order to recertify the household at the end of its transitional benefit 
period, the State agency must issue a notice of expiration to the 
household rather than a notice of adverse action.
    State agencies have asked the Department what procedure they should 
follow when a household returns to TANF during the transitional benefit 
period. The Department is proposing that under these circumstances a 
State agency apply the same procedures it would apply if the household 
had reached the final month of its transitional period. Thus, when the 
State agency learns that a household receiving transitional benefits 
has returned to TANF, the State agency may either issue an RFC and 
adjust the household's benefits based on information it has about the 
household's new circumstances and extend the household's certification 
period if it chooses, or it may shorten the household's certification 
period and require the household to undergo a recertification. Because 
the law does not authorize State agencies to shorten a household's 
certification period under these circumstances, the State agency would 
be required to issue a notice of adverse action rather than a notice of 
expiration, which the State agency may issue when the household reaches 
the end of its transitional period. However, to eliminate the delay 
associated with issuing a notice of adverse action, and to keep the 
procedure for when a household returns to TANF during the transitional 
benefit period consistent with the procedure for when a household 
reaches the end of its transitional period, the Department is proposing 
that the State agency be required to include in the transition notice a 
statement to the effect that if the household returns to TANF during 
the transitional benefit period, the State agency must either 
reevaluate the household's food stamp case or shorten the household's 
certification period and require it to undergo a recertification. The 
Department believes that this advanced notification that the State 
agency may shorten the household's food stamp certification period if 
it returns to TANF during the transition period is a sufficient 
substitute for the notice of adverse action. The new requirements will 
be contained in 7 CFR 273.12(f)(4)(ix).

Implementation

    All of the provisions of FSRIA addressed in this rule, except 
Section 4401, were effective on October 1, 2002. Section 4401 has 3 
different implementation dates. The provision restoring food stamp 
eligibility to qualified aliens who are otherwise eligible and who are 
receiving disability benefits regardless of date of entry was effective 
on October 1, 2002. The provision restoring food stamp eligibility to 
qualified aliens who are otherwise eligible and who have lived in the 
U.S. for 5 years as a qualified alien beginning on date of entry was 
effective April 1, 2003. The provision restoring food stamp eligibility 
to qualified aliens who are otherwise eligible and who are under 18 
regardless of date of entry and the provision eliminating the sponsor 
deeming requirements for immigrant children were both effective October 
1, 2003.
    The Department is proposing that the changes made by this rule 
would be effective and implemented no later than the first day of the 
month 180 days after publication of the final rule.

List of Subjects

7 CFR Part 272

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

7 CFR Part 273

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

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

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

PART 272--REQUIREMENTS FOR PARTICIPATING STATE AGENCIES

    2. In Sec.  272.2, a new paragraph (d)(1)(xvi) is added to read as 
follows:


Sec.  272.2  Plan of operation.

* * * * *

[[Page 20758]]

    (d) * * *
    (1) * * *
    (xvi) If the State agency chooses to implement the optional 
provisions specified in:
    (A) Sections 273.2(f)(1)(xii), 273.2(f)(8)(i)(A), 273.9(d)(5), 
273.9(d)(6)(i), and 273.12(a)(4) of this chapter, it must include in 
the Plan's attachment the options it has selected;
    (B) Section 273.8(e)(19) of this chapter, it must include in the 
Plan's attachment a statement that the option has been selected and a 
description of the resources being excluded under the provision;
    (C) Section 273.9(c)(3) of this chapter, it must include in the 
Plan's attachment a statement that the option has been selected and a 
description of the types of educational assistance being excluded under 
the provision;
    (D) Section 273.9(c)(18) of this chapter, it must include in the 
Plan's attachment a statement that the option has been selected and a 
description of the types of payments being excluded under the 
provision;
    (E) Section 273.9(c)(19) of this chapter, it must include in the 
Plan's attachment a statement that the option has been selected and a 
description of the types of income being excluded under the provision;
    (F) Section 273.12(a)(5) of this chapter, it must include in the 
Plan's attachment a statement that the option has been selected and a 
description of the types of households to whom the option applies;
    (G) Section 273.12(c) of this chapter, it must include in the 
Plan's attachment a statement that the option has been selected and a 
description of the deductions affected; and
    (H) Section 273.12(f)(4)(i) of this chapter, it must include in the 
Plan's attachment a statement that the option has been selected and 
specify the categories of households eligible for transitional benefits 
and the maximum number of months for which such benefits will be 
provided.
* * * * *

PART 273--CERTIFICATION OF ELIGIBLE HOUSEHOLDS

    3. In Sec.  273.2:
    a. Paragraph (c)(3) is amended by adding three new sentences after 
the second sentence.
    b. Paragraph (f)(1)(xii) is amended by adding three new sentences 
after the third sentence.
    c. Paragraph (f)(8)(i)(A) is amended by adding two new sentences 
after the fourth sentence and is further amended by removing in the new 
seventh sentence the words ``The State agency shall require a household 
eligible for the child support deduction'' and adding in their place 
the words ``For all other households eligible for the child support 
deduction or exclusion, the State agency shall require the household''. 
The additions read as follows:


Sec.  273.2  Office operations and application processing.

* * * * *
    (c) * * *
    (3) * * * If the State agency maintains a web page, it must make 
the application available on the web page in each language in which the 
State agency makes a printed application available. The State agency 
must provide on the web page the addresses and phone numbers of all 
State food stamp offices and a statement that the household should 
return the application form to its nearest local office. The 
applications must be accessible to persons with disabilities in 
accordance with Section 504 of the Rehabilitation Act of 1973, Pub. L. 
93-112, as amended by the Rehabilitation Act Amendments of 1974, Pub. 
L. 93-516, 29 U.S.C. 794. * * *
* * * * *
    (f) * * *
    (1) * * *
    (xii) * * * For households that pay their child support exclusively 
through their State CSE agency, the State agency may rely solely on 
information provided by that agency in determining a household's legal 
obligation to pay child support, the amount of its obligation and 
amounts the households has actually paid. Before the State agency may 
use the CSE agency's information, the household must sign a statement 
authorizing release of the household's child support payment records to 
the State agency. State agencies that choose to rely solely on 
information provided by their state CSE agency in accordance with this 
paragraph (f)(1)(xii) must specify in their state plan of operation 
that they have selected this option. * * *
* * * * *
    (8) * * *
    (i) * * *
    (A) * * * For households eligible for the child support deduction 
or exclusion, the State agency may rely solely on information provided 
by the State CSE agency in determining the household's legal obligation 
to pay child support, the amount of its obligation and amounts the 
household has actually paid if the household pays its child support 
exclusively through its State CSE agency and has signed a statement 
authorizing release of its child support payment records to the State 
agency. State agencies that choose to rely solely on information 
provided by their state CSE agency in accordance with this paragraph 
(f)(8)(i)(A) must specify in their state plan of operation that they 
have selected this option. * * *
* * * * *
    4. In Sec.  273.4:
    a. Paragraphs (a)(5)(ii)(B) through (a)(5)(ii)(F) are amended by 
removing the second sentence of each paragraph.
    b. Paragraph (a)(5)(ii)(H) is amended by removing the words ``on 
August 22, 1996, was lawfully residing in the U.S., and is now'' and 
adding in their place the word ``is.''
    c. Paragraph (a)(5)(ii)(J) is amended by removing the words ``on 
August 22, 1996, was lawfully residing in the U.S. and is now'' and 
adding in their place the word ``is.''
    d. A new paragraph (a)(5)(ii)(K) is added.
    e. Paragraph (a)(6) is amended by removing the reference 
``(a)(5)(ii)(H) through (a)(5)(ii)(J)'' and adding in its place the 
reference (a)(5)(ii)(I)''.
    f. Paragraph (c)(2)(v) is amended by adding a new sentence to the 
end of the paragraph.
    g. Paragraph (c)(3)(iv) is amended by adding two new sentences 
after the first sentence and is further amended by removing the semi-
colon at the end of the last sentence and adding in its place a period, 
and by adding three sentences to the end of the paragraph.
    h. A new paragraph (c)(3)(vi) is added.
    The additions read as follows:


Sec.  273.4  Citizenship and alien status.

    (a) * * *
    (5) * * *
    (ii) * * *
    (K) An alien who has resided in the U.S. as a qualified alien as 
defined in paragraph (a)(5)(i) of this section for 5 years.
* * * * *
    (c) * * *
    (2) * * *
    (v) * * * The State agency must use the same procedure to determine 
the amount of deemed income and resources to exclude in the case of a 
sponsored alien who is exempt from deeming in accordance with paragraph 
(c)(3)(vi) of this section.
    (3) * * *
    (iv) * * * Prior to determining whether an alien is indigent, the 
State agency must explain the purpose of the determination to the alien 
and/or household representative and provide the alien and/or household

[[Page 20759]]

representative the opportunity to refuse the determination. If the 
household refuses the determination, the State agency will not complete 
the determination and will deem the sponsor's income and resources to 
the alien's household in accordance with paragraph (c)(2) of this 
section. * * * State agencies may develop an administrative process 
under which information about the sponsored alien is not shared with 
the Attorney General or the sponsor without the sponsored alien's 
consent. The State agency must inform the sponsored alien of the 
consequences of failure to provide such consent. If the sponsored alien 
fails to provide consent, he or she shall be ineligible pursuant to 
paragraph (c)(5) of this section, and the State agency shall determine 
the eligibility and benefit level of the remaining household members in 
accordance with Sec.  273.11(c).
* * * * *
    (vi) An alien under 18 years of age.
* * * * *
    5. In Sec.  273.8:
    a. Paragraph (b) is amended by adding after the words ``for 
households including'' the words ``one or more disabled members or''.
    b. A new paragraph (e)(19) is added to read as follows:


Sec.  273.8  Resource eligibility standards.

* * * * *
    (e) * * *
    (19) At State agency option, any resources that the State agency 
excludes when determining eligibility or benefits for Temporary 
Assistance for Needy Families cash assistance as defined by 45 CFR 
260.31(a)(1) and (a)(2), or medical assistance under section 1931 of 
the Social Security Act, (but not for programs that do not evaluate the 
financial circumstances of adults in the household and programs grand-
fathered under section 404(a)(2) of the Social Security Act) except 
licensed vehicles not excluded under section 5(g)(2)(C) or (D) of the 
Food Stamp Act of 1977, as amended and cash on hand, amounts in any 
account in a financial institution that are readily available to the 
household, including money in checking or savings accounts, savings 
certificates, stocks, or bonds. The term ``readily available'' applies 
to resources, in a financial institution, that can be converted to cash 
in a single transaction, without going to court to obtain access or 
incurring a financial penalty other than loss of interest. State 
agencies may exclude deposits in individual development accounts (IDAs) 
made under written agreements that restrict the use of such deposits to 
home purchase, higher education or starting a business. State agencies 
may also exclude deposits in individual retirement accounts (IRAs) if 
the terms of those accounts impose a penalty, other than forfeiture of 
interest, for early withdrawal. A State agency that chooses to exclude 
resources under this paragraph (e)(19) must specify in its State plan 
of operation that it has selected this option and provide a description 
of the resources that are being excluded.
* * * * *
    6. In Sec.  273.9:
    a. A new paragraph (c)(3)(v) is added.
    b. New paragraphs (c)(17), (c)(18) and (c)(19) are added.
    c. Paragraph (d)(1) is revised.
    d. Paragraph (d)(2) is amended by revising the second sentence.
    e. Paragraph (d)(5) is revised.
    f. Paragraph (d)(6) is amended by revising the paragraph heading.
    g. Paragraph (d)(6)(i) is amended by revising the first sentence 
and adding a new second sentence.
    h. Paragraph (d)(6)(iii)(C) is amended by adding before the period 
in the third sentence ``unless the State agency mandates use of 
standard utility allowances in accordance with paragraph (d)(6)(iii)(E) 
of this section''.
    i. Paragraph (d)(6)(iii)(E) is amended by removing the fifth 
sentence and adding four new sentences after the second sentence.
    j. Paragraph (d)(6)(iii)(F) is amended by revising the first 
sentence and by removing the word ``However'' at the beginning of the 
second sentence.
    The additions and revisions read as follows:


Sec.  273.9  Income and deductions.

* * * * *
    (c) * * *
    (3) * * *
    (v) At its option, the State agency may exclude any educational 
assistance that must be excluded under its State Medicaid rules that 
would not already be excluded under this section. A State agency that 
chooses to exclude educational assistance under this paragraph 
(c)(3)(v) must specify in its State plan of operation that it has 
selected this option and provide a description of the educational 
assistance that is being excluded. The provisions of paragraphs 
(c)(3)(ii), (c)(3)(iii) and (c)(3)(iv) of this section do not apply to 
income excluded under this paragraph (c)(3)(v).
* * * * *
    (17) Legally obligated child support payments paid by a household 
member to or for a nonhousehold member, including payments made to a 
third party on behalf of the nonhousehold member (vendor payments) and 
amounts paid toward child support arrearages. However, at its option, 
the State agency may allow households a deduction for such child 
support payments in accordance with paragraph (d)(5) of this section 
rather than an income exclusion.
    (18) At the State agency's option, any State complementary 
assistance program payments excluded for the purpose of determining 
eligibility under section 1931 of the Social Security Act for a program 
funded under Title XIX of the Social Security Act. A State agency that 
chooses to exclude complementary assistance program payments under this 
paragraph (c)(18) must specify in its State plan of operation that it 
has selected this option and provide a description of the types of 
payments that are being excluded.
    (19) At the State agency's option, any types of income that the 
State agency excludes when determining eligibility or benefits for 
Temporary Assistance for Needy Families cash assistance as defined by 
45 CFR 260.31(a)(1) and (a)(2), or medical assistance under section 
1931 of the Social Security Act, (but not for programs that do not 
evaluate the financial circumstances of adults in the household and 
programs grand-fathered under section 404(a)(2) of the Social Security 
Act) except that the State agency shall not exclude wages or salaries; 
gross income from a self-employment enterprise, including the types of 
income referenced in paragraph (b)(1)(iii) of this section; benefits 
under Title I, II, IV, XIV or XVI of the Social Security Act, including 
supplemental security income (SSI) benefits, Temporary Assistance for 
Needy Families (TANF) benefits, and foster care and adoption payments; 
regular payments from a government source; worker's compensation; child 
support payments made to the household from a nonhousehold member; 
support or alimony payments made to the household from a nonhousehold 
member; annuities; pensions; retirement benefits; disability benefits; 
or old age or survivor benefits; and monies withdrawn or dividends 
received by a household from trust funds considered to be excludable 
resources under Sec.  273.8(e)(8). Payments or allowances a household 
receives from an intermediary that are funded from a government source 
are considered payments from a government source. The State agency must 
exclude for food stamp purposes the same amount of income it excludes 
for TANF or

[[Page 20760]]

Medicaid purposes. A State agency that chooses to exclude income under 
this paragraph (c)(19) must specify in its State plan of operation that 
it has selected this option and provide a description of the resources 
that are being excluded.
    (d) * * *
    (1) Standard deduction. (i) 48 States, District of Columbia, 
Alaska, Hawaii, and the Virgin Islands. Effective October 1, 2002, in 
the 48 States and the District of Columbia, Alaska, Hawaii, and the 
Virgin Islands, the standard deduction for household sizes one through 
six shall be equal to 8.31 percent of the monthly net income standard 
for each household size established under paragraph (a)(2) of this 
section rounded to the nearest whole dollar. For household sizes 
greater than six, the standard deduction shall be equal to the standard 
deduction for a six-person household.
    (ii) Guam. Effective October 1, 2002, in Guam, the standard 
deduction for household sizes one through six shall be equal to 8.31 
percent of double the monthly net income standard for each household 
size for the 48 States and the District of Columbia established under 
paragraph (a)(2) of this section rounded to the nearest whole dollar. 
For household sizes greater than six, the standard deduction shall be 
equal to the standard deduction for a six-person household.
    (iii) Minimum deduction levels. Notwithstanding paragraphs 
(d)(1)(i) and (d)(1)(ii) of this section, the standard deduction in any 
year for each household in the 48 States and the District of Columbia, 
Alaska, Hawaii, Guam, and the Virgin Islands shall not be less than 
$134, $229, $189, $269, and $118, respectively.
    (2) * * * Earnings excluded in paragraph (c) of this section shall 
not be included in gross earned income for purposes of computing the 
earned income deduction, except that the State agency must count any 
earnings used to pay child support that were excluded from the 
household's income in accordance with the child support exclusion in 
paragraph (c)(17) of this section.
* * * * *
    (5) Optional child support deduction. At its option, the State 
agency may provide a deduction, rather than the income exclusion 
provided under paragraph (c)(17) of this section, for legally obligated 
child support payments paid by a household member to or for a 
nonhousehold member, including payments made to a third party on behalf 
of the nonhousehold member (vendor payments) and amounts paid toward 
child support arrearages. Alimony payments made to or for a 
nonhousehold member shall not be included in the child support 
deduction. A State agency that chooses to provide a child support 
deduction rather than an exclusion in accordance with this paragraph 
(d)(5) must specify in its State plan of operation that it has chosen 
to provide the deduction rather than the exclusion.
    (6) Shelter costs. (i) Homeless shelter deduction. A State agency 
may provide a standard homeless shelter deduction of $143 a month to 
households in which all members are homeless individuals but are not 
receiving free shelter throughout the month. A State agency that 
chooses to provide a homeless household shelter deduction must specify 
in its State plan of operation that it has selected this option. * * *
* * * * *
    (iii) * * *
    (E) * * * If the State agency chooses to mandate use of standard 
utility allowances, it must provide a standard utility allowance that 
includes heating or cooling costs to residents of public housing units 
which have central utility meters and which charge the households only 
for excess heating or cooling costs. The State agency also must not 
prorate a standard utility allowance that includes heating or cooling 
costs provided to a household that lives and shares heating or cooling 
expenses with others. In determining whether the standard utility 
allowances increase program costs, the State agency shall not consider 
any increase in costs that results from providing a standard utility 
allowance that includes heating or cooling costs to residents of public 
housing units which have central utility meters and which charge the 
households only for excess heating or cooling costs. The State agency 
shall also not consider any increase in costs that results from 
providing a full (i.e., not prorated) standard utility allowance that 
includes heating or cooling costs to a household that lives and shares 
heating or cooling expenses with others. * * *
    (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, except that the State agency shall not prorate the standard for 
such households if the State agency mandates use of standard utility 
allowances in accordance with paragraph (d)(6)(iii)(E) of this section. 
* * *
    7. In Sec.  273.10:
    a. The introductory text of paragraph (d) is revised.
    b. Paragraph (d)(8) is revised.
    c. Paragraph (e)(1)(i)(B) is amended by adding a new sentence to 
the end of the paragraph.
    d. Paragraph (e)(1)(i)(F) is revised.
    e. Paragraph (f)(4) is revised.
    The revisions and addition read as follows:


Sec.  273.10  Determining household eligibility and benefit levels.

* * * * *
    (d) * * * Deductible expenses include only certain dependent care, 
shelter, medical and, at State agency option, child support costs as 
described in Sec.  273.9.
* * * * *
    (8) Optional child support deduction. If the State agency opts to 
provide households with a deduction rather than an income exclusion for 
legally obligated child support payments in accordance with Sec.  
273.9(d), the State agency may budget such payments prospectively, in 
accordance with paragraphs (d)(2) through (d)(5) of this section, or 
retrospectively, in accordance with Sec.  273.21(b) and Sec.  
273.21(f)(2), regardless of the budgeting system used for the 
household's other circumstances.
    (e) * * *
    (1) * * *
    (i) * * *
    (B) * * * If the State agency has chosen to treat legally obligated 
child support payments as an exclusion in accordance with paragraph 
(c)(17) of this section, multiply the excluded earnings used to pay 
child support by 20% and subtract that amount from the total gross 
monthly income.
* * * * *
    (F) If the State agency has chosen to treat legally obligated child 
support payments as a deduction rather than an exclusion in accordance 
with Sec.  273.9(d)(5), subtract allowable monthly child support 
payments in accordance with Sec.  273.9(d)(5).
* * * * *
    (f) * * *
    (4) Shortening certification periods. The State agency may not end 
a household's certification period earlier than its assigned 
termination date, unless the State agency receives information that the 
household has become ineligible, the household has not complied with 
the requirements of Sec.  273.12(c)(3), or the State agency must 
shorten the household's certification

[[Page 20761]]

period to comply with the requirements of Sec.  273.12(a)(5). Loss of 
public assistance or a change in employment status is not sufficient in 
and of itself to meet the criteria necessary for shortening the 
certification period. The State agency must close the household's case 
or adjust the household's benefit amount in accordance with Sec.  
273.12(c)(1) or (c)(2) in response to reported changes. The State 
agency must issue a notice of adverse action as provided in Sec.  
273.13 to shorten a participating household's certification period in 
connection with imposing the simplified reporting requirement. The 
State agency may not use the Notice of Expiration to shorten a 
certification period, except that the State agency must use the notice 
of expiration to shorten a household's certification period when the 
household is receiving transitional benefits under Sec.  273.12(f)(4), 
has not reached the maximum allowable number of months in its 
certification period during the transitional period, and the State 
agency has chosen to recertify the household in accordance with Sec.  
273.12(f)(4)(vi)(B).
* * * * *
    8. In Sec.  273.11:
    a. Paragraph (c)(1)(ii) is amended by redesignating paragraphs 
(c)(1)(ii)(B) and (c)(1)(ii)(C) as (c)(1)(ii)(C) and (c)(1)(ii)(D), 
respectively, and adding a new paragraph (c)(1)(ii)(B).
    b. Paragraph (c)(2)(iv) is amended by redesignating paragraphs 
(c)(2)(iv)(B) and (c)(2)(iv)(C) as paragraphs (c)(2)(iv)(C) and 
(c)(2)(iv)(D), respectively, and adding a new paragraph (c)(2)(iv)(B).
    The additions read as follows:


Sec.  273.11  Action on households with special circumstances.

* * * * *
    (c) * * *
    (1) * * *
    (ii) * * *
    (B) Assigning a standard deduction to the household;
* * * * *
    (2) * * *
    (iv) * * *
    (B) Assigning a standard deduction to the household;
* * * * *
    9. In Sec.  273.12:
    a. Paragraph (a)(1) introductory text is amended by adding a 
sentence after the second sentence;
    b. Paragraph (a)(1)(vi) is amended by adding a new sentence to the 
end of the paragraph;
    c. Paragraph (a)(1)(vii) is removed, and paragraph (a)(1)(viii) is 
redesignated as paragraph (a)(1)(vii);
    d. Paragraph (a)(4) introductory text is amended by removing the 
first sentence and adding three new sentences to the beginning of the 
paragraph.
    e. Paragraphs (a)(5) and (a)(6) are redesignated as paragraphs 
(a)(6) and (a)(7), respectively, and a new paragraph (a)(5) is added;
    f. Newly redesignated paragraph (a)(6) introductory text is amended 
by removing the first sentence and by adding in its place two new 
sentences;
    g. A new paragraph (b)(1)(vi) is added;
    h. Paragraph (b)(2) is revised;
    i. The introductory text of paragraph (c) is amended by:
    1. Removing the word ``shall'' in the second sentence and adding in 
its place the word ``may'';
    2. Removing the word ``However,'' at the beginning of the fourth 
sentence; and
    3. Adding seven new sentences after the first sentence.
    j. Paragraph (f)(4) is revised.
    The revisions and additions read as follows:


Sec.  273.12  Requirements for change reporting households.

    (a) * * *
    (1) * * * Simplified reporting households are subject to the 
procedures as provided in paragraph (a)(5) of this section. * * *
* * * * *
    (vi) * * * However, the State agency may remove this reporting 
requirement if it has chosen to rely solely on information provided by 
the State's CSE agency in determining a household's legal obligation to 
pay child support, the amount of its obligation, and amounts the 
household has actually paid in accordance with Sec.  273.2(f)(1)(xii).
* * * * *
    (4) For households eligible for the child support exclusion at 
Sec.  273.9(c)(17) or deduction at Sec.  273.9(d)(5), the State agency 
may rely solely on information provided by the State CSE agency in 
determining the household's legal obligation to pay child support, the 
amount of its obligation and amounts the household has actually paid if 
the household pays its child support exclusively through its State CSE 
agency and has signed a statement authorizing release of its child 
support payment records to the State agency. State agencies that choose 
to rely solely on information provided by their State CSE agency in 
accordance with this paragraph (a)(4) must specify in their State plan 
of operation that they have selected this option. If the State agency 
chooses not to rely solely on information provided by its State CSE 
agency, the State agency may require the household to report child 
support payment information on a change report, a monthly report, or a 
quarterly report. * * *
* * * * *
    (5) The State agency may establish a simplified reporting system in 
lieu of the change reporting requirements specified under paragraph 
(a)(1) of this section. The following requirements are applicable to 
simplified reporting systems:
    (i) Included households. The State agency may include any household 
certified for at least 4 months within a simplified reporting system. 
The State agency may not require households with no earned income in 
which all adult members are elderly or disabled, migrant or seasonal 
farm worker households, or households in which all members are homeless 
individuals to submit periodic reports in connection with the 
simplified reporting requirement. The certification periods of such 
households must be at least 4 months, but not more than 6 months.
    (ii) Notification of simplified reporting requirement. The State 
agency must notify households of the simplified reporting requirements, 
including the consequences of failure to file a report, at initial 
certification, recertification, and whenever the State agency transfers 
the household to simplified reporting during a certification period.
    (iii) Periodic report. (A) Except for households exempt from 
periodic reporting in accordance with paragraph (a)(5)(i) of this 
section, the State agency may require a household exempt from change 
reporting requirements in accordance with paragraph (a)(5)(i) of this 
section to submit a periodic report on its circumstances from once 
every 4 months up to once every 6 months. The State agency need not 
require a household certified for 6 months or less to submit a periodic 
report during its certification period. However, a household certified 
for more than 6 months must submit a periodic report at least once 
every 6 months.
    (B) The periodic report form must request from the household 
information on any changes in circumstances in accordance with 
paragraphs (a)(1)(i) through (a)(1)(vii) of this section.
    (C) If the household files a complete report resulting in reduction 
or termination of benefits, the State agency shall send an adequate 
notice, as defined in Sec.  271.2 of this chapter. The notice must be 
issued so that the household will receive it no later than the time 
that its benefits are normally received. If the household fails to 
provide sufficient information or

[[Page 20762]]

verification regarding a deductible expense, the State agency will not 
terminate the household, but will instead determine the household's 
benefits without regard to the deduction.
    (D) If a household fails to file a complete report by the specified 
filing date, the State agency will send a notice to the household 
advising it of the missing or incomplete report no later than 10 days 
from the date the report should have been submitted. If the household 
does not respond to the notice, the household's participation shall be 
terminated. The State agency may combine the notice of a missing or 
incomplete report with the adequate notice of termination described in 
paragraph (a)(5)(iii)(C) of this section.
    (E) The periodic report form shall be the sole reporting 
requirement for any information that is required to be reported on the 
form, except that a household required to report less frequently than 
quarterly shall report when its monthly gross income exceeds the 
monthly gross income limit for its household size in accordance with 
paragraph (a)(5)(iv) of this section, and able-bodied adults subject to 
the time limit of Sec.  273.24 shall report whenever their work hours 
fall below 20 hours per week, averaged monthly.
    (iv) Reporting when gross income exceeds 130 percent of poverty. A 
household subject to simplified reporting in accordance with paragraph 
(a)(5)(i) of this section, whether or not it is required to submit a 
periodic report, must report when its monthly gross income exceeds the 
monthly gross income limit for its household size, as defined at Sec.  
273.9(a)(1). In determining household size for this paragraph 
(a)(5)(iv), the household shall use the household size that existed at 
the time of its most recent certification or recertification.
    (v) State agency action on changes reported outside of a periodic 
report. The State agency must act when the household reports that its 
gross monthly income exceeds the gross monthly income limit for its 
household size. For other changes, the State agency need not act if the 
household reports a change for another public assistance program in 
which it is participating and the change does not trigger action in 
that other program but results in a decrease in the household's food 
stamp benefit. The State agency must act on all other changes reported 
by a household outside of a periodic report in accordance with one of 
the following two methods:
    (A) the State agency must act on any change in household 
circumstances in accordance with paragraph (c) of this section, or
    (B) the State agency must act on any change in accordance with 
paragraph (c)(1) of this section if it would increase the household's 
benefits. The State agency must not act on changes that would result in 
a decrease in the household's benefits unless:
    (1) The household has voluntarily requested that its case be closed 
in accordance with Sec.  273.13(b)(12);
    (2) The State agency has information about the household's 
circumstances considered verified upon receipt; or
    (3) There has been a change in the household's PA grant, or GA 
grant in project areas where GA and food stamp cases are jointly 
processed in accord with Sec.  273.2(j)(2).
    (vi) State plan requirement. A State agency that chooses to use 
simplified reporting procedures in accordance with this section must 
state in its state plan of operation that it has implemented simplified 
reporting and specify the types of households to whom the reporting 
requirement applies.
    (6) In accordance with Sec.  273.10(d)(4), the State agency may 
rely solely on information provided by the State's Title IV-D agency in 
determining a household's legal obligation to pay child support, the 
amount of its obligation, and amounts the household has actually paid. 
If the State agency does not take this option but requires a household 
who is eligible to receive a child support exclusion or deduction in 
accordance with Sec.  273.9(c)(17) or Sec.  273.9(d)(5), respectively, 
to report information necessary for the expense or deduction, it may 
require the household to report such information on a change report, a 
periodic report, a monthly report or a quarterly report. * * *
* * * * *
    (b) * * *
    (1) * * *
    (vi) If the State agency has chosen to disregard reported changes 
that affect some deductions in accordance with paragraph (c) of this 
section, a statement explaining that the State agency will not change 
certain deductions until the household's next recertification and 
identifying those deductions.
    (2) The quarterly report form, including the form for the quarterly 
reporting of the child support obligation, and the periodic report form 
used in simplified reporting under paragraph (a)(2)(ii) of this 
section, must be written in clear, simple language, and must meet the 
bilingual requirements described in Sec.  272.4(b) of this chapter. In 
addition the form must specify the date by which the agency must 
receive the form and the consequences of submitting a late or 
incomplete form. The form (or an attachment) must specify the 
verification the household must submit with the form, inform the 
household where to call for help in completing the form, and include a 
statement to be signed by a member of the households indicating his or 
her understanding that the information provided may result in reduction 
or termination of benefits. The form should also include a brief 
description of the Food Stamp Program fraud penalties. If the State 
agency has chosen to disregard reported changes that affect some 
deductions in accordance with paragraph (c) of this section, the form 
should include a statement explaining that the State agency will not 
change certain deductions until the household's next recertification 
and identifying those deductions.
* * * * *
    (c) * * * However, if the household reports a change during the 
certification period, other than a change in earnings or residence, 
that would affect the household's eligibility for, or amount of, a 
deduction under Sec.  273.9(d), the State agency may at its option 
disregard the change and continue to provide the household the 
deduction amount that was established at certification until the 
household's next recertification. In the case of a household assigned a 
24-month certification period in accordance with Sec.  273.10(f)(1) and 
(f)(2), the State agency must act on any disregarded changes reported 
during the first 12 months of the certification period at the required 
12-month contact for elderly and disabled households and in the 
thirteenth month of the certification period for households residing on 
a reservation who are required to submit monthly reports. Changes 
reported during the second 12 months of the certification period can be 
disregarded until the household's next recertification. If the State 
agency chooses to act on changes that affect a deduction, it may not 
act on changes in only one direction, i.e., changes that only increase 
or decrease the amount of the deduction, but must act on all changes 
that affect the deduction. The State agency may disregard changes 
reported by the household in accordance with paragraph (a)(1) of this 
section and changes it learns of from a source other than the 
household. The State agency must not disregard changes in earned income 
or shelter costs arising from a change in residence until the 
household's next recertification but must act on those changes in 
accordance with paragraphs (c)(1) and (c)(2) of this

[[Page 20763]]

section. A State agency that chooses to postpone action on reported 
changes in deductions in accordance with this paragraph (c) must state 
in its State plan of operation that it has selected this option and 
specify the deductions affected. * * *
* * * * *
    (f) * * *
    (4) Transitional Benefits Alternative. (i) The State agency may 
elect to provide households leaving TANF with transitional food stamp 
benefits as provided in this paragraph (f)(4). A State agency that 
chooses to provide transitional benefits must state in its State plan 
of operation that it has selected this option and specify the 
categories of households eligible for such benefits and the maximum 
number of months for which transitional benefits will be provided. The 
State agency may choose to limit transitional benefits to households in 
which all members had been receiving TANF, or it may provide such 
benefits to any household in which at least one member had been 
receiving TANF. The State agency may not provide transitional benefits 
to a household which is leaving TANF when:
    (A) The household is leaving TANF due to a TANF sanction;
    (B) The household is a member of a category of households 
designated by the State agency as ineligible for transitional benefits; 
or
    (C) All household members are ineligible to receive food stamps for 
any of the following reasons:
    (1) Disqualified for intentional program violation in accordance 
with Sec.  273.16;
    (2) Ineligible for failure to comply with a work requirement in 
accordance with Sec.  273.7;
    (3) An SSI recipient in a cash-out state in accordance with Sec.  
273.20;
    (4) Ineligible student in accordance with Sec.  273.5;
    (5) Ineligible alien in accordance with Sec.  273.4;
    (6) Fails to provide information necessary for making determination 
of eligibility or for completing any subsequent review of its 
eligibility in accordance with Sec.  273.2(d) and Sec.  
273.21(m)(1)(ii);
    (7) Ineligible because it knowingly transferred resources for the 
purpose of qualifying or attempting to qualify for the program as 
provided at Sec.  273.8(h);
    (8) At State option, disqualified from food stamps for failure to 
perform an action under Federal State or local law relating to a means-
tested public assistance program in accordance with Sec.  273.11(k);
    (9) Disqualified for receipt of multiple food stamps;
    (10) Disqualified for being a fleeing felon in accordance with 
Sec.  273.11(n);
    (11) At State option, ineligible for failing to cooperate with 
child support agencies in accordance with Sec.  273.11(o) and (p);
    (12) At State option, ineligible for being delinquent in court 
ordered child support in accordance with 273.11(q); or
    (13) Able-bodied adults without dependents who fail to comply with 
the requirements of Sec.  273.24.
    (ii) The State agency must use procedures at paragraph (f)(3) of 
this section to determine the continued eligibility and benefit level 
of households denied transitional benefits under this paragraph (f)(4).
    (iii) When a household leaves TANF, the State agency may freeze for 
up to 5 months the household's benefit amount after making an 
adjustment for the loss of TANF. This is the household's transition 
period. Before initiating the transition period, the State agency must 
recalculate the household's food stamp benefit amount by removing the 
TANF payment from the household's food stamp income. At its option, the 
State agency may also adjust the benefit initially and at any time 
during the transition period to account for changes in household 
circumstances that it learns from another State or Federal means-tested 
assistance program in which the household participates. To provide the 
full transitional period, the State agency may extend the certification 
period for up to 5 months and may extend the household's certification 
period beyond the maximum periods specified in Sec.  273.10(f).
    (iv) When a household leaves TANF, the State agency at its option 
may end the household's existing certification period and assign the 
household a new certification period that conforms to the transitional 
period. The recertification requirements at Sec.  273.14 that would 
normally apply when the household's certification period ends must be 
postponed until the end of the new certification period. If the 
transition period results in a shortening of the household's 
certification period, the State agency shall not issue a household a 
notice of adverse action under Sec.  273.10(f)(4) but shall specify in 
the transitional notice required under paragraph (f)(4)(v) of this 
section that the household must be recertified when it reaches the end 
of the transitional benefit period or if it returns to TANF during the 
transitional period.
    (v) At any time during the transitional period, the household may 
apply for recertification. If a household applies for recertification 
during its transitional period, the State agency shall observe the 
following procedures:
    (A) The State agency must schedule an interview in accordance with 
Sec.  273.2(e);
    (B) The State agency must provide the household with a notice of 
required verification in accordance with Sec.  273.2(c)(5) and provide 
the household a minimum of 10 days to provide the required 
verification.
    (C) If the household fails to undergo an interview or submit 
required verification within the timeframes established by the State in 
accordance with paragraphs (A) and (B), or the household is determined 
to be ineligible for the program, the State agency will deny the 
household's application for recertification and continue the 
household's transitional benefits to the end of the transitional 
benefit period, at which time the State agency will either recertify 
the household or send an RFC in accordance with paragraph (f)(4)(vii) 
of this section;
    (D) If the household is determined eligible for the regular Food 
Stamp Program but is entitled to a benefit lower than its transitional 
benefit, the State agency shall encourage the household to withdraw its 
application for recertification and continue to receive transitional 
benefits. If the household chooses not to withdraw its application, the 
State agency shall complete the recertification process and issue the 
household the lower benefit beginning with the first month of the new 
certification period.
    (E) If the household is determined eligible for the program, its 
new certification period will begin with the first day of the month 
following the month in which the household submitted the application 
for recertification. The State agency must issue the household full 
benefits for that month. For example, if the household applied for 
recertification on the 25th day of the third month of a five-month 
transitional period, and the household is determined eligible for the 
regular Food Stamp Program, the State agency will begin the household's 
new certification period on the first day of what would have been the 
fourth month of the transitional period.
    (F) If the household is eligible for the regular Food Stamp Program 
and entitled to benefits higher than its transitional benefits, and the 
State agency has already issued the household transitional benefits for 
the first month of its certification period, the State agency must 
issue the household a supplement.

[[Page 20764]]

    (G) Applications for recertification submitted in the final month 
of the transitional period must be processed in accordance with current 
regulations at 7 CFR 273.14.
    (vi) The State agency must issue a transition notice (TN) to the 
household that includes the following information:
    (A) A statement informing the household that it will be receiving 
transitional benefits and the length of its transitional period;
    (B) A statement informing the household that it has the option of 
applying for recertification at any time during the transitional 
period. The household must be informed that if it does not apply for 
recertification during the transitional period, at the end of the 
transitional period the State agency must either reevaluate the 
household's food stamp case or require the household to undergo a 
recertification.
    (C) A statement that if the household returns to TANF during its 
transitional benefit period, the State agency will either reevaluate 
the household's food stamp case or require the household to undergo a 
recertification. However, if the household has been assigned a new 
certification period in accordance with paragraph (f)(4)(iii) of this 
section, the notice must inform the household that it must be 
recertified if it returns to TANF during its transitional period.
    (D) A statement explaining any changes in the household's benefit 
amount due to the loss of TANF income and/or changes in household 
circumstances learned from another State or Federal means-tested 
assistance program;
    (E) A statement informing the household that it is not required to 
report and provide verification for any changes in household 
circumstances until the deadline established in accordance with 
paragraph (c)(3) of this section or its recertification interview; and
    (F) A statement informing the household that the State agency will 
not act on changes that the household reports during the transitional 
period prior to the deadline specified in paragraph (f)(4)(vi)(E) of 
this section and that if the household experiences a decrease in income 
or an increase in expenses or household size prior to that deadline, 
the household should apply for recertification.
    (vii) If the household does report changes in its circumstances 
during the transition period, the State agency may at its option adjust 
the household's benefit amount in accordance with paragraph (c) of this 
section or make the change effective the month following the last month 
of the transitional period. However, in order to prevent duplicate 
participation, the State agency must act to change the household's 
transitional benefit when a household member moves out of the household 
and either reapplies as a new household or is reported as a new member 
of another household.
    (viii) In the final month of the transitional benefit period, the 
State agency must do one of the following:
    (A) Issue the RFC specified in paragraph (c)(3) of this section and 
act on any information it has about the household's new circumstances 
in accordance with paragraph (c)(3) of this section. The State agency 
may extend the household's certification period in accordance with 
Sec.  273.10(f)(5) unless the household's certification period has 
already been extended past the maximum period specified in Sec.  
273.10(f) in accordance with paragraph (f)(4)(iii) of this section; or
    (B) Recertify the household in accordance with Sec.  273.14. If the 
household has not reached the maximum number of months in its 
certification period during the transitional period, the State agency 
may shorten the household's prior certification period in order to 
recertify the household. When shortening the household's certification 
period pursuant to this section, the State agency must send the 
household a notice of expiration in accordance with Sec.  273.14(b).
    (ix) If a household receiving transitional benefits returns to TANF 
during the transitional period, the State agency shall end the 
household's transitional benefits and follow the procedures in 
paragraph (f)(4)(viii) of this section to determine the household's 
continued eligibility and benefits for the Food Stamp Program. However, 
for a household assigned a new certification period in accordance with 
paragraph (f)(4)(iv) of this section, the household must be recertified 
if it returns to TANF during its transitional period.
    10. In Sec.  273.21:
    a. Paragraph (f)(2)(iv) is amended by removing the words ``The 
State agency'' at the beginning of the first sentence and adding in 
their place the words ``If the State agency chooses to act on a change 
in one or more deductible expenses, it''; and is further amended by 
adding a new sentence at the beginning of the paragraph.
    b. Paragraph (f)(2)(v) is amended by removing the words ``The State 
agency'' at the beginning of the second sentence and adding in their 
place the words ``If the State agency chooses to act on a change in one 
or more deductible expenses, it'';
    c. A new paragraph (h)(2)(ix) is added; and
    d. Paragraph (j)(1)(vii)(C) is revised.
    The revision and additions read as follows:


Sec.  273.21  Monthly Reporting and Retrospective Budgeting (MRRB).

* * * * *
    (f) * * *
    (2) * * *
    (iv) The State agency at its option may disregard reported changes 
in deductible expenses, except for changes in shelter costs related to 
a change in residence, and continue to provide the household the 
deduction amount that was established at certification until the 
household's next recertification. * * *
* * * * *
    (h) * * *
    (2) * * *
    (ix) If the State agency has chosen to disregard reported changes 
that affect some deductions in accordance with paragraph (j)(1)(vii)(C) 
of this section, include a statement explaining that the State agency 
will not change certain deductions until the household's next 
recertification and identifying those deductions.
* * * * *
    (j) * * *
    (1) * * *
    (vii) * * *
    (C) Deductions as billed or averaged from the corresponding budget 
month, including those shelter costs billed less often than monthly 
which the household has chosen to average, except that the State agency 
at its option may disregard reported changes in deductible expenses, 
except for changes in shelter costs related to a change in residence, 
and continue to provide the household the deduction amount that was 
established at certification until the household's next 
recertification.
* * * * *

    Dated: March 31, 2004.
Eric M. Bost,
Under Secretary, Food, Nutrition and Consumer Services.
[FR Doc. 04-8414 Filed 4-15-04; 8:45 am]
BILLING CODE 3410-30-P